Grain Market Insider: May 31, 2023
All prices as of 1:45 pm Central Time
| Corn | ||
| JUL ’23 | 594 | 0 |
| DEC ’23 | 521.75 | -3.5 |
| DEC ’24 | 504.75 | -1.75 |
| Soybeans | ||
| JUL ’23 | 1299.75 | 3.25 |
| NOV ’23 | 1146.5 | -6.75 |
| NOV ’24 | 1122.5 | -14 |
| Chicago Wheat | ||
| JUL ’23 | 594.25 | 3.25 |
| SEP ’23 | 608 | 2.5 |
| JUL ’24 | 656 | 2 |
| K.C. Wheat | ||
| JUL ’23 | 790.5 | 6.75 |
| SEP ’23 | 785.25 | 4.75 |
| JUL ’24 | 751.75 | -2 |
| Mpls Wheat | ||
| JUL ’23 | 780 | -13 |
| SEP ’23 | 782.5 | -12 |
| SEP ’24 | 761.25 | 3.75 |
| S&P 500 | ||
| JUN ’23 | 4194.25 | -20.75 |
| Crude Oil | ||
| JUL ’23 | 68.1 | -1.36 |
| Gold | ||
| AUG ’23 | 1985.4 | 8.3 |
Grain Market Highlights
- Following a sharp drop in the overnight session on a more favorable June weather forecast and demand concerns, corn had a strong recovery of 15-1/2 cents as month end positioning entered the market.
- The soybean complex saw quite the reversal led by the July contract following concerns of slowing Chinese demand and higher world veg oil production, which weighed heavily on the soybean complex overnight.
- The wheat complex ended the day mixed as Minneapolis contracts lagged on strong planting progress numbers, while K.C. and Chicago contracts uncovered short covering on continued Kansas crop concerns and oversold conditions.
- Concerns over possible higher interest rates, lower consumer demand and slower world economies weighed on the commodity sector, likely adding pressure to grain futures early in the session.
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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.
- July corn has had nearly a 60-cent rally in the last couple of weeks. The selloff from the recent high of 606-3/4 shows there is still a lot of volatility in the market, and that a changing weather forecast can push the market significantly in either direction. If you still have Old Crop to sell, consider using this rally to begin pricing some of those bushels. Don’t forget, there is about a 75-cent inverse between the July and September futures contracts, which could be lost when bids get rolled from one contract to the next in the next few weeks.
- No action is currently recommended for the 2023 new crop. Planting is nearly complete and the volatile weather months still ahead. December corn has dropped nearly 120 cents from its January high, and with that drop, much of the weather risk premium has eroded away. With drought still looming in the WCB and the funds carrying a 92k contract short position, we continue to target the 590 – 630 range in the December futures to suggest adding cash sales. If you happen to not have any New Crop sold, you should consider targeting the 550 – 560 area to begin pricing bushels.
- 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
- Weak Chinese economic data, demand concerns, and a weather forecast showing the potential for a more active pattern weighed heavily on corn prices to start the session, but end of month profit taking and position squaring lifted corn to a steady to lower close.
- Tuesday evening weather models continue to show the potential for increased precipitation and cooler temperatures for the second week of June in areas of the Corn Belt, limiting the new crop futures ability to rally.
- The USDA released the first corn crop ratings on Tuesday afternoon. The USDA stated that 69% of this year’s crop rated good/excellent as of Sunday night. Expectations were for the crop to be 71% good/excellent and in line with the 5-year average. Last year’s first initial crop rating was 73% good/excellent. Corn planting reached 92% complete, up from 81% last week and in line with expectations.
- The firmer close off the session lows may indicate a market looking for more information. While demand news stayed quiet, weather forecasts can have a tendency to change. Money flow may have been more neutral, looking for more confirmation of a true weather pattern change. The movement of wheat futures turning higher into the close likely supported the corn market in the afternoon.
Above: The July contract is beginning to show signs of exhaustion, but Wednesday’s bullish reversal is a positive sign that there is support near 575. If current prices can hold and close above the 50-day moving average near 610, the market would be poised to test April’s high of 647-1/2. Support below the market rests between 550 and 530, and again near the 2021 September low of 497-1/2.
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
- July soybeans found support last week just above the 1300 level. While the month of May has been a rough one for the soy complex, the market remains in a seasonal window conducive for upside volatility and opportunity. Given the oversold nature of the market, combined with a still tight Old Crop domestic balance, continue to hold on progressing any Old Crop sales for now.
- 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
- Soybeans began the day sharply lower driven by another significant drop in soybean oil, but prices managed to somewhat recover through the day with July soybeans ending higher, deferred months lower, and soybean oil relatively unchanged.
- Disappointing economic numbers out of China added bearish pressure to the market with their PMI data showing a slowing in the economic activity over the past month.
- China is still a buyer of Brazilian soybeans despite the poor economic data and purchased 5 more July soybean cargoes in addition to the 10 to 12 last week. Some analysts estimate total Chinese soybean imports closer to 102-104 mmt compared to the USDA’s estimate of 98 mmt.
- Brazil has reportedly made some rare soybean sales to the US equal to a combined 120,000 metric tonnes. Brazil has now passed the US in both soy and corn exports.
- Yesterday’s USDA weekly Crop Progress report showed a jump in soybean planting to 83% completion vs 65% on average, and 56% of the crop is emerged vs 40% on average.
Above: The market continues to show signs of being oversold and Wednesday’s bullish reversal indicates there is support near 1270, and follow through buying could lead to a market bounce. The next area of support could be found between 1237 – 1214 with nearby resistance near 1350 and 1420.
Wheat
Market Notes: Wheat
- The USDA rated the US winter wheat crop condition at 34% good to excellent versus 31% last week and the spring wheat crop at 85% planted only slightly behind the 86% average.
- Despite recent rains, the winter wheat crop in Kansas is still struggling with a 69% poor to very poor rating. The rain is probably too late to help the wheat crop, but could benefit corn and soybeans.
- End of month profit taking and position squaring possibly added to the strength in the wheat market along with anticipation that a US debt ceiling deal may be reached.
- Russia is still said to be lowering their wheat export prices, now at $230-$240 per ton. Alongside the rising US dollar, both factors may pressure the US export market and limit upside for wheat futures.
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. The market is down more than 300 cents from its October high and has become extremely oversold. The July contract may also post its 8th consecutive down month in a row at prices not seen since early 2021, even though wheat inventories of major exporting countries are anticipated to fall to 16 year lows. With the market being this oversold and a fund net position short nearly 113k contracts, we continue to eye the 640 – 670 range to clean up and market any remaining Old Crop inventory.
- We recommend not taking any action on the 2023 crop at this time. While the window of opportunity is quickly closing for Old Crop, it is still wide open for better opportunities ahead for New Crop. We are currently targeting a more aggressive window of 720 – 800 to suggest advancing sales and move more New Crop inventory.
- 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: The market is currently oversold and testing support between 593 and 565, with the next area of possible support below the market near the September ’20 low of 533-1/4. Resistance above the market could be found between 670 and 724.
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: Wednesday’s bullish reversal indicates that there is support near 760, and any follow through buying could be supportive with the market showing signs of being oversold. Resistance may be found above the market between 833 and 850, with further support resting below the market near 736-1/4.
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 July contract continues to be weak and showing signs of being oversold. Additionally, open interest is falling, indicating liquidation. The market is showing signs of being oversold, which could be supportive if buying returns. Resistance currently sits between 820 and 855 and then the recent high of 888-1/2. Support below the market may be found between 770 and 760.
