Grain Market Insider: May 19, 2023
All prices as of 1:45 pm Central Time
| Corn | ||
| JUL ’23 | 554.5 | -0.75 |
| DEC ’23 | 499.75 | -1 |
| DEC ’24 | 492.75 | -0.25 |
| Soybeans | ||
| JUL ’23 | 1307.25 | -26 |
| NOV ’23 | 1175.5 | -11.5 |
| NOV ’24 | 1156 | -6 |
| Chicago Wheat | ||
| JUL ’23 | 605 | -6.75 |
| SEP ’23 | 617 | -7.5 |
| JUL ’24 | 661.25 | -4 |
| K.C. Wheat | ||
| JUL ’23 | 824.25 | -32.75 |
| SEP ’23 | 815.5 | -30 |
| JUL ’24 | 751.25 | -11.75 |
| Mpls Wheat | ||
| JUL ’23 | 804 | -24.5 |
| SEP ’23 | 807 | -23.75 |
| SEP ’24 | 752.25 | -17 |
| S&P 500 | ||
| JUN ’23 | 4197.5 | -14.5 |
| Crude Oil | ||
| JUL ’23 | 71.8 | -0.14 |
| Gold | ||
| AUG ’23 | 2002.2 | 23.9 |
Grain Market Highlights
- Corn futures recovered early in the day as short covering entered the market following Thursday’s bullish reversal, but succumbed to selling pressure from outside markets and neighboring wheat and soybeans.
- Despite Thursday’s bullish reversal, continued fund long liquidation and short selling on favorable weather and weak export demand pushed soybeans lower.
- Soybean meal and oil finished in the red along with soybeans, with soybean oil supported somewhat from higher Malaysian palm oil, while meal encountered weakness from cheaper South American offers.
- Technical selling and profit taking dominated the K.C. contracts and led the wheat complex lower, as rain moves through the southern Plains, even though the Kansas City wheat council tour estimated the Kansas crop at only 178 mb.
- A rise in economic concerns may have added to the pall over the grain markets as US debt ceiling negotiations stalled with both sides at an apparent impasse for now.
- To see the updated US 7-day precipitation forecast and June Precipitation Outlook from the Climate Prediction Center, 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
No Action
2024
No Action
Puts
2022
No Action
2023
No Action
2024
No Action
Corn Action Plan Summary
- No action is recommended at this time for Old Crop. As the 2022 crop marketing year begins to wind down, most if not all, your Old Crop bushels should be sold out. With recent export sales cancellations, large rallies for Old Crop corn may be difficult to come by, and with a substantial inverse between old and new crop contracts, consider selling rallies in the 575-600 range to market any remaining inventory.
- No action is currently recommended for the 2023 new crop. While the crop is going in the ground fast, the most volatile part of the growing season remains ahead. We’re going to maintain an opportunistic posture for now, targeting 590 – 630 versus December corn to suggest any further cash sales.
- Continue to hold current sales levels for the 2024 crop year. We will look for opportunities to make further sales as we move through the 2023 growing season as weather volatility builds.
Market Notes: Corn
- Early short covering faded during the session as selling pressure from wheat and soybean markets spilled into the corn market during the session. In addition, markets turned softer overall as the US debt ceiling talks stalled between politicians in Washington DC.
- The weak afternoon price action keeps the market on the defensive going into next week, as the sellers appear to still be in control of the market.
- Overall, US weather looks to stay favorable as corn planting is hitting the home stretch. The market will be keeping a close eye on the northern Plains and the slow progress in that region with prevent plant dates starting as early as May 25.
- Demand remains a focus on Old Crop corn prices. Export sales are soft, and the market is concerned that additional China cancellations could occur, with still 2.1 MMT of corn sales on the books that still need to be delivered to China.
- Corn basis levels are reflecting softer tones as producers have slowed field work, allowing for better movement of stored supplies onto the cash market.
Above: Stochastic indicators have crossed over to the downside indicating there may be more weakness ahead, though the market is showing signs of being oversold. With July corn searching for support, it may find some between 550 and 530, and again near the 2021 September low of 497-1/2, while nearby resistance sits near 600 and again near the 50-day moving average.
Soybeans
Action Plan: Soybeans
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
Soybeans Action Plan Summary
- We recommend holding current sales levels for Old Crop. We are beginning to push into the May-June seasonal window of opportunity, where prices could bounce as processors begin to push to keep tight on-hand supplies flowing, and seasonal weather concerns can get priced into the market.
