Crops Analysis | April 19, 2022
Price action: July corn futures fell 7 3/4 cents to $7.99 1/4 after reaching a contract high at $8.14 overnight. December corn lost 2 3/4 cents to $7.47 after hitting a contract high for the seventh consecutive day.
Fundamental analysis: Corn futures fell on profit-taking after the nearby contract rose near a 10-year high overnight. A downturn in wheat futures and a big drop in crude oil also weighed on corn, as did a surging U.S. dollar. The May-July corn spread narrowed recently, possibly suggesting concern that historically high prices are curbing demand and fatigue among market bulls.
Further pressure in corn is likely to be limited the next couple weeks amid concerns over slow U.S. planting progress. USDA reported 4% of the U.S. corn crop was planted as of April 17, up from 2% a week earlier but behind the 6% average the previous five years. More rain is expected over parts of the Corn Belt in the coming week, with temperatures generally cooler than normal. The April 27-May 3 period will be drier overall and planting should increase, said World Weather Inc. today. We think it’s still too early to get overly concerned about significant corn-planting delays.
Technical analysis: Corn bulls still have a strong near-term technical advantage. The next upside price objective for the bulls is to close July futures above solid longer-term resistance at the record high of $8.43 3/4. The next downside target for bears is closing prices below support at $7.50. First resistance is seen at today’s high of $8.14, then at $8.25. First support is at this week’s low of $7.83 3/4, then $7.70.
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 fell 1 1/2 cents to $16.91 3/4, after rising to a three-week high overnight at $17.05 3/4. July soymeal fell 70 cents to $459.60 per ton and July soyoil rose 11 points to 78.20 cents per pound after matching the contract high of 78.50 cents reached yesterday.
Fundamental analysis: Soybean futures ended mixed after an overnight climb to six-week highs faded under profit-taking and spillover pressure from a drop in the wheat market. Sharp declines in crude oil also weighed on the soy complex, with nearby Nymex futures down over $5 a barrel late today. Nearby soybeans were supported by signs of stepped-up buying interest from China, though price upside may be limited with the near-completion of South America’s soybean harvest filling the export pipeline. A slow start to U.S. corn planting has stirred some ideas that soybean acres may increase if farmers shift more acres to soybeans, but November futures still ended little-changed after falling earlier in the session. USDA yesterday reported 1% of the U.S. crop was planted as of April 17, slower than the 2% five-year average.
Early today, USDA reported a daily sale of 123,650 MT of soybeans for delivery to “unknown destinations” during the 2021-22 marketing year. That followed a USDA announcement last Friday of soybean sales to China totaling 661,000 MT (121,000 MT for 2021-22 and 540,000 MT for 2022-23), along with 177,000 MT to unknown destinations for 2021-22.
Technical analysis: Bullish momentum in the soy complex faltered slightly as July soybeans generated little followthrough buying after briefly pushing above yesterday’s high. Further weakness in coming days may foster beliefs the market is in the process of establishing a near-term top, but for now, prices remain in a firm two-week uptrend.
Initial support in July soybeans comes in around yesterday’s low at $16.69, followed by the 10-day moving average around $16.52 3/4. Initial resistance is pegged at the March high of $17.08 followed by the contract high at $17.41, posted Feb. 24. Based on the continuation chart, further resistance is seen at $17.65, a 9 1/2-year high reached in late February. July soybeans reached a three-week high at $17.05 3/4 overnight before fading, while November soybeans hit $15.28 3/4, the highest intraday price since Feb. 24.
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 fell 19 3/4 cents to $11.09 after posting a six-week high at $11.43 1/2 overnight. July HRW wheat fell 12 3/4 cents to $11.76 1/4 and July spring wheat fell 5 3/4 cents to $11.72 1/4.
Fundamental analysis: SRW futures led declines across the wheat markets as traders booked profits following strong gains the past two weeks. Weakness in crude oil and strength in the U.S. dollar also burdened wheat futures. The U.S. dollar index climbed to the highest level since March 2020, fostering concern over slower demand for dollar-denominated commodities such as wheat. Wheat futures fell even as USDA’s crop condition ratings declined, contrary to expectations for slight improvement.
Winter wheat conditions deteriorated last week as drought persisted in the Plains. USDA rated 30% of U.S. the crop in “good” to “excellent,” down two percentage points from a week ago, below an average of analyst expectations and the lowest for this time of year since 1996. When USDA’s weekly crop condition ratings are plugged into the weighted Pro Farmer Crop Condition Index (0 to 500-point scale, with 500 being perfect), the HRW crop declined 6.3 points to 271.5, which is 59.4 points below the five-year average for mid-April. The SRW crop improved 4.8 points on the week to 350.2, led by Illinois and Michigan, though that’s still 9.0 points below the five-year average for the date.
Technical analysis: Wheat bulls stumbled today as July SRW futures reached a new swing high but found little additional buying interest and faded to close below yesterday’s low, a potential bearish “key reversal” lower. Followthrough weakness tomorrow could confirm the reversal and possibly signal a near-term top. But the market remains in a firm two-week uptrend and buyers for months have typically emerged on price downdrafts.
SRW bulls' upside objectives include closing July futures above solid resistance at $12.00, while bears' targets include closing July below support at $10.25. Initial support at today’s low of $11.05 3/4 is backed by the 10-day moving average at $10.83 1/4. In HRW, bulls' upside objectives include closing July futures above solid resistance at the contract high of $12.59, posted March 7, while bears are aiming for a close below solid support at $10.60. July HRW wheat reached a six-week high at $12.02 1/4 overnight before fading.
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 fell 492 points to 138.33 cents per pound, the lowest close in a week, while new-crop December dropped 252 points to 120.95 cents.
Fundamental analysis: Cotton futures followed crude oil, gold and grain markets lower, while sharp strengthening in the U.S. dollar also encouraged sellers. Soaring inflation has contributed to recent strength in cotton and other commodities, but concern a potential recession could hurt exports and domestic apparel demand is also a growing worry.
Losses in new-crop cotton futures was limited by uncertain prospects for the 2022 harvest. USDA yesterday reported planting was underway in eight top U.S. cotton states, but it’s too early to make a firm judgement about the size of the U.S. crop. The crop was 10% planted as of April 17, near the five-year average at 9%.
Technical analysis: The May cotton chart still strongly favors the bulls. The contract again failed to top last Thursday’s high at 146.14 cents, with the close also falling well short of yesterday’s contract-high close of 144.74. Look for stiff resistance at those levels, then psychologically important 150.00 cents. Today’s close remained well above initial support at the contract’s 10-day moving average near 138.25, with backing from the 20-day moving average at 136.63 cents. A drop below those levels would have bears targeting the April 11 low of 131.58 cents, then the 40-day moving average at 128.37 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.
