Grain Market Insider: June 22, 2023
All prices as of 1:45 pm Central Time
| Corn | ||
| JUL ’23 | 660.5 | -10.5 |
| DEC ’23 | 620.75 | -8 |
| DEC ’24 | 555.75 | -8.75 |
| Soybeans | ||
| JUL ’23 | 1500.5 | -14.25 |
| NOV ’23 | 1339.5 | -37.5 |
| NOV ’24 | 1249 | -7 |
| Chicago Wheat | ||
| JUL ’23 | 739 | 4.5 |
| SEP ’23 | 752.75 | 4.5 |
| JUL ’24 | 780.25 | 5.75 |
| K.C. Wheat | ||
| JUL ’23 | 871 | -2.75 |
| SEP ’23 | 872.5 | 0.5 |
| JUL ’24 | 841.25 | 5.5 |
| Mpls Wheat | ||
| JUL ’23 | 880 | 1.25 |
| SEP ’23 | 884.5 | 2.75 |
| SEP ’24 | 821 | 4.75 |
| S&P 500 | ||
| SEP ’23 | 4416.75 | 7.5 |
| Crude Oil | ||
| AUG ’23 | 69.43 | -3.1 |
| Gold | ||
| AUG ’23 | 1924.3 | -20.6 |
Grain Market Highlights
- Profit taking from extremely overbought conditions weigh on the corn market as traders move long positions out of the nearby contract and into the deferred contracts.
- Soybean meal, which was down 3.5%, led soybeans lower as traders booked profits from a radically overbought market.
- Soybean oil, on the other hand, was able to shake off its losses and rally 240 points from the low to close .10 cents higher despite yesterday’s disappointing EPA mandate numbers.
- Further short covering in the Chicago contracts and concerns that India’s wheat crop may be much smaller than anticipated helped buoy all three classes to a positive close save for July K.C., which likely saw traders move long positions to the September contract.
- Possibly adding pressure to the markets today was the US dollar, as it traded higher today, likely in response to Fed Chairman Jerome Powell’s comments yesterday stating that more rate hikes are likely to fight inflation.
- To see the current US NOAA 7 – day US Precipitation Outlook and US Drought Monitor scroll down to the Other Charts/Weather Section.
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Corn
Action Plan: Corn
Calls
2022
No Action
2023
No Action
2024
No Action
Cash
2022
No Action
2023
Active
Sell DEC ’23 Cash
2024
No Action
Puts
2022
No Action
2023
New Alert
Enter(Buy) DEC ’23 580 Puts ~ 30c
2024
No Action
Corn Action Plan Summary
- No new action is recommended for Old Crop. Any remaining old crop bushels that you may have should be getting priced into this rally. We won’t have any “New Alerts” for 2022 Corn — either Cash, Calls, or Puts, as we have moved focus onto 2023 and 2024 Crop Year Opportunities.
- Grain Market Insider recommends buying Dec 23 580 corn puts today for about 30 cents in premium plus commission and fees. Additionally, Grain Market Insider sees an active opportunity to sell New Crop 2023 corn. With the Dec 23 contract trading at the upper end of our 590 – 630 target range, Insider recommends buying December puts today to add downside coverage on New Crop in case prices move significantly lower. Despite the ongoing drought concerns, we still have confidence to continue to recommend selling into this rally as the Dec 23 610 Call options have been in place since May 2nd. On May 2nd, Insider recommended buying 560 and 610 Dec calls, and then recommended exiting the 560s on June 2nd once the 560 calls had gained enough in value to offset the cost of the 610 calls. Owning both calls and puts can be very beneficial in a market as volatile as this. If it doesn’t rain, and Dec corn continues to rally, the 610 calls will continue to gain in value and protect your new sale. Meanwhile, buying puts will allow you to protect the downside on more bushels without committing to a sale when your production may be uncertain. For now, the market is strong, though demand remains sluggish, and with Brazil beginning to harvest another possible record crop, both domestic and world carryout figures could potentially rise further. Any change to a more favorable weather forecast could easily turn the market lower and erase much, if not all, of the 125 cent rally from the May 19th low.
- Continue to hold current sales levels for the 2024 crop year. Much like the Dec 23 contract, the Dec 24 contract has rallied significantly from the May 18 lows as the market prices in possible crop reductions that could carry over into the 2024 crop year. Be watchful, as we are, entering into the time frame where we would consider suggesting making additional sales recommendations for the 2024 crop year.
Market Notes: Corn
- Profit taking on extremely overbought conditions and a sharply lower soybean market weighed down corn futures, as the July contract led the New Crop contracts lower as traders moved long July positions to the September contract.
- The European weather model shows 10 days of mostly dry weather for the Midwest, primarily in Il, E IA, IN, and parts of MO and S WI. Whereas the US model has rain in 8-10 day forecast, but some think it may be overdone.
