Crops Analysis | August 12, 2022
Price action: December corn futures rose 14 1/2 cents to $6.42 1/4, up 32 1/4 cents for the week and the contract’s highest closing price since $6.53 3/4 on June 20.
5-day outlook: December corn settled near an eight-week high after USDA lowered its forecast for the U.S. corn crop more than expected, indicating extreme heat and dryness in the Midwest this summer crimped yield potential. In its Crop Production report today, USDA pegged the 2022 crop at 14.359 billion bu., about 33 million bu. under expectations and down 146 million bu. from its July estimate. The estimated crop would be down 756 million bu. from 2021. This week’s strong close may generate follow-through buying early next week, but traders will likely quickly shift attention back to Midwest weather and Monday’s weekly crop ratings.
30-day outlook: Midwest weather will continue to be the key price influencer for at least a couple more weeks, with corn traders likely looking to the soybean market for direction ahead of USDA’s next Crop Production update Sept. 12. Continued dryness in the western Corn Belt may keep prices elevated and could spark a rally back toward the July high ($6.58 1/2) or even the $7 mark if traders sense yield prospects may erode further. USDA lowered its national average yield estimate to 175.4 bu. per acre, down 1.6 bu. per acre from last year’s record and 5.6 bu. (3.1%) below trendline. But any widespread rain events would slow upside momentum.
90-day outlook: The longer-term picture leans bearish for corn amid increasing grain shipments out of Ukraine, slipping domestic basis and new-crop exports off to a slow start (2022-23 outstanding sales through the week ended Aug. 4 totaled 8.05 MMT, are down 56% from the same point in 2021-22). Pressure from the impending harvest will likely arise at some point in September. Outside markets such as crude oil and the U.S. dollar may also factor into grain market direction. Crude oil futures extended a two-month downtrend this week and further declines could prompt speculators to cut long exposure in the grain markets.
What to do: Get current with advised sales. Wait to make additional 2022-crop sales.
Cash-only marketers: You are 100% sold on 2021-crop. You should have 50% of expected 2022-crop forward-sold for harvest delivery.
Price action: November soybeans rose 5 3/4 cents to $14.54 1/4, up 45 1/2 cents for the week and the contract’s highest closing price since $14.68 1/2 on July 29. September soymeal rose $8.20 to $465.70, a lifetime-high close for the contract. September soyoil rose 23 points to 69.53 cents, a seven-week closing high.
5-day outlook: Soybean futures dropped sharply after USDA unexpectedly hiked its estimate for the U.S. soybean crop, but quickly rebounded to end higher and post solid gains for the week. In its first survey-based figures, USDA estimated the crop at a record 4.531 billion bu., up from 4.505 billion bu. in a July forecast. Analysts on average expected USDA to lower its estimate by about 50 million bu. With USDA’s crop estimate as a starting point, trade focus will quickly return to Midwest weather and weekly crop ratings Monday. This week’s strong close could fuel followthough buying interest early next week, with market bulls likely targeting the July high in November futures at $14.89.
30-day outlook: Weather during the second half of August and early September will be key to soy complex direction as the growing season winds down. Persistent dryness in the western Midwest, combined with continued strength in soymeal and soyoil, could drive continued upside, but a widespread rain event could quickly send prices tumbling. Market uncertainty will remain high and the next few weeks may bring more choppy, volatile price action as traders monitor weekly crop ratings and weather forecasts and wait for USDA’s Crop Production update Sept. 12.
90-day outlook: Market focus will shift to demand and South America’s upcoming crop season as traders gain a firmer sense of U.S. production. Soybean futures will require solid export demand to remain at elevated levels. While China curbed 2021-22 soybean imports, the country re-emerged as a buyer of U.S. beans in recent weeks, and new-crop export sales overall have remained strong. During the week ended Aug. 4, outstanding soybean sales for 2022-23 totaled 15.7 MMT, 53% above the average for that date over the previous five years.
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.
Price action: September SRW wheat fell 4 3/4 cents to $8.06, up 30 1/4 cents for the week. September HRW wheat ended unchanged at $8.89 1/4, up 41 cents for the week. September spring wheat fell 2 1/4 cents to $9.19 1/2, up 33 cents for the week.
5-day outlook: While the winter wheat market bulls had the better trading week, this week marked the fourth consecutive week of choppy, sideways and languishing price action at lower levels. Today’s monthly USDA supply and demand report carried no big surprises to break wheat prices out of recent trading ranges. The agency’s U.S. all-wheat crop estimate increased only 2 million bu. from last month to 1.783 billion bu., 8 million bu. lower than the average trade estimate.
30-day outlook: With corn and soybean growing seasons in late stages and harvest looming, look for wheat traders to look to the corn and soybean markets for price direction in coming weeks. Wheat traders in the coming weeks will continue to closely watch the U.S. dollar index, which this week hit a four-week low. Further weakness in the dollar could help wheat futures establish a market floor after recent sideways and choppy trading at lower levels.
90: day outlook: Wheat traders will continue to monitor the progress of Ukrainian grain shipments out of the Black Sea region. Reports said two more ships left Ukraine’s Black Sea ports Friday, including the first wheat shipment under the new export deal. A total of 14 ships have now departed from Ukraine over the past two weeks following a recent deal with Russia. One market analyst said just one errant Russian missile coming near the grain-carrying vessels or shipping ports could derail the whole process.
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.
Price action: December cotton rose the 400-point daily limit to 108.59 cents per pound, up 1,246 points, or 13% for the week and the highest closing price since June 21.
5-day outlook: Look for a strong cotton futures opening Monday, with trading limits likely to expand to 500 points, building on gains triggered by USDA Supply and Demand and Crop Production reports today. USDA lowered its estimates for U.S. harvested acres (down from 8.55 million to 7.13 million acres) and yield (down from 870 to 846 pounds per acre), which resulted a sharp cut in the production forecast from 15.50 million to 12.57 million bales, a 28% reduction in U.S. output. Bulls may also have been encouraged by the minimal 100,000-bale cut to the USDA’s estimate of 2021-22 U.S. cotton exports to 14.65 million pounds, which added the same amount to old-crop carryout at 3.5 million bales.
30-day outlook: Traders will likely increase focus upon the U.S. crop outlook, especially if drought continues in the Southern Plains, or a major hurricane threatens the Southeast. The recent slowdown in U.S. cotton export sales and shipments could also exert increasing downward pressure on prices if it persists, as might a resumption of the first-half U.S. dollar rally. Signs of a U.S. recession could undercut prices as well since consumers often cut back on apparel purchases in tough times.
90-day outlook: Late summer/fall weather and export news will likely remain key to the 90-day cotton price outlook, although economic news seems likely to exert inordinate influence over the market through the balance of the year. La Nina conditions are more conducive to Atlantic hurricanes, so the potential for a major storm making landfall on the U.S. coast seems relatively high. It’s impact on the U.S. crop will likely depend on the timing. That is, a late-summer storm that brings plentiful rains to a crop with unopened bolls could boost production prospects and undercut prices. Conversely, a later storm that drowns cotton in open bolls could send prices higher.
What to do: Get current with advised 2022-crop sales. Our next upside sales target is the 105.00-cent to 110.00-cent range in December cotton futures.
Hedgers: You should be 70% forward-priced for harvest delivery on expected 2022-crop production.
Cash-only marketers: You should be 70% forward-priced for harvest delivery on expected 2022-crop production.