- We recommend not adding to current sales levels for the new 2023 crop at this time. As we continue through planting season, favorable weather conditions and South American competition have pressed US prices down nearly 17% from the beginning of the year. The potential remains for a tighter New Crop balance sheet, as the US Drought Monitor map remains concerning. We would consider recommending the next sales in the 1350 to 1400 area.
- 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
- The soy complex started the day higher this morning but ended lower. July beans led the way down and were pulled lower primarily by soybean meal.
- Early morning support came from a jump in Malaysian palm oil by 2.6% on renewed Chinese demand, but for the week it lost 4.6%. Crude oil began the day higher but slipped as well.
- Bearish outside influences drove the entire grain complex lower following comments by Fed Chairman Powell, and agreements about raising the debt ceiling that were halted a few hours ago after disagreements occurred between Republican negotiators and the White House.
- Last week’s export sales of 623,000 bushels of Old Crop beans weighed on markets again today. To arrive at the USDA’s expectations, an additional 80 mb of soybeans need to be sold by August. Shipments were a marketing year low at 6.9 mb.
Above: While July soybeans posted a bearish reversal on 5/08 and have continued to follow through to the downside, the market is showing signs of being oversold, which could be supportive if reversal action occurs. The next area of support may be found near 1288 and 1181, the July 2022 and November 2021 lows respectively. Nearby resistance may be found between 1420 and 1450, and again near 1500.
Wheat
Market Notes: Wheat
- The Kansas wheat crop tour estimated an average yield of 30 bpa, compared to a 5-year average of 45 bpa. Additionally, they are projecting the Kansas crop at 178 mb, the worst since 1963.
- Despite the crop tour findings, K.C. wheat lost about 30 cents today in the front month contracts. This may indicate that the poor conditions have already been priced in the market.
- The strengthening El Nino pattern could be cause for concern with drought for Australia’s wheat crop. Russia’s spring wheat areas are also warm and dry.
- Russian wheat exports continue to be cheap, with their FOB values hitting a 22-month low of $250 per metric ton.
Action Plan: Chicago 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
Chicago Wheat Action Plan Summary
- No new action is recommended for the 2022 crop. As the 2022 crop marketing year begins to wind down, most if not all, your Old Crop bushels should be sold out, and with large rallies difficult to come by at this time of year. Consider selling rallies in the 640 to 670 range to market any remaining inventory.
- We recommend not taking any action on the 2023 crop at this time. Managed Money funds currently hold their largest net short position since 2018, with a near record of about 40% of the total open interest in the Chicago contracts. Such a large position could be very supportive should the funds buy back their positions if market dynamics change due to HRW concerns or supply concerns in corn.
- No action is currently recommended for the 2024 crop. While we are looking for stronger markets to present themselves in this currently weak environment, there are factors that could be supportive, should they occur. Such as any escalation of the Ukraine war or disruption of grain movement in the Black Sea, or a significant devaluation of the US Dollar back to 2021 levels, as that market is showing characteristics of a potential drop.
Above: July wheat has pierced the low end of the recent trading range but remains in the broader range from earlier this month. If buying returns and the market can break through nearby resistance around 669 and the 50-day moving average, it may be in position to test the April high of 718. Key support may be found near 592.
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. Crop ratings overall are at historically low levels, and production concerns persist. Additionally, any unforeseen geopolitical changes in the Black Sea region could cause the market to bounce and retrace 25% towards the 2022 high.
- Patience is warranted for the 2024 crop. The 2024 market has limited liquidity, and it may be until mid-summer before recommendations are posted.
Above: The July contract posted a bearish reversal lower on 5/17, a negative development, with some profit taking as indicated by a drop in open interest. If the market can reverse and break through the 885 to 917 resistance area it could make a move towards 966. With the market looking for support, some may be found between 736 and 716.
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 action is currently recommended for the 2022 crop. With planting concerns and a seasonal tendency for old crop prices to increase over the next 4-5 weeks, we are continuing to wait for better prices to develop. The calendar is becoming a constraint though, and we’ll be looking to part with any remaining old crop bushels by mid-June or so.
- No action is recommended on the 2023 crop at this time. Wet conditions have delayed some planting and raised some prevent planting concerns which could continue to influence the market and generate better selling opportunities in the coming months. We are in no hurry to sell right now with everything going on.
- 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 posted a bearish reversal on 5/17 and stochastic indicators have crossed to the downside, indicating momentum has shifted downward for now. Initial resistance may be found between 830 and 855, with support between 770 and 760.
Other Charts / Weather