- The latest US Drought Monitor shows deepening drought in the Dakotas and much of the North and Central Midwest, where conditions haven’t been this poor since 1988.
- Between June and July in 2012, the USDA lowered corn yield by 20 bu. and if it were to happen this year, there are concerns that it would put yield below 170 and take nearly 1 billion bushels from this year’s production.
- Last week’s ethanol production numbers were released today and showed an increase to 1.052k barrels/day, up from 1.018k barrels/day the week prior. While the increase in production is positive, the pace still falls below what is needed to reach the USDA’s estimate.
- Brazil’s safrinha corn harvest is well underway and continues to weigh on the country’s domestic basis, potentially further slowing US exports with cheaper export prices than US offers.
Above: The corn market continues to run on weather concerns, and the September contract is above the 50-day moving average and knocking on the door of 100-day moving average and the recent 625 high. If the market can push through that level, it may be able to make a run for the 650 – 670 resistance level around the March highs. If not, support may be found between 580 and 540.
Soybeans
Action Plan: Soybeans
Calls
2022
No Action
2023
No Action
2024
No Action
Cash
2022
No Action
2023
Active
Sell NOV ’23 Cash
2024
No Action
Puts
2022
No Action
2023
No Action
2024
No Action
Soybeans Action Plan Summary
- No new action is being recommended for Old Crop. Any remaining old crop bushels should be getting priced into this rally. We won’t have any “New Alerts” for 2022 Soybeans — either Cash, Calls, or Puts, as we have moved focus onto 2023 and 2024 Crop Year Opportunities.
- Grain Market Insider sees an active opportunity to sell New Crop 2023 soybeans. Grain Market Insider sees an active opportunity to sell New Crop 2023 soybeans. November soybeans have rallied over 200 cents from the May 31st low and hit the upper end of our 1300 to 1350 target range. With the November contract a little bit over the upper end of this range, an Active sales opportunity continues to get some New Crop priced. KC Wheat has demonstrated that domestic drought conditions do not necessarily guarantee higher domestic prices if global supplies are ample. US wheat country has been extremely dry for many months, yet prices are about even with where prices were in late 2021, before Russia invaded Ukraine. Global soybean supplies could be record large, and this could be a rally risk factor.
- Continue to hold off on pricing the 2024 crop. We look to make sales further into the 2023 growing season when selling opportunities tend to improve seasonally.
Market Notes: Soybeans
- Soybeans closed sharply lower, led down by new crop as soybean meal lost over 3.5% in the August contract, while soybean oil recovered at the end of the day for a positive close.
- The entire soy complex was volatile today after soybean oil closed limit down yesterday causing all three soy products to have expanded limits today. Soybean oil was driven lower by the EPA announcement regarding biofuel mandates.
- Forecasts for the Corn Belt are still very dry for the next seven days, but Iowa is now expected to receive slightly more rain, while Illinois and Indiana are expected to remain dry.
- While the EPA’s targets for advanced biofuels were below industry hopes, they do allow some growth of renewable diesel production, but not as much as expansion plans already proposed.
Above: The market’s eye is squarely on the weather at this time. The August contract has rallied through the 50-day moving average, approaching the 1450 resistance area and the 100-day ma. If the market can rally beyond this point, the resistance area between 1500 and 1550 could be its next target. If the market drops back, support could be found between 1340 and 1300 with further support near 1270.
Wheat
Market Notes: Wheat
- After trading on both sides of unchanged, all three US wheat classes closed higher with the exception of July K.C. wheat.
- Private estimates of India’s wheat crop are 10% below their government’s estimate, and if this is correct, it could mean that India will need to import wheat.
- As a reminder, July grain option expiration is tomorrow, and first notice date for July grain futures next Friday. With the funds still believed to be net short wheat, this could lead to some spread trading if they roll out of July and into deferred contracts.
- The heavy rain in China’s wheat growing region is still expected to result in quality downgrades, and more wheat to be used for feed.
- Sov Econ reduced their Russian wheat crop projection to 86.8 mmt vs 88.0 mmt previously because of hot and dry weather.
- Due to the shortened week, export sales data is delayed until tomorrow, but is likely to continue to show disappointing numbers for wheat, since Russia continues to dominate on the export front.
Action Plan: Chicago Wheat
Calls
2022
No Action
2023
No Action
2024
No Action
Cash
2022
No Action
2023
Active
Sell SEP ’23 Cash
2024
Active
Sell JUL ’24 Cash
Puts
2022
No Action
2023
No Action
2024
No Action
Chicago Wheat Action Plan Summary
- No new action is recommended for the 2022 crop. Grain Market Insider is done with the 2022 crop, and there will be no New Alerts posted for the 2022 crop going forward.
