Grain Market Insider: May 5, 2023
All prices as of 1:45 pm Central Time
| Corn | ||
| JUL ’23 | 596.5 | 7.5 |
| DEC ’23 | 534.75 | 6.25 |
| DEC ’24 | 520.75 | 3 |
| Soybeans | ||
| JUL ’23 | 1436.5 | 18.75 |
| NOV ’23 | 1280 | 11.5 |
| NOV ’24 | 1238.25 | 6 |
| Chicago Wheat | ||
| JUL ’23 | 660.25 | 15.25 |
| SEP ’23 | 671.5 | 14.75 |
| JUL ’24 | 699.25 | 9.75 |
| K.C. Wheat | ||
| JUL ’23 | 833 | 34.75 |
| SEP ’23 | 824 | 32.5 |
| JUL ’24 | 797 | 21.75 |
| Mpls Wheat | ||
| JUL ’23 | 836 | 24 |
| SEP ’23 | 839.75 | 24.25 |
| SEP ’24 | 781.5 | 18.75 |
| S&P 500 | ||
| JUN ’23 | 4151.25 | 75.5 |
| Crude Oil | ||
| JUL ’23 | 71.26 | 2.75 |
| Gold | ||
| AUG ’23 | 2041.6 | -33.4 |
Grain Market Highlights
- Technical short covering and carryover strength from wheat helped the corn market continue its rally after posting a reversal earlier this week.
- Soybean oil led the soybean complex higher today in concert with higher Malaysian palm oil and crude oil, while soybean meal posted minor gains, weighed down by global demand concerns.
- Argentina reported early yield estimates of only 17 bpa, which added support to soybean prices.
- Hard Red Winter and Spring wheat crop concerns in addition to the technical short covering after posting market reversals earlier in the week helped to rally all three wheat classes further to end the week.
- To see the updated National Weather Service 6-10 day forecast and National Drought Monitor, scroll down to the Other Charts / Weather section.
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Corn
Action Plan: Corn
Calls
2022
No Action
2023
Continued Opportunity
Enter(Buy) DEC ’23 Calls:
560 @ ~ 22c & 610 @ ~ 12c
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. At this point in the crop marketing year most, if not all, of your Old Crop 2022 corn should be sold out. With the substantial inverse between old and new crop contract months, large rallies for Old Crop corn may be difficult to come by as we move forward. Consider using 40 to 50-cent rallies to sell any remaining inventory.
- There is continued opportunity to buy December ’23 560 and 610 calls. The December corn contract shows signs of support with a hook reversal after making a new low for the move, and with the market approximately 50 cents off the recent high and 115 cents off the fall high, it has eroded enough risk premium ahead of the long growing season that call valuations look attractive here.
- 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
- Buyer strength led by good front month spread action and short covering in the wheat market spilled over into the corn market again on Friday, as July corn closed the week with double digit gains.
- The corn market forged a good rally in the second half of the week as money moved into the long side of the market despite a fundamental picture that is negative in the short term.
- Demand concerns stay a focus of the corn market as weekly export sales totals this past week posted net cancellations for the first time in 20 years. There was talk on Friday that China was a buyer of South African corn, still looking away from the U.S. for corn supplies.
- Despite some areas of potential rainfall, extended forecasts are favorable for improved planting pace for this year’s corn crop. The market will be watching the planting pace in northern states closely next week.
- Next week will set up a battle between favorable technical signals and possible bearish fundamentals as the market prepares for the May 12 USDA WASDE report and our first projection for the 2023-24 marketing year.
Above: The market is severely oversold and has exhibited a second reversal after making a new low for the move, indicating short-term selling may be exhausted, which could be seen as supportive. Nearby resistance sits near 612 and again near the 50-day moving average, while support for the July contract rests between the recent low of 569 and the July ’22 low near 562.
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 supplies flowing.
