Movement in rice futures has been erratic in recent weeks. Old crop July peaked last week at $19.92 before turning sharply lower. New crop futures haven’t experienced the same volatility, but Tuesday’s close above previous resistance at $15.50, which had capped the market for the past two months, opened the market to the possibility of a retest of resistance near $16. The market is mainly focused on the condition of the U.S. crop, with 70% of the crop is rated good to excellent. In Arkansas, only 65% of the crop is rated good to excellent, as hot, dry conditions stress the crop. In the June supply/demand report, USDA lowered the long grain carryout estimate by 1 million cwt, thanks to an increase in the export projection. Last week’s export totals were extremely disappointing, though, coming in at just 10,400 metric tons.
Soybeans have staged a surprising rally in the past week. The market has been fueled by short covering and strength in soy oil and palm oil futures. Traders are also worried about the crop. Drought-like conditions are prevalent throughout the Midwest. Nationwide, 54% of the crop is in good to excellent condition, down from 59% last week and 68% a year ago. In Arkansas, though, the crop is faring a bit better, with 71% rated good to excellent. Weather markets can turn around fast if conditions improve. For now, though, the forecast remains hot and dry for many growing regions. November futures could test resistance between $13.86 and $14.
Corn futures have also rallied in recent days. December futures charted a new 10-month high this week, and a close above the $6 mark would suggest further gains are possible. Monday’s crop conditions report gave the market an additional boost, as the condition of the crop is deteriorating rapidly. USDA says that 55% of the crop is now in good to excellent condition. That’s down from 61% last week and 70% last year. Traders are beginning to think it will be difficult for farmers to meet the current USDA forecast of 181.5 bushels/acre and that corn supplies will be tighter in the fall. The current weather forecast shows little chance for meaningful relief.
Cotton futures have not followed the grain markets. December cotton is in position to test trendline support near 79.5 cents. Overhead resistance begins at 82.5 cents. 47% of the crop is rated good to excellent, mostly due to poor conditions in Texas, where only 30% of the crop is rated good to excellent. In Arkansas, 81% of the crop is rated good to excellent. The June 30 Plante Acreage report could provide some support, as analysts think the current estimate of 11.25 million acres is too high.
Wheat prices are sharply higher, mostly on carryover strength from corn and soybeans. Open interest has dropped, though, indicating the rally might be short-lived. For July, there isn’t much technical resistance below the $8 level, while the most active September contract has some resistance around $7.46.
Livestock and Poultry
In the June Supply/Demand report, USDA reduced the U.S. red meat and poultry production forecast as lower pork and poultry production more than offset a higher beef production forecast. Beef production is expected to rise on higher slaughter totals. Pork production was lowered on lighter carcass weights. Broiler production estimates were reduced on the pace of slaughter and recent hatchery data. The 2023 cattle price forecast was raised from last month on improved demand. The hog price forecast was raised from last month for the second quarter. Broiler, turkey, and egg price forecasts were reduced on current price data.
Hog futures have rallied sharply in recent weeks, but rallies in corn and soybeans have offset those gains for hog producers. Many hog producers are currently losing money, and as a result, there is evidence of herd liquidation. Sow slaughter for the week of June 3 was up over 12% according to USDA. Live cattle futures are looking toppy, as deferred contracts have charted key reversals. Selling interest has been limited so far, however. Uptrending support is near $165 for the August contract.