Crops Analysis | May 4, 2022
Price action: July corn futures rose 1 1/4 cent to $7.94 1/4, after dropping to a one-week low earlier, while December futures rose 1 cent to $7.36 1/4.
Fundamental analysis: Corn futures ended mixed as spillover from a rally in the wheat market was offset by expectations for improved planting conditions in the Midwest. The eastern Corn Belt will receive little rain, along with warmer temperatures and faster drying rates, beginning Saturday through May 12, World Weather Inc. said today. “Planting should quickly increase once the ground firms up after rain comes to an end Friday,” the forecaster said.
Supply-demand fundamentals remain otherwise bullish with ethanol production increasing and the Russia/Ukraine war disrupting global grain trade. U.S. ethanol production averaged 969,000 barrels per day (BPD) during the week ended April 29, up 6,000 bpd from the previous week and up 1.8% from the corresponding week last year, the Energy Information Administration reported. Ethanol stocks declined 78,000 barrels, to 23.887 million barrels, the lowest level since the week ending Jan. 14. Ethanol stocks are down 10% from the end of March, which was the highest level since spring 2020.
Tomorrow’s weekly USDA export sales report will be scrutinized for indications whether high corn prices are curtailing demand. Net weekly corn sales for 2021-22 are expected to range from 500,000 MT to 1.2 MMT, while net sales for 2022-23 are expected to range from 700,000 MT to 1.2 MMT. A week ago, USDA reported net sales for the week ended April 21 totaling 866,800 MT for 2021-22, down 5% from the average for the previous four weeks.
Technical analysis: Corn bulls retain the near-term technical advantage with nearby futures trending up since late January and July futures well-above key moving averages aside from the 10-day, currently $8.01 1/4. July futures rebounded after falling as low as $7.89 1/2, the lowest intraday price since last week’s low of $7.81 on April 25. Near-term support includes last week’s low at $7.80 1/2 and the 20-day moving average at $7.56 3/4. Upside targets for bulls include the contract high of $8.24 1/2, posted April 29. December futures settled higher for the first session in four and remain within reach of the $7.57 contract high posted April 29.
What to do: Get current with advised 2021- and 2022-crop sales.
Hedgers: You should be 90% sold in the cash market on 2021-crop. You should also have 40% of expected 2022-crop production forward-sold for harvest delivery.
Cash-only marketers: You should be 90% sold on 2021-crop. You should also have 40% of expected 2022-crop production forward-sold for harvest delivery.
Price action: July soybeans rose 10 cents to $16.40 1/2, after hitting a three-week low earlier. July soymeal fell $5.70 to $418.20, a three-month closing low. July soyoil rose 215 points to 82.43 cents per pound.
Fundamental analysis: Soybean futures rose for the first day in three with support from strength in soyoil, crude oil and wheat markets. The prospect that delayed U.S. corn planting will lead to higher soybean acres limited strength in new-crop November futures, though fieldwork conditions in the Midwest are expected to improve next week. Corn futures remain near recent contract highs and wheat futures rebounded today, and continued strength in those markets may keep sellers at bay in soybeans.
However, slumping soymeal futures are an increasingly bearish element for soybeans. Spreaders appear to be buying soyoil and selling soymeal. If meal futures continue to trend lower, soybean bulls might only see sideways-at-best price action in the near term. Tomorrow’s weekly USDA export sales report is expected to show U.S. soybean sales of 200,000 to 575,000 MT for the 2021-22 marketing year and sales of 400,000 to 1.05 million MT for 2022-23. Traders will be especially watching for any amount of U.S. soybean purchases coming from China.
Technical analysis: Soybean bulls have a solid near-term technical advantage as prices are in the middle of a wide and choppy trading range at higher levels. The next near-term upside objective for bulls is closing July prices above solid resistance at $17.00. The next downside price objective for bears is closing prices below solid support at $16.00. First resistance is seen at Tuesday’s high of $16.62 3/4, then $16.75. First support is seen at today’s low of $16.22, then $16.00.
Soymeal bulls have lost the near-term technical advantage with prices in a five-week downtrend on the daily bar chart. The next upside objective for bulls is to close July futures above solid resistance at $441.00. The next downside objective for bears is closing prices below solid support at $400.00. First resistance comes in at today’s high of $427.20, then at this week’s high of $435.30. First support is seen at today’s low of $418.40, then $415.00.
