Crops Analysis | August 10, 2022

( )

Corn ­

Advice: We advise hedgers and cash-only marketers to sell the final 10% of 2021-crop corn to get to 100% sold. We’ll wait on additional new-crop corn sales.

Price action: December corn futures rose 4 1/2 cents to $6.18 1/2, the contract’s highest closing price since July 29, but well-off early-session highs.

Fundamental analysis: Corn futures ended near two-week highs but faded from initial highs as soybeans sank to losses and some weather outlooks suggested greater rain chances next week in the dry western Corn Belt. Earlier today, World Weather Inc. said the 10-day forecast for central U.S. crop areas turned drier today compared with outlooks earlier this week, but temperatures will be normal to below-normal. The expected weather “will slow the deterioration of crop conditions because of the milder conditions, but rain will eventually be needed,” the forecaster said.

Weather concerns likely will continue to support prices as traders ready for USDA’s Crop Production and Supply and Demand reports Friday. USDA is widely expected to lower its projections for U.S. corn production and yields. Based on a Reuters survey of analysts, corn production is expected at 14.392 billion bu., down from USDA’s current estimate of 14.505 billion bu. Also today, U.S. ethanol production averaged 1.022 million barrels per day (bpd) during the week ended Aug. 5, down 21,000 bpd from the previous week but up 3.7% from the corresponding week last year.

Technical analysis: Corn market technicals lean neutral to bearish even with two consecutive higher closes, with December futures ending around the middle of the trading range that’s held since the end of June. December futures nudged briefly above resistance around $6.26, where 40- and 200-day moving averages converge but failed to generate followthrough buying interest. A push above that level would have bulls targeting last week’s high at $6.36 1/2 and the 50-day moving average at $6.42 1/4. Initial support comes in at the 10- and 20-day moving averages at $6.09 1/2 and $6.01, respectively, followed by last week’s low at $5.87 1/2.

What to do: Sell the final 10% of 2021-crop corn to protect against basis erosion. Wait to make additional 2022-crop sales.

Hedgers: NEW ADVICE -- Sell the final 10% of 2021-crop corn to get to 100% sold in the cash market. You should have 50% of expected 2022-crop forward-sold for harvest delivery.  

Cash-only marketers: NEW ADVICE -- Sell the final 10% of 2021-crop corn to get to 100% sold. You should have 50% of expected 2022-crop forward-sold for harvest delivery.

 

Soybeans

Price action: November soybeans fell 1 cent to $14.27 3/4 after earlier rising to $14.54 3/4, the highest intraday price since Aug. 1. September soymeal rose 50 cents to $449.60, after fading sharply from an early rally to a contract high. September soyoil rose 162 points to 67.38 cents, a six-week closing high.

Fundamental analysis: Soybeans faded from an initial rally and ended over 25 cents off early-session highs, with pressure possibly related to some forecasts indicating greater rainfall prospects for dry parts of the Midwest. In a midday update, World Weather said the GFS model was “much wetter from central and southern South Dakota through eastern Kansas, the southwestern half of Iowa, and Missouri Monday into next Wednesday,” though the forecaster said the latest outlook “is likely too wet. The GFS model also increased rain in the northern Plains and the northwestern Corn Belt Aug. 17-19, but this update may also be too wet, World Weather said.

Weather remains a concern with the crop in critical pod-setting and -filling phases, likely limiting selling pressure ahead of USDA’s Crop Production and Supply and Demand reports Friday. USDA is expected to show slightly smaller production prospects than it projected in July. The soybean crop will total 4.481 billion bu., based on a Reuters survey of analysts, down from USDA’s July projection of 4.505 billion bushels. The average U.S. yield is expected at 51.1 bu. per acre, down 0.4 bu. Also today, USDA reported a sale of 196,000 MT of soybeans for delivery to China during the 2022-23 marketing year. Today’s announcement follows two previous soybean sales to China earlier this month totaling 264,000 MT.

Technical analysis: Soybean futures retain a near-term bullish bias but upside momentum faded to some degree with today’s weak close. November soybeans pushed above the 50-day moving average at $14.35 1/2 but could sustain buying interest and settled below that level. Initial support is seen at the 10- and 40-day moving averages at $14.15 1/2 and $14.08 1/2, respectively, with further support at last week’s low at $13.56. Initial resistance comes in at today’s high of $14.54 3/4 and the 100-day moving average of 14.63 3/4. Longer-term, bulls may target the end-July high at $14.89.

What to do: Get current with advised cash sales. Hedgers should maintain the 10% short hedge position in November futures at $14.73.

Hedgers: You should be 60% forward-sold for harvest delivery on expected 2022-crop production. You also have 10% of expected 2022-crop production hedged in short November soybean futures at $14.73. You should be 95% sold in the cash market on 2021-crop.

Cash-only marketers: You should be 60% forward-sold for harvest delivery on expected 2022-crop production. You should be 90% sold on 2021-crop.

 

Wheat

Price action: September SRW wheat rose 18 1/4 cents to $7.99 3/4, the contract’s highest closing price since July 29. September HRW wheat rose 21 cents to $8.72 3/4. September spring wheat gained 13 1/2 cents to $9.06 1/4.

