Written Commentary
SOYBEANS
The soybean complex was sharply divided today with soybeans and meal sharply higher, while oil was limit down. July-23 soybeans closed above $15 for the first time in 3 ½ months, next resistance is the Dec-22 high at $15.46. Today’s high in July-23 meal is just shy of the 100 day MA at $442. Synthetically July-23 soybean oil was roughly down another 50 points at 55.15, just below its 100 day MA at 55.25. While deferred soybean meal contracts settled limit up, they were trading at the close. Soybean crop conditions fell 5% to 54% G/E. The soybean CC Index fell to 79.6, down from 80.6 LW and is the lowest level for this week in June since 2002. Today’s price plunge in soybean oil is a direct result of the markets disappointment in the EPA’s revised biofuel blending mandates thru 2025. The biofuel industry has stated the govt. mandates significantly lowball the industries growth potential. Oil saw a significant short covering price rally in recent weeks on hopes the EPA would boost these mandates first presented in Dec-22. It appears these hopes have been dashed. Soybean oil usage for biofuels is expected to reach 11.6 bil. bu. for the 2022/23 MY that ends in Aug. Usage is expected to grow 7.8% in 2023/24 to 12.5 bil. Lbs. The EPA announcement is longer term negative, and psychologically damaging. Remember however industry capacity at 5.365 bil. gallons annually (as of Mch-23) is expected to grow 52% with plants currently under construction. These take time however. Spot board crush margins plunged to $.63 bu., matching a 2 year low. Soybean oil product value plunged to 39%, down from its recent peak at 42%.
CORN
Prices were up $.27 – $.32. Good rains are expected across the SE, the northern plains and the far western corn belt this week. With the exception of a few pockets along the Ohio Valley region, much of the nation’s midsection is looking at no more than .25 – .50” of an inch over the next 5 – 7 days as temperatures rise to above normal readings. Next resistance for July-23 is the Dec-22 high at $6.77 ½. Next resistance for Dec-23 is the October high of $6.37 ¼. Corn crop conditions fell 6% to 55% G/E, a larger than expected drop. The corn CC index fell to 79.8, down from 81.1 LW and is the lowest since 2012. Current ratings suggest an average yield closer to 174 bpa, well below the current USDA forecast of 181.5 bpa. With conditions likely to fall again next week I suspect the market will start to anticipate an average yield at or below 170. The EPA mandates for ethanol are 15.25 bil. gallons in 2023, falling to 15.0 bil. in both 2024 and 2025.
WHEAT
Prices were sharply higher across the board with Chicago and KC up $.36 – $.39, while MGEX was $.28 – $.30 higher. Chicago July-23 reached a 4 month high essentially closing right at the Mch-23 high. Next resistance not until the Feb high at $8.10. Today’s surge in KC July-23 was capped by the 50 week MA at $8.76 ½. WW ratings held steady at 38% G/E, however there was a 1% shift from both VP and poor into the fair category. As a result the WW CC index improved to 75.4, the 6th consecutive weekly increase and well above the 71.9 from YA. Harvest advanced only 7% to 15% complete, vs. 23% YA and 5-year Ave. of 20%. Harvest progress in Kansas at only 8%, vs. 23% YA and 16% Ave. should jump significantly this week as they dry out from recent heavy rains. Spring wheat conditions plunged 9% to 51% G/E, also a much steeper decline than expected. The CC Index for spring wheat fell to 79.0, the lowest since 2017. SovEcon lowered their 2023 Russian wheat production est. by 1.2 mmt to 86.8 mmt, just above the USDA forecast of 85 mmt. Also supporting wheat values are reports India continues to ask seek FOB offers for Russian wheat suggesting their domestic production may not meet their demand.
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