Grain Market Insider: May 8, 2023
All prices as of 1:45 pm Central Time
| Corn | ||
| JUL ’23 | 596.5 | 0 |
| DEC ’23 | 529.75 | -5 |
| DEC ’24 | 515.25 | -5.5 |
| Soybeans | ||
| JUL ’23 | 1433.75 | -2.75 |
| NOV ’23 | 1272.5 | -7.5 |
| NOV ’24 | 1233.5 | -4.75 |
| Chicago Wheat | ||
| JUL ’23 | 654 | -6.25 |
| SEP ’23 | 666 | -5.5 |
| JUL ’24 | 698 | -1.25 |
| K.C. Wheat | ||
| JUL ’23 | 844.25 | 11.25 |
| SEP ’23 | 834.25 | 10.25 |
| JUL ’24 | 801.25 | 4.25 |
| Mpls Wheat | ||
| JUL ’23 | 843.75 | 7.75 |
| SEP ’23 | 846.75 | 7 |
| SEP ’24 | 779 | -2.5 |
| S&P 500 | ||
| JUN ’23 | 4154.25 | 4 |
| Crude Oil | ||
| JUL ’23 | 73.04 | 1.77 |
| Gold | ||
| AUG ’23 | 2048.7 | 4.5 |
Grain Market Highlights
- Weak export inspections and expectations of lower export demand dragged on the corn market, while a strong US domestic basis is helping keep Old Crop firm relative to New Crop as end users need to keep their supplies flowing.
- Anticipation of higher 23/24 ending stocks and lower soybean oil prices had traders selling soybeans with New Crop leading Old Crop lower.
- Despite higher Malaysian palm oil and higher crude oil, soybean oil traded lower, likely on profit taking following the recent rally and ahead of Friday’s USDA report. Lower bean oil prices pressed July Board Crush margins 3 cents lower per bushel.
- K.C. and Minneapolis wheat contracts continued their march north on poor crop and planting conditions in their respective areas, while Chicago contracts found pressure on continued fund selling and good crop conditions.
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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
- Spread trading between Old Crop and New Crop corn futures was the setup of the market on Monday. Old crop prices, supported by the supportive cash market and expected planting pace and favorable weather, pressured the New Crop futures.
- Cash basis levels on the National Average Corn basis were trading near 36 cents over July as of last Friday, and well over the 5-year average of 15 cents. This reflects the tightness of old crop supplies available and the current front-end demand for corn.
- The expected planting pace for last week is that 48% of the corn crop will be planted as of Sunday versus a 5-year average of 42%. Favorable weather forecasts overall should help maintain a good pace of planting despite rain in the Corn Belt on Monday.
- Weekly export inspections for corn were disappointing at 963,000 MT, well below last week’s totals. Year-over-year, export inspections are down 35% of last year and behind the pace needed to reach the USDA forecast for the marketing year.
- The corn market and grain markets in general will be looking towards Friday’s USDA WASDE report for near-term direction and the market’s first look at 2023-24 marketing year supply/demand numbers. The report will be released on Friday, May 12 at 2:00 CST.
Above: The market is recovering from being oversold and continues to be under the influence of the bullish reversal from 5/03. 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
- Soybeans, along with soybean meal and oil, began the day higher but faded to a lower close for all but soybean meal, which ended slightly higher. Lower export inspections were not supportive.
- Soybean inspections totaled 14.5 mb for the week ending Thursday, May 4, at the lower end of expectations. Total inspections are now at 1,758 mb and are even with the previous year.
- Crop progress will be released this afternoon, and the average trade estimate is that 34% of the soybean crop has been planted. Progress was 19% planted as of last week.
- Today, palm oil futures surged by 4.3% to the highest price in three weeks, while crude oil worked higher as well. Depressed world veg oil prices have negatively affected the soy complex.
- While Brazilian soybean premiums have risen slightly from a few weeks ago, their prices are low enough to spur Chinese demand and for China to cancel US purchases for cheaper Brazilian soybeans. Brazilian producers are scaling back on sales, however, which could drive prices back up.
Above: July soybeans have recovered from being severely oversold and posted a bearish reversal on 5/08 which indicates recent buying could be exhausted and the market may turn lower. 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
- K.C. contracts led the market higher on the continued concern of lower production in the southern Plains. Some believe total HRW production could be as low as 200 mb.
- Adding support to the Minneapolis contracts are dry conditions in Canada, while the northern Plains continue to be wet, with growing concerns about the number of prevent plant acres.
- The Wheat Quality Council Tour will begin on May 15, which will give the market a much better understanding of the Kansas wheat crop’s condition. So far, Oklahoma’s wheat crop is thought to be the smallest in nearly 70 years.
- The Black Sea grain deal continues to be in negotiations, though there are thoughts that any renewal may be unlikely. If so, it could be a bullish influence in the market as other world exporters would need to fill the gap.
- The CFTC reported on Friday that Managed Money fund positions as of Tuesday, May 2 were net short 126,324 contracts of Chicago wheat, which comprises nearly 40% of the commodity’s total open interest, and the second highest percentage in 17 years.
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 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.
