Crops Analysis | June 3, 2022
Price action: July corn futures fell 3 1/4 cents to $7.27, down 49 3/4 cents for the week and the contract’s lowest closing price since April 1. The lead contract also posted its fifth straight weekly decline. December corn fell 4 1/4 cents to $6.90, down 40 cents for the week and a two-month low.
5-day outlook: Corn futures slumped to two-month lows to end the week as a favorable crop outlook and spillover pressure from a steep downturn in wheat fueled active long liquidation across the grains. USDA’s next crop progress updates Monday likely will show planting of the U.S. corn crop near completion, shifting focus to the agency’s first crop ratings of the season as well as June weather. Earlier this week, USDA reported 86% of the U.S. corn crop was planted as of May 29, up from 72% a week earlier and just one percentage point behind the five-year average. Funds have been rapidly shedding long exposure in corn and further breakdown in the charts, such as a drop under this week’s low of $7.20 1/2 in July, could signal further downside.
30-day outlook: Weather and crop conditions will be key price influencers in the month ahead. While crops are behind schedule, market attitudes toward the weather outlook for the first half of June lean bearish, with young crops expected to benefit from abundant moisture. “Regular rounds of showers and thunderstorms through the next two weeks and at least another week of mild temperatures will maintain favorable conditions for developing crops with rain not likely to fall frequently enough to prevent late planting from taking place between rounds of precipitation,” World Weather Inc. said today. Strong initial crop ratings the next few weeks could keep prices under pressure ahead of USDA’s June 30 Acreage Report.
90-day outlook: Summer weather and export demand will be key to longer-term market direction. A weather-driven rally in the U.S. is always possible, though World Weather earlier this week “softened” its U.S. summer outlook, noting that heat and dryness “are less likely to become excessive features during the first half of summer and that will buy time for early planted crops to develop in a good environment before any threatening heat or dryness evolves,” the forecaster said. Data “suggests a lack of excessive heat” for the central U.S. On the export front, U.S. corn sales have been seasonally weak for the past month, suggesting that high prices may be curbing demand. Early today, USDA reported net U.S. corn sales for the week ended May 26 at 185,800 MT for 2021-22, down 52% from the average for the previous four weeks. Net sales for 2022-23 totaled 48,700 MT, down from 58,300 MT the previous week.
What to do: Get current with advised 2021- and 2022-crop sales.
Cash-only marketers: You should be 90% sold on 2021-crop. You should have 50% of expected 2022-crop forward-sold for harvest delivery.
Price action: July soybeans tumbled 31 1/2 cents to $16.97 3/4, down 34 1/2 cents for the week and the contract’s first weekly decline in the past four. November soybeans fell 14 3/4 cents to $15.27, down 17 cents for the week. July soymeal fell $7.00 to $407.90 per ton and July soyoil rose 41 points to 81.85 cents per pound.
5-day outlook: The soy complex ended the week on a mixed note, with nearby soybeans and soymeal posting weekly declines but soyoil higher, supported by strength in crude oil and concerns regarding tight global vegoil supplies. Continued weakness in corn and wheat could exert pressure on the soy complex next week, along with expectations for another jump in U.S. planting progress. Earlier this week, USDA reported 66% of the soybean crop planted, up from 50% a week earlier and 1 percentage point behind the five-year average. But planting in Minnesota and North Dakota remain well behind schedule and overall crop emergence lags normal.
30-day outlook: Traders will closely follow June weather and early crop development in the Midwest as focus turns to the summer growing season. The weather outlook for the first half of June appears bearish overall for grain markets, with abundant moisture and a lack of extreme heat expected to aid plant growth. USDA’s June 30 Acreage report will be a tone-setter for the rest of summer. Seasonal patterns favor soybean bulls during June, though beans may actually see sideways-to-lower futures trade if corn and wheat continue slipping. The potential for a summer weather problem should limit the downside in new-crop futures.
90-day outlook: Summer weather will be key. Long-term demand underpinnings for soybeans, including robust crushing activity and sharply higher export commitments for 2022-23, appear solid. The drought in South America has driven export business to the U.S. in recent months, but export trends recently have softened to some extent. USDA today reported net weekly U.S. soybean sales totaling 111,600 MT for 2021-22, down 77% from the prior four-week average and a marketing year low. For 2022-23, net sales totaled 284,000 MT, down from 443,000 MT the previous week. Export commitments are running 3% behind year-ago, the same as last week. USDA projects exports in 2021-22 at 2.140 billion bu., down 5.4% from the previous marketing year.
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 be 50% forward-priced on expected 2022-crop for harvest delivery.
Cash-only marketers: You should be 85% sold on 2021-crop. You should be 50% forward-priced on expected 2022-crop for harvest delivery.
Price action: July SRW wheat fell 18 1/4 cents to $10.40, down $1.00 3/4 for the week. July HRW wheat dropped 22 1/2 cents to $11.21, down $1.14 1/4 for the week. July spring wheat fell 7 3/4 cents to $11.91 3/4, down $1.13 for the week.
5-day outlook: Winter wheat futures fell a third consecutive week, solidifying near-term price downtrends on daily charts and suggesting some followthrough technical selling pressure is likely next week. The prospect of an agreement to allow grain exports from Ukraine continues to weigh prices. Spring wheat joined winter wheat in this week’s sell-off. That suggests concerns over delayed plantings have eased or are factored into prices.
30-day outlook: Seasonal price patterns in grain markets favor bears over the next 30 days, partly reflecting accelerating harvest pressure in wheat. Expect wheat traders to look more to the corn and soybean markets in coming weeks as weather scares in both can pop up very quickly in the summer.
90-day outlook: USDA reported net weekly U.S. wheat sales totaling 700 MT for 2021-22, while net sales for 2022-23 were 363,500 MT. The new marketing-year sales were above expectations. U.S. wheat export sales will have to improve in the coming months if futures prices are to remain at what are still historically elevated levels. The U.S. dollar index trading near a 20-year high signals wheat will remain uncompetitive on world markets.
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.
Price action: July cotton fell 93 points to 138.18 cents per pound, down 124 points for the week.
5-day outlook: USDA reported net weekly old-crop cotton sales at 354,200 running bales during the week ended May 26, an increase of over 300,000 bales from the previous week and impressive considering by the 2021-22 crop year ends July 31. New-crop sales reached an impressive 109,100 bales, with shipments leaping to 484,200 bales, a marketing-year high. The implied demand strength in response to the recent price decline inspired a bullish followthrough to Thursday’s big rebound, but bulls couldn’t sustain the advance. We suspect concerns about a recession and a drop in consumer apparel demand undercut July futures, whereas recent West Texas rains caused traders to rethink ideas a Southwest drought would greatly reduce 2022 U.S. cotton production. Look for traders to focus on Monday’s USDA Crop Progress report and Thursday’s export sales next week.
30-day outlook: Export demand will remain key to the old-crop cotton outlook, especially if sales and shipments retain some of the robustness implied by the latest numbers. Other factors potentially include the equity markets, crude oil and the U.S. dollar, as well as other ag markets. New-crop prices will likely be more closely linked to crop conditions and the weather outlook and their implications for the size of the fall 2022 crop.
90-day outlook: Although export demand will remain extremely important to the cotton market outlook, look for traders to begin focusing much more heavily upon new-crop growing conditions and weather, since those will ultimately determine the supplies available to the U.S. and global markets next year. Traders and investors will continue watching the outside markets, particularly the value of the dollar and equity indexes for clues as to likely demand strength later this year and in 2023.
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.