- Grain Market Insider sees an active opportunity to sell 2023 New Crop. We are in a weather market and with the US Drought Monitor showing dryness across the Midwest, September Chicago Wheat has now rallied about 22% from its May 31 low into the March – April resistance area and is overbought. As of late, the wheat market has largely been a follower of the corn market, and this rally has been fueled in part by the Funds exiting their short positions. While there are production concerns in parts of the country, demand has been weak, and the potential remains for a rising carryout. Any change to a more favorable weather forecast could easily erase much, if not all, of the weather premium that has been added to prices. With the dry conditions and great uncertainty that many of you are experiencing, about how much you will have to harvest, we understand there’s hesitancy to sell anything here. If you are concerned about committing physical bushels with a cash sale, consider selling futures or buying put options.
- Grain Market Insider sees an active opportunity to sell 2024 Chicago wheat. Prices for the 2024 crop have largely followed prices for the 2023 crop and are currently about 20% above the low set on May 31. Weather and production concerns have been the primary driver of prices lately, and the funds have likely been covering short positions, further feeding the rally. As we all know, weather markets can be fickle beasts, and any change in the forecast or crop conditions can quickly turn traders from buyers to sellers, quickly erasing much, if not all, of the premium priced into the market. Grain Market Insider recommends making a sale on next year’s 2024 Chicago wheat crop and using either a July ’24 futures contract or a July 24 HTA contract so basis can be set at a later date, as it should improve in time.
Above: September wheat has had a strong run and is nearing the 200-day moving average around 750, which it hasn’t seen since last October. Above there, resistance may be found between the psychological resistance point of 800 and 865. With further resistance coming in between 900 – 950. Should prices turn lower, initial support may be found near 670 and then again near 611.
Action Plan: KC Wheat
Calls
2022
No Action
2023
No Action
2024
No Action
Cash
2022
No Action
2023
No Action
2024
No Action
Puts
2022
No Action
2023
No Action
2024
No Action
KC Wheat Action Plan Summary
- No new action is recommended for the 2022 crop. Though most, if not all, of your Old Crop 2022 wheat may be sold, consider storing any remaining Old Crop, if possible, in anticipation of a short new crop this year, and marketing it along with the new crop.
- We continue to look for better prices before making any 2023 sales. While Crop ratings have improved and the Black Sea export corridor remains open, questions remain about the size of the HRW crop, whether Russia will continue to agree to keep the Black Sea corridor open, and what production looks like in Europe and Australia. We continue to target 950 – 1000 in the July futures as a potential level to suggest the next round of New Crop sales.
- Patience is warranted for the 2024 crop. With continued issues in the Black Sea region and with major exporting countries’ stocks expected to fall to 16-year lows, we are willing to be patient with further sales of New Crop HRW wheat. We are targeting just below the 900 level on the upside while keeping an eye on recent lows for any violation of support.
Above: The market has been able to trade above the recent resistance area and is near the 200-day moving average and 870 resistance. If the market can push through, 920 is the next major point of resistance. If it falls back, initial support could be near 825 with further support between 778 and 764.
Action Plan: Mpls Wheat
Calls
2022
No Action
2023
No Action
2024
No Action
Cash
2022
No Action
2023
No Action
2024
No Action
Puts
2022
No Action
2023
No Action
2024
No Action
Mpls Wheat Action Plan Summary
- No new action for 2022 Old Crop MINNEAPOLIS Wheat. Prices haven’t moved much over the last couple of weeks, and it’s disappointing to see the lack of upside opportunities that the market has offered following the large snowfall and the late start to planting this spring. Yet, the marketing year for Old Crop is quickly winding down, and any additional upside opportunities may be more difficult to come by before New Crop harvest, especially given record European wheat shipments and falling Russian prices. Also, we typically recommend finishing up sales on any remaining Old Crop bushels by mid-June, as bids will soon shift from the July to September contract, and there is currently no carry offered.
- No action is recommended on the 2023 crop at this time. The September ’23 contract had a 120-cent range in the month of May where it found support just above 770. While the planting has largely been completed, dryness in some areas is increasing. With a full growing season ahead of us, we are not looking to make any sales right now. (Updated 6/22)
- We continue to be patient to market any of the 2024 crop. The market for the 2024 crop continues to be illiquid, and it may be early summer before we post any recommendations, continue to be patient.
Above: The market has rolled from the July to the September contract and has rallied out of its congestion area on the Front Month Continuous chart into the May highs. Further resistance above the market may be between 889 and 940, the April and December highs respectively. While the upside breakout is a positive sign, the market will need additional bullish news to keep it moving. Should the market reverse course and turn lower, support below the market may be found between 770 and 760.
Other Charts / Weather