For soyoil bulls, the next upside objective is closing July prices above solid resistance at the contract high of 87.65 cents. Bears' next downside objective is closing prices below solid support at 75.00 cents. First resistance is seen at 83.00 cents, then at this week’s high of 84.53 cents. First support is seen at 80.00 cents, then at this week’s low of 79.25 cents.
What to do: Get current with advised 2021- and 2022-crop sales.
Cash-only marketers: You should be 85% sold on 2021-crop. You should also have 40% of expected 2022-crop production forward-sold for harvest delivery.
Price action: July SRW wheat surged 31 cents to $10.76 1/2. July HRW wheat rose 30 1/2 cents to $11.23 1/4. July spring wheat climbed 21 3/4 cents to $11.77 1/4.
Fundamental analysis: Wheat futures rallied in the wake of reports India’s government lowered its estimate for the country’s 2021-22 wheat production by 5.7% to 105 million MT and is considering restricting wheat exports. A severe heat wave is gripping India, the world’s second-largest wheat producer, intensifying concern over tighter global supplies already disrupted by the Russia/Ukraine war.
Spring wheat futures were supported by expectations rain in the northern Plains, Canada’s eastern Prairies and the upper U.S. Midwest will further delay planting. Today’s forecast suggests rain frequency the next two weeks “will be much too high to offer good field working opportunities in the water-logged areas of North Dakota, northern Minnesota or Manitoba, Canada,” World Weather said.
Tomorrow’s weekly USDA export sales report is expected to show U.S. wheat sales of zero to 200,000 MT in the 2021-22 marketing year and sales of 100,000 to 250,000 MT in the 2022-23 marketing year.
Technical analysis: Winter wheat bulls have a near-term technical advantage and regained strength today. SRW bulls' next upside objective is closing July prices above solid resistance at the April high of $11.43 1/2. Bears' next downside objective is closing prices below solid support at $10.00. First resistance is seen at today’s high of $10.89, then at $11.00. First support is seen at $10.50, then at this week’s low of $10.34 1/4.
HRW bulls' next upside objective is closing July futures above solid resistance at the $12.00 area. Bears' next downside objective is closing prices below solid support at $10.50. First resistance is seen at today’s high of $11.34, then at $11.50. First support is seen at $11.00, then at this week’s low of $10.86 3/4.
What to do: Get current with advised 2021- and 2022-crop sales.
Hedgers: You should be 90% sold on 2021-crop in the cash market. You have 10% of 2021-crop hedged in July SRW futures at $8.75 1/4. You should also have 50% of expected 2022-crop forward-sold for harvest delivery.
Cash-only marketers: You should be 90% sold on 2021-crop. You should also have 50% of expected 2022-crop forward-sold for harvest delivery.
Price action: July cotton soared 468 points to 154.76 cents per pound after posting a contract high for the fifth straight session. May futures ended at 158.02 cents, the highest settlement for a nearby contract in nearly 11 years.
Fundamental analysis: Cotton futures were supported by tight domestic supplies and export demand. One reason for bullishness is the number of “on-call” sales registered with the NYMEX. These represent previously made cash transactions, but the price at which the trades have been made are linked to cotton futures. Futures’ recent rally has fostered beliefs merchants will be forced to pay up once those positions are completed or unwound.
New-crop cotton was supported by adverse weather in key growing areas. Much of the West Texas cotton region is in extreme drought, while India and Pakistan are in an extreme heat wave that may curb output. Tomorrow’s weekly USDA export sales report will be studied closely for demand signals.
Technical analysis: Bulls hold a strong technical advantage, with July futures posting a fresh contract high at 155.95 cents, which now represents initial resistance. Bulls are likely targeting the 160.00 area. Above that area, look for resistance around five-cent intervals on the chart, such as 165.00 cents and 170.00 cents. Tuesday’s high at 152.90 marks initial support, with backing from the psychologically important 150.00 level. A drop below that level would have bears targeting the 140.00 cents.
What to do: Get current with advised 2021- and 2022-crop sales.
Hedgers: You are 100% priced in the cash market on 2021-crop. You should also be 50% forward-priced for harvest delivery on expected 2022-crop production.
Cash-only marketers: You should be 90% priced on 2021-crop. You should also be 50% forward-priced for harvest delivery on expected 2022-crop production.