- We recommend not adding to current sales levels for the new 2023 crop at this time. Our research indicates there is about a 74% likelihood of improved prices moving into the June time frame. Also, weather conditions will begin to dominate the market as we begin to move through planting and into the growing season, and we may consider recommending sales in the 1400 to 1450 area if any significant concerns arise.
- 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
- Argentina’s soybean harvest is estimated to be about 20% complete with yields coming in near 17 bpa, suggesting a crop of only 18 mmt versus the USDA’s April estimate of 27 mmt.
- Lending further support to soybeans, soybean oil gained on follow through strength from strong weekly export sales and palm oil, which was up nearly 5% overnight. Additionally, crude oil posted gains of about $2.95, or about 4.25%.
- With Brazil’s offers for September delivery having rallied about 60 cents in the last few days for September and making US offers more attractive, it has been rumored that China has purchased US soybeans out of the PNW for October delivery.
- Soybeans continue higher with follow through buying from Wednesday’s reversal. Strong resistance lies near Tuesday’s high of 1440, and if the market can break through that area, it could be set up to test the 50-day moving average near 1462.
Above: July soybeans traded lower to post a new low for the move and reversed to settle near unchanged. The market will need further confirmation to continue in either direction following two consecutive reversals. Support lies near the recent low of 1392 with further support near 1350. Should support hold and buyers enter the market, resistance may be found between 1450 and 1460, and again near 1500.
Wheat
Market Notes: Wheat
- Strong short covering in the three classes of wheat futures continues to push prices higher into the end of the week. Wheat futures have likely found a near-term bottom on Wednesday, and prices have rallied into today’s close.
- Fueled by crop concerns, KC hard red winter wheat prices have rallied nearly $1.00 off Wednesday’s lows fueled by the Oklahoma crop tour forecasting the worst Oklahoma winter wheat crop since 1955. The Kansas wheat tour kicks off on May 15 with similar results expected.
- The wheat market will stay focused on the May 18 deadline for a possible disruption of the Black Sea grain deal, as increased tensions and constant rhetoric out of Russia may put the agreement lasting in jeopardy.
- In the northern Plains, spring wheat planting is delayed, and forecast for precipitation over the weekend might further stall progress and concerns for production of the crop.
- Despite the late week rally, managed funds are likely to show a near record short position in the wheat market on Tuesday when the Commitment of Traders report is calculated, giving the market more potential room for short covering rally to grow.
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. At this point in the crop marketing year most, if not all, of your Old Crop 2022 wheat should be sold out. With large rallies difficult to come by at this time of year, consider using 40 to 50-cent rallies to sell any remaining inventory.
- We recommend not taking any action on the 2023 crop at this time. Corn and K.C. wheat are near historic premiums to Chicago wheat, which could lend support to the Chicago contracts if HRW production concerns persist, or if any production concerns develop for 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: The market is correcting from being oversold and open interest has been declining on the rally, indicating traders are covering short positions and the rally may be short lived. Further short covering activity could be fuel for a test of the 718 to 724 resistance area if fresh buyers enter the market on additional bullish news. Initial resistance could be found near 668 and again between 718 and 724, while 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 despite recent the recent rain. 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 is recovering from being oversold and has gained momentum on the rally with open interest on the rise, which indicates new buyers could be getting long the market. If the market can break through the 835 to 850 resistance area, it could further test the 886 to 902 resistance area. Otherwise, initial support may be found near 769, with key support near 740.
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. We look for better pricing opportunities for the 2022 crop with potential planting concerns and a seasonal tendency for better prices as we move through springtime.
- No action is recommended on the 2023 crop at this time. The snowy and cold winter has given rise to wet conditions and planting concerns which may present good selling opportunities in the coming weeks.
- We continue to be patient to market any of the 2024 crop. Due to the lack of liquidity for the 2024 crop, there may not be any recommendations until late spring or early summer. This is the time for patience, not action.
Above: The market continues to recover from being oversold, and with open interest on the rise, it appears that new buyers may be entering, and getting long the July contract. Resistance still resides above the market near 870 and 895, while support may be found between 770 and 760.
Other Charts / Weather
