Crops Analysis | May 9, 2022
Price action: July corn futures fell 12 3/4 cents to $7.72, the contract’s lowest closing price since April 11. December corn dropped a dime to $7.10 3/4, the lowest settlement in over four weeks.
Fundamental analysis: Corn futures got caught in a wash of aggressive selling in the commodity sector amid myriad fund liquidation, fundamental pressure and chart-based selling. Momentum has shifted, meaning bulls must step up to defend long positions or the market will be a risk of additional near-term price pressure.
Fundamental pressure came from improved Midwest weather, which will allow producers in many of the major production areas to finally make significant planting progress. Much warmer and mostly dry conditions are expected across much of the Corn Belt, Delta and Southeast over the next two weeks. The Northern Plains and Upper Midwest will continue to battle a wetter pattern and some flooding.
USDA’s weekly corn export inspections totaled 1.393 MMT (54.8 million bu.). That mildly reduced the average weekly pace needed to hit USDA’s export forecast to 39.7 million bushels. USDA could adjust its export forecast in Thursday’s Supply & Demand Report.
Technical analysis: July corn futures closed below the last reaction low and appeared to post the strongest topping signals since early last fall when the market began a roughly $3 price rally. Initial support is the 40-day moving average at $7.61 1/2, followed by the 50-day average around $7.51 1/2, which lines up with a 23.6% retracement of the strong rally from the September low to the April 29 contract high. Old support at $7.80 1/2 is initial resistance, though bulls likely need a close above $8.00 to strongly suggest another run at the highs could be in order.
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 also have 40% of expected 2022-crop production forward-sold for harvest delivery.
Fundamental analysis: Soy complex futures fell sharply amid active fund liquidation driven by slumping technicals in soybeans and soymeal and expectations for improving planting activity across the Midwest. Sharp declines in crude oil, with nearby U.S. futures down more than $7 earlier today, also contributed to liquidation pressure. Warmer, drier weather beginning last weekend in much of the Midwest should allow farmers to catch up on delayed fieldwork the next two weeks. USDA’s weekly progress report after today’s close is expected to show U.S. soybean planting was 16% completed as of Sunday, up from 8% the previous week.
USDA reported 503,414 MT (18.5 million bu.) of soybeans inspected for export during the week ended May 5, down from 604,711 MT the previous week. Expectations ranged from 400,000 to 885,000 MT. A recent pickup in exports has helped the U.S. narrow the gap with last year’s levels. Inspections are running 14.7% behind year-ago, compared to 15.2% last week. USDA’s 2021-22 export forecast of 2.115 billion bu. is 6.5% below 2020-21.
Technical analysis: Soybean technicals have taken a bearish turn with July futures closing at the lowest price in over five weeks and under key short- and medium-term moving averages, plus far below the contract high of $17.41 reached in late February. Continued weakness in soymeal remains burdensome for soybeans, as do signs of a near-term peak in soyoil, which closed at a two-week low. In July soybeans, bears are likely targeting the April low at $15.60 1/2. A close below that price and the 100-day moving average at $15.54 could trigger further liquidation that puts the February lows under $15.00 in sight. July soybeans are approaching oversold levels based on the Relative Strength Index.
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.
Price action: July SRW wheat fell 15 3/4 cents to $10.92 3/4 after earlier reaching a three-week high at $11.35. July HRW wheat fell 6 1/4 cents at $11.64 1/4. July spring wheat futures fell 2 cents to $12.06 3/4 after earlier posting a contract high at $12.34 3/4
Fundamental analysis: Winter wheat futures erased overnight gains and ended lower on expectations that recent rains will improve crop conditions in the parched U.S. Plains. Sharp declines in crude oil contributed to liquidation pressure across major commodities. Still supportive for wheat futures markets concerns over drought in the U.S. Plains, while spring wheat pushed to contract highs on planting delays in the Northern Plains. While some beneficial rainfall has occurred in winter wheat country recently, World Weather Inc. today said unusual heat “will lead to significant evaporation rates…and net drying will still occur in most areas due to the heat.”
USDA this morning reported 236,847 MT of U.S. wheat were inspected for export during the week ended May 5. That’s down from 392,443 MT the previous week but within trade expectations.
This afternoon’s USDA weekly crop progress reports are expected to show 28% of the U.S. winter wheat crop in good to excellent condition, according to a Reuters survey. That would be up 1 percentage point from last week, but still among the lowest ratings on record for this time of year. Approximately 69% of the U.S. winter wheat crop was in a drought area as of May 3.
Technical analysis: With deteriorating corn and soybean charts, wheat market bulls must show resilience this week or risk further declines. Winter wheat bulls still have the overall near-term technical advantage. SRW bulls' next upside price objective is closing July prices above solid resistance at $12.00. Bears' next downside objective is closing prices below solid support at the May low of $10.34 1/4. First resistance is seen at today’s high of $11.35 and then at the April high of $11.43 1/2. First support is seen at $10.70 and then at $10.50.
HRW bulls' next objective is closing July prices above solid resistance at the April high of $12.02 1/4. Bears' next downside objective is closing prices below solid support at the May low of $10.86 3/4. First resistance is seen at $12.02 1/4, then at $12.20. First support is seen at $11.50, then $11.23 1/4.
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 futures fell 68 points to 142.93 cents per pound, the contract’s lowest closing price since April 27.
Fundamental analysis: Cotton futures fell for a third straight day and neared a two-week slow on spillover pressure from weakness in U.S. stocks and selloffs in grain and crude oil markets. Nearby Nymex crude dropped over $7 a barrel late today, contributing to liquidation pressure across commodity markets. Further strength in the U.S. dollar fueled concern that demand for dollar-based commodities could suffer. The U.S. dollar index hit a 20-year high today.
Declines in cotton futures may be limited by continuing worries over dryness in key U.S. crop areas, such as West Texas. A stationary frontal system across the southwestern U.S. Plains starting Tuesday will act as a trigger for setting off showers and thunderstorms from West Texas cotton, corn and sorghum areas into the central hard red winter wheat production areas, World Weather said today. The precipitation “will spark some excitement for farmers and traders in the region, but the resulting precipitation as good as it may be, will not break the drought,” the forecaster said.
Today’s weekly USDA crop progress report could influence futures direction in coming days. Last week, USDA said 16% complete of the U.S. cotton crop was planted as of May 1, one percentage point ahead of the five-year norm.
Technical analysis: Cotton bulls still hold a technical advantage but momentum has stalled somewhat with the sharp declines since late last week. There are still no strong, early clues to suggest that a market top is close at hand, and there was relatively limited followthrough selling today. The next upside objective for bulls is to close July futures above at the contract high of 155.95 cents, posted May 4. Downside objectives for bears includes closing July below support at 140.00 cents. First resistance is seen at the 10-day moving average around 146.06 and further at 150.00 cents. Initial support is seen at the 20-day moving average at 142.17.
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.