Fundamental analysis: Wheat futures climbed near two-week highs on short-covering fueled in part by a sharp decline in the U.S. dollar index, which fell to a six-week low. Adverse weather in some European wheat regions also supported prices. Romania’s wheat harvest is projected to be 15% to 18% smaller than 2021, Reuters reported. Weather conditions in U.S. spring wheat country also lean bullish. World Weather projected limited Northern Plains rainfall over the coming week with warm to hot temperatures, which could lead to increasing crop stress in unirrigated areas. “Greater rainfall continues to be needed, especially in the western half of the region,” the forecaster said. “There will be some localized relief; however, rainfall is expected to be quite limited in the second week of the outlook and dryness concerns will remain.”

USDA weekly export sales report Thursday is expected to show U.S. wheat sales of 200,000 to 600,000 MT in the 2022-23 marketing year. Last week’s report showed wheat sales at 249,900 MT. Traders are also looking ahead to Friday’s USDA Crop Production and monthly Supply and Demand reports, with analysts expecting a boost in U.S. wheat production.

Technical analysis: Winter wheat bears have a solid near-term technical advantage with prices in 2 1/2-month downtrends on daily charts. SRW bulls' next upside objective is closing September futures above solid resistance at $8.50. Bears' next downside objective is closing prices below solid support at the January low of $7.38 1/4. First resistance is at today’s high of $8.08 1/2, then at $8.25. First support is seen at Tuesday’s low of $7.72 3/4, then at the August low of $7.52.  

HRW bulls' next upside price objective is closing September prices above solid technical resistance at last week’s high of $9.15 1/4. Bears' downside objective is closing prices below solid support at $8.00. First resistance is seen at today’s high of $8.78 1/2, then $9.00. First support is seen at $8.50, then at this week’s low of $8.29 3/4.

What to do: Get current with advised hedges. Wait on a corrective rebound to increase cash sales.

Hedgers: You have 15% of 2022-crop hedged in short December SRW futures at $7.83. You should be 85% sold in the cash market on 2022-crop. You should be 30% forward-priced on expected 2023-crop for harvest delivery next year.

Cash-only marketers: You should be 85% sold on 2022-crop. You should also be 30% forward-priced on expected 2023-crop production for harvest delivery next year.

 

Cotton

Advice: We advise hedgers and cash-only marketers to sell another 10% of expected 2022-crop cotton to get to 70% forward-priced.

Price action: December cotton rose 187 points to 100.94 cents, the highest closing price since June 23.

Fundamental analysis: Cotton rose on chart-based buying and a sharp decline in the U.S. dollar index. Gains in the crude oil and U.S. stock index markets today were also friendly for cotton futures. Weather in Texas cotton country still leans bullish. World Weather said reported Texas rainfall this week “will be too little, too late for a serious change in production potentials.” Rains in Texas crop areas “may” evolve again late next week after showers occur today and Thursday, the forecaster said.

Cotton traders are awaiting Thursday weekly USDA export sales and Friday’s monthly USDA Supply and Demand report. Friday’s USDA data will provide the first survey-based forecast of the size of this year’s U.S. cotton crop.

Technical analysis: Cotton futures bulls have the overall near-term technical advantage with prices in a three-week uptrend on the daily chart. The next upside objective for bulls is to close December futures above resistance at 108.00 cents. The next downside objective for bears is closing prices below solid support at 95.00 cents. First resistance is seen at today’s high of 102.68 cents, then at 104.00 cents. First support is seen at 100.00 cents, then at today’s low of 97.70 cents.

What to do: Sell another 10% of expected 2022-crop cotton. Our next upside sales target is the 105.00-cent to 110.00-cent range in December cotton futures. Get current with advised 2022-crop sales.

Hedgers: NEW ADVICE -- Sell another 10% of expected 2022-crop cotton to get to 70% forward-priced for harvest delivery.

Cash-only marketers: NEW ADVICE -- Sell another 10% of expected 2022-crop cotton to get to 70% forward-priced for harvest delivery.

 

Latest News

PF Report Reaction: Bullish USDA data for corn
PF Report Reaction: Bullish USDA data for corn

Corn planting intentions and March 1 stocks came in lower than expected.

Report Snapshot: USDA shows lighter-than-expected corn acres and stocks
Report Snapshot: USDA shows lighter-than-expected corn acres and stocks

USDA reported corn acres of 90.036 million acres for 2024 and March 1 stocks of 8.347 billion bu., both well below trade estimates. Soybean acres were slightly lower than expectations, while stocks were higher.

Timeline and Issues in Getting Baltimore Port Channel Reopened
Timeline and Issues in Getting Baltimore Port Channel Reopened

Exxon Mobil and SAF | Fed governor says ‘no rush’ to lower rates | Russia aids Cuba | Key USDA reports today

Cattle Strength Wanes | March 28, 2024
Cattle Strength Wanes | March 28, 2024

Japan works to support Yen, Eurozone cuts production forecast and the Biden Administration will repair Baltimore Bridge...

Ahead of the Open | March 28, 2024
Ahead of the Open | March 28, 2024

Corn, soybeans and wheat traded in tight ranges overnight, with grains showing relative strength into the break.