Crops Analysis | May 26, 2022

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Corn

Price action: July corn futures fell 7 1/4 cents to $7.65, the contract’s lowest closing price since $7.58 3/4 on April 11. December corn fell 4 1/2 cents to $7.18 3/4, the lowest close in over two weeks.

Fundamental analysis: Nearby corn futures dropped to the lowest settlement in over six weeks on pressure from lackluster export sales and an outlook for favorable crop weather in the Midwest. Unwinding of long corn-short soybean spreads also weighed on corn futures. With the U.S. corn crop likely at least three-fourths planted, delayed planting concerns have eased and additional rain expected for much of the Midwest should enhance early plant development. The two-week outlook “remains favorable for crops in the ground as a mix of rain and sunshine will keep soil conditions favorable while some of the drier areas benefit from increases in soil moisture,” World Weather Inc. said today.

Signs of flagging foreign demand also weighed on the market. Early today, USDA reported net weekly U.S. corn sales of 151,600 MT for 2021-22, down 63% from the previous week, down 73% from the average for the previous four weeks and a marketing-year low. For 2022-23, net sales totaled 58,300 MT, far short of expectations for sales of 200,000 to 800,000 MT. U.S. export commitments are now 14% behind year-ago, up from 13% behind last week.

Technical analysis: Near-term technicals in corn have turned bearish with the July contract settling under the 50-day moving average, currently $7.70, for the first time since mid-January. July futures are on track for a fourth consecutive weekly drop, and further declines a possible, especially if funds further reduced a still-sizable net long position before the long holiday weekend. Downside levels to watch include the 100-day moving average at $7.08 ¼ and the late-March low at $6.95 1/2. Initial resistance comes in at Wednesday’s high at $7.73 and this week’s high at $7.88.

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.

 

Soybeans

Price action: July soybeans surged 45 1/2 cents to $17.26 1/2, a lifetime-high settlement for the contract. November soybeans rose 32 cents to $15.44 3/4, also a lifetime-high close. July soymeal gained $4.00 to $428.20 per ton and July soyoil rose 160 points to 80.52 cents per pound.

Fundamental analysis: Soybean futures erased overnight declines and rallied behind expectations that wet conditions for the northern Midwest will further delay spring planting. Only 7% of the soybean crop in North Dakota was planted as of May 22, while the Minnesota crop was just 32% planted, both far behind the five-year average for that date. Forecasts appeared to hold little promise farmers in those states will catch up quickly. Over the next two weeks, the far northwestern Corn Belt “will continue to be cool enough through the next week that drying rates will keep improvements in conditions for fieldwork gradual with little fieldwork likely when rain falls daily in parts of the region this weekend into the middle of next week,” World Weather said today.

The soy complex was also supported by strength in crude oil futures and optimism over demand. USDA reported net weekly soybean sales totaling 276,800 MT for 2021-22, down 63% from the previous week and down 48% from the prior four-week average. For 2022-23, net sales totaled 443,000 MT, led by unknown destinations, at 284,000 MT. While old-crop sales were at the low end of trade expectations, new-crop soybeans sales commitments now total 11.8 MMT, triple the five-year average at this point in the marketing year.

Technical analysis: Bullish momentum gained fresh fuel today as July futures posted the highest close in the contract’s lifetime and reached an intraday high at $17.37, topping the April high of $17.34 and near the contract high of $17.41 posted Feb. 24. Based on the continuation chart, additional upside targets include $17.57 1/2, nearby futures’ intraday high for April, and $17.65, a 9 1/2-year high posted during February.

What to do: Get current with advised 2021- and 2022-crop sales.

Hedgers: You should be 95% 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 85% sold on 2021-crop. You should also have 40% of expected 2022-crop production forward-sold for harvest delivery.

 

Wheat

Price action: July SRW wheat fell 5 cents to $11.43 1/4. July HRW wheat fell 4 3/4 cents to $12.28 1/2. July spring wheat futures jumped 11 3/4 cents to $12.92 1/4.

Fundamental analysis: Winter wheat futures fell for the fifth day in the past six amid pressure from weak technicals and expectations crops in the U.S. Plains will benefit from recent rains. Traders continued to monitor the Russia/Ukraine war following reports earlier this week that Russia is ready to provide a humanitarian corridor for vessels carrying food to leave Ukraine in return for the lifting of some sanctions. Turkey is in negotiations with Russia and Ukraine to open a corridor via the Bosphorus for grain exports from Ukraine, a senior Turkish official told Reuters. However, Russia-based consultancy SovEcon said it doubts there will be a full-scale resumption of Ukrainian grain exports anytime soon.

USDA export numbers continued to illustrate limited overseas demand. USDA reported a net weekly U.S. wheat sales reduction of 2,300 MT for 2021-22, a marketing-year low. For 2022-23, net sales totaled 246,300 MT, down from 325,600 MT the previous week and in-line with expectations. Spring wheat planting delays are expected to continue with more rain is expected Friday through early next week in the Northern Plains, raising potential for at least some abandonment. 

Technical analysis: Winter wheat bulls have a near-term technical advantage but have lost strength. Seven-week price uptrends are still in place on the daily charts. SRW bulls' next upside objective is closing July futures above solid resistance at the contract high of $12.84. Bears' next downside objective is closing prices below solid support at $11.00. First resistance is seen at today’s high of $11.60 1/4, then $11.80. First support is seen at this week’s low of $11.14 1/2, then $11.00.

HRW bulls' next upside objective is closing July futures above solid resistance at the contract high of $13.79 1/4. Bears' next downside objective is closing prices below solid support at $11.50. First resistance is seen at $12.50, then $12.75. First support is seen at $12.00, then at this week’s low of $11.92.

What to do: Get current with advised sales.

Hedgers: You should be 100% sold on 2021-crop in the cash market and have 65% of 2022-crop sold in the cash market. You should also have 10% of expected 2023-crop production sold for harvest delivery next year.

Cash-only marketers: You should be 100% sold on 2021-crop and 65% priced on 2022-crop production. You should also have 10% of expected 2023-crop production sold for harvest delivery next year.

 

Cotton

Price action: July cotton fell 455 points to 140.61 cents per pound, while new-crop December fell 28 points to 124.33. 

Fundamental analysis: Cotton futures fell despite gains in crude oil and U.S. stocks, suggesting easing concern over a potential for a recession that would hurt cotton demand. USDA export sales report apparently triggered today’s sell-off, although the results did not appear especially bearish. Old-crop cotton sales reached just 37,000 running bales, down 67% from the week prior figure and down 70% from the four-week average. However, small old-crop sales aren’t surprising with the current marketing year ending soon.

New-crop sales at 95,413 bales marked a five-week high, although not nearly as large as some weekly totals posted over the past few months. Traders may have been reacting to the shipments figure at 318,472 bales, since that was the lowest weekly figure since early February. We think traders would be well advised to wait at least another week before turning bearish, since next week’s figures will reflect the market’s reaction to recent price weakness.   

Technical analysis: Today’s July futures dive gave back yesterday’s strong advance and then some, with bears proving able to force a close below support at the contract’s 40-day moving average at 141.28. So bears may now hold the short-term technical advantage. A followthrough drop would have bears targeting the April 25 low at 132.33, then the psychological 130.00 and 125.00 levels. Resistance above the 40-day moving average likely falls between the contract’s 10- and 20-day moving averages near 144.90 and 145.90. A move above those levels would open the door to a test of the May 17 high of 151.95, then the contract high at 155.95.

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.

 

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