Written Commentary
SOYBEANS
The soybean complex was mixed with soybeans down $.15 – $.40, soybean meal down $14 – $17, while soybean oil recovered to close slightly better. The July/Nov spread jumped $.23 today and at one point was up $.50 from earlier this week. July-23 managed to scratch out a close back above the $15 level, next resistance is the Dec-22 high at $15.46. Key support in July-23 oil rests at 52.35, the midpoint between the May low and the June high. The 50 day MA rests at 51.97. In all likelihood yesterday’s EPA announcement will have no impact on 2022/23 balance sheets, and minimal impact on 2023/24. With sizable investments from big oil and private equity groups along with state/federal tax incentives the EPA appears to feel the industry should be able to continue expanding without the backdrop of federal mandates. Current renewable diesel capacity at nearly 3.3 bil. (end of Mch-23) is expected to grow to roughly 6 bil. with current projects under construction while mandates only grow to 3.35 bil. by 2025. Spot board crush margins continue to erode, down to $.47 at today’s close, a multi-year low. 57% of the US soybean area is in drought, that’s up from 51% LW vs. only 19% a month ago. Still below the peak of 71% last fall. Export sales tomorrow expected to range from 5 – 30 mil. in soybeans, 0 – 10k tons soybean oil, and 150 – 400k tons meal. Key quarterly stocks and acreage data a week from tomorrow.
CORN
Prices were down $.07 – $.10. It was an inside day on the charts for both July and Dec contracts. Resistance for July-23 is yesterday’s high of $6.72 ½, followed by last Dec high of $6.77 ½. Resistance for Dec-23 is at last Oct. high at $6.37 ¼. With overnight forecasts offering better prospects for rain for key drought stressed areas, the stage was set for the early session sell-off. Midday maps weren’t as generous with the rainfall, which stimulated the price recovery. As expected today’s US drought monitor did show an expansion of the Midwest drought, along with a deepening of its intensity. At the moment I believe new crop corn is trading an average yield of 171 – 173 bpa, down from the USDA est. of 181.5 bpa in June. In order to support prices up to the $6.50 – $6.75 range I believe yield expectations will need to fall to 170 or lower. Ethanol production surged last week to 1.052 tbd, up from 1.018 tbd the previous week and the highest since Dec-22. If production held at this pace over the remaining 11 weeks of the MY, the USDA usage est. is still 25 mil. bu. to high. Implied gasoline demand last week rose 2% from the previous week to 9.375 mil. barrels per day, which was 10% above the same week YA. As usual demand fundamentals take a back seat to changing forecasts in a weather market. 65% of the US corn area is in drought, up from 57% LW, and up from only 25% a month ago. Still well below the peak of 71% last fall. Export sales tomorrow expected to range from 0 – 30 mil. bu., likely little of that to be old crop.
WHEAT
Prices were mostly higher with Chicago up $.04 – $.08, MGEX up $.01 – $.03, while KC was mixed with spot July-23 down $.03 while deferred contracts were steady to higher. Chicago July-23 has reached a 4 month high, next resistance is the Feb-23 high at $8.10. KC July-23 pierced its 100 week MA resistance at $8.89 ¼ before pulling back. With recent rains in the US Southern plains and improved crop ratings, KC/Chicago July-23 spread has collapsed from its May peak at $2.75 to testing key support at $1.28. With less than a month left, an extension of the BSGI seem to be longshot. Supporting wheat prices is the belief that India’s wheat crop may be well below the official govt. forecast of 112.7 mmt, just below the USDA est. of 113.5 mmt. Sources suggest production could fall closer to the 100 – 103 mmt range with the slow arrival of monsoonal rains. If so they may be forced to import wheat to kept domestic prices from soaring. Volume estimates would range from 4 – 8 mmt in order to keep domestic supplies adequate. It’s been reported they have requested FOB offers from Russia in recent days/weeks. 15% of the spring wheat crop is in drought, up from only 4% LW, however well below last fall’s peak of 79%. Look for these drought areas to ease in next week’s update with healthy rains in store thru early next week.
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