Crops Analysis | May 13, 2022
Price action: July corn futures fell 10 1/4 cents to $7.81 1/4, down 3 1/2 cents for the week and the second consecutive weekly drop. December corn fell 4 1/4 cents to $7.48 3/4, still up 28 cents for the week. The new-crop contract notched a contract high at $7.58 1/2
5-day outlook: Corn futures fell on pre-weekend profit-taking pressure after prices climbed Thursday following USDA’s lower-than-expected U.S. yield estimate for 2022. Concern over delayed seeding and reduced yield prospects for corn planted after mid-May likely will support futures next week. USDA’s weekly progress update after Monday’s close should illustrate that recent warmer, drier weather helped farmers speed fieldwork, but planting is likely to remain behind normal. USDA reported 22% of the U.S. corn crop was planted as of May 8, up from 14% the previous week but under the 50% average for that date the previous five years.
30-day outlook: Weather and planting progress will also be key influencers into early June, along with exports. Warm temperatures and a mix of rain and sunshine across the Midwest during the next two weeks “should allow for good planting progress in much of the region with the far northwestern Corn Belt continuing to see the poorest conditions for fieldwork,” World Weather Inc. said today. If corn planting delays extend further into May, some farmers may switch acres to soybeans, which could further support December futures beyond the contract high posted today.
90-day outlook: Longer-term trade focus will eventually shift to Midwest late-spring and summer weather and early crop development. Grain prices are already elevated due to drought in South American and war in Ukraine, and a weather-driven rally in the U.S. is always a possibility. Disappointing recent export sales suggest high prices may be curbing demand, as net U.S. corn sales for the week ended May 5 totaled just 192,700 MT for 2021-22, down 80% from the average for the previous four weeks and a marketing-year low. However, China’s return to the U.S. market via a daily USDA sales announcement May 12 after a two-week absence could signal another round of buying, similar to what happened last month and May 2021.
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.
5-day outlook: July soybeans rallied to a weekly high with support from sharp gains in crude oil and soymeal, and fresh export business from China. The strong close to end the week combined with broader concern over tight global grain supplies could further support the soy complex next week, with U.S. plantings likely to remain behind schedule. Early this week, USDA reported the U.S. soybean crop at 8% planted as of May 8, below the five-year average of 13%. About 3% of the crop had emerged, 1 percentage point behind the five-year average.
30-day outlook: Midwest weather and planting progress over the next month will be key to price direction as market focus shifts from old-crop futures to new-crop contracts. November soybeans ended the week at $14.98 1/4, up 27 1/2 cents for the week. But further delays in corn planting may prompt some farmers to switch ground to soybeans, which could weigh on new-crop November futures, as could USDA’s outlook for a second record U.S. crop is a row. On Thursday, USDA projected 2022-23 U.S. soybean production at an all-time high of 4.64 billion bu., about 27 million bu. above analysts’ expectations and 205 million bu. above 2021-22 production.
90-day outlook: The remainder of spring planting and the ultimate corn-versus-soybean acreage balance will be closely followed, along with early crop development. Late-planted soybeans could be vulnerable to late-summer heat during critical flowering and pod-setting phases. Nearby futures will require sustained demand to hold at elevated levels in coming months, and recent USDA sales numbers have proven disappointing. USDA Thursday reported net weekly soybean sales at 143,700 MT for 2021-22, down 74% from the prior four-week average and a marketing-year low. However, USDA today reported a daily sale of 132,000 MT of soybeans for delivery to China during the 2021-22 marketing year. Today's report was USDA’s first soybean sales announcement to China since April 26 and served as a reminder that a short South American crop has kept the U.S. export window open longer than usual.
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 rose 1 1/4 cents to $11.77 1/2, a two-month high and a gain of 69 cents for the week. July HRW wheat rose 12 cents to $12.82, a lifetime-high close and a gain of $1.11 1/2 for the week. July spring wheat rose 9 cents to $13.25 after posting a contract high for the third straight day.
5-day outlook: The technically bullish weekly high closes in wheat markets may generate followthrough buying interest early next week. USDA numbers earlier this week strengthened bullish fundamentals. The 2022 U.S. HRW wheat crop was estimated at 590 million bu., the smallest since 1963-64. Weather patterns in winter and spring wheat country still favor bulls.
World Weather reported net drying is expected in the southern U.S. Plains for the next week to 10 days. “This may stress some of the more immature crops that did not get significant rain recently.” Weekly crop progress reports on Monday afternoon will again be closely scrutinized but are not expected to show any significant improvement in the U.S. HRW crop. Wet weather in spring wheat country has prompted concerns over delayed plantings.
30-day outlook: The U.S. dollar index this week surged to a 20-year high, which has potentially negative implications for U.S. wheat exports. This week’s USDA export sales data showed weekly U.S. wheat sales down 88% from the previous reporting week, down 79% from the four-week average and at a marketing year low. The U.S. wheat export market is especially sensitive to an appreciating U.S. dollar. If the greenback continues to rise on the foreign exchange market, it will be difficult for U.S. wheat export sales to improve and for the presently elevated wheat prices to stay that way.
USDA this week lowered estimated 2021-22 ending HRS stocks by another 12 million bu., to a 14-year low. With the slow pace of spring planting and more rain and flooding expected in the Dakotas and Minnesota, HRS futures prices will likely remain at their historically elevated levels in the coming weeks.
90-day outlook: Bullish USDA data this week, combined with Ukraine’s grain export and crop-growing disruptions, could in the coming weeks boost nearby HRW futures above today’s 14-year high. Looking out over the horizon, wheat traders wonder how high U.S. wheat prices must remain to buy the needed additional U.S. wheat acres for 2023.
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 33 points to 145.20 cents per pound, up 159 points for the week.
5-day outlook: Cotton market bulls turned in a strong week as futures held near recent contract highs. The sideways price action this week came amid the U.S. dollar index hitting a 20-year high and the major U.S. stock indexes notching 12-month lows. However, the market bulls are worried that a continued appreciation in the greenback and/or continued selling pressure in the U.S. stock market could work to limit the upside in cotton futures, if not prompt some significant downside price pressure.
30-day outlook: Cotton traders will continue to closely monitor the crude oil market, which this week pushed back above $110 a barrel in Nymex futures. If oil continues to trade sideways-to-higher in the coming weeks, cotton prices should be able to sustain their present price levels. However, a big sell off in crude oil would be a bearish development that could sink the cotton futures market.
90-day outlook: The cotton crop in the important West Texas Panhandle region is under stress from dry conditions. Some rains in the Texas Panhandle, western Oklahoma and portions of West Texas earlier this week were welcome, “but much of the moisture is being evaporated away by warm and dry conditions. No follow up precipitation of significance is expected.” The significant rain missed the most important dryland production areas of West Texas. As the summer progresses, this situation is likely to become a more bullish element for the cotton futures market.
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.
