Crops Analysis | May 19, 2022
Price action: July corn futures rose 1 3/4 cents to $7.83 1/4, while December futures fell 4 1/4 cents to $7.36, the lowest settlement for the new-crop contract since May 11.
Fundamental analysis: Corn futures ended mixed, with nearby contracts supported by concern over tight global grain supplies and new-crop prices pressured by expectations for improved U.S. planting progress. A second day of sharp declines in wheat also weighed on corn futures. USDA’s weekly export sales numbers were mixed but conveyed a bullish longer-term demand picture, with new-crop sales commitments running 45% above the five-year average, partly due to China purchases. Net U.S. corn sales for the week ended May 12 totaled 435,300 MT for 2021-22, down 36% from the average for the previous four weeks. Net sales for 2022-23 totaled 588,500 MT, led by China at 544,000 MT.
Weather concerns and potential for reduced yields due to late Midwest planting continue to underpin the market. The National Weather Service 90-day forecast calls for elevated odds of above-normal temps across virtually the entire country for June through August. Below-normal precip is also expected across much of the western Corn Belt, with the exception including Minnesota. Also today, the International Grains Council cut its 2022-23 forecast for global corn production by 13 MMT, to 1.184 billion MT, reflecting a downward revision to the U.S. crop.
Technical analysis: Corn futures continue to hold a largely a bullish technical posture, though upside momentum stalled in recent sessions, signaling sideways near-term price movement if key support levels hold. Continued weakness in wheat futures pose one downside risk. For July corn, initial support is seen at the 40-day moving average at $7.75 1/4 and this month’s low at $7.69. A break under those levels may have bears targeting the 50-day moving average at $7.64 1/2. Initial resistance comes in around the 10-day moving average at $7.86 3/4 and Monday’s high at $8.10 1/4.
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 rose 27 3/4 cents to $16.90 1/2, the contract’s highest close since April 27. November soybeans rose 15 cents to $15.14 1/2. July soymeal rallied $11.30 to $425.30 per ton, the highest close since May 2, while July soyoil fell 102 points to 79.53 cents per pound, a four-week low.
Fundamental analysis: Nearby soybeans a hit three-week high behind a resurgent soymeal market and stronger-than-expected weekly export data that underscored how South America’s drought-driven crop shortfall is generating additional business for the U.S. USDA reported net weekly U.S. soybean sales at 752,700 MT for 2021-22, up 65% from the prior four-week average and above expectations ranging from 150,000 to 500,000 MT. China was the lead buyer at 392,600 MT, including 57,000 MT switched from “unknown destinations.”
For 2022-23, net sales totaled 149,500 MT, which included 113,500 MT for unknown destinations. A recent demand pickup has helped U.S. soybean export commitments narrow a gap with last year’s levels to about 4%, down from 5% last week. For 2022-23, outstanding export sales now total 11.4 MMT, up 63% from new-crop sales for the same period in 2021-22 and triple the average from the previous five years. Also today, soyoil tumbled in the wake of reports Indonesia will lift its palm oil export ban May 23 following improvements in the domestic cooking oil supply situation.
Technical analysis: Bullish momentum in soybean futures gained further strength as July futures ended higher for the seventh session in the past eight. A push above $17.00 and the late-April high at $17.04 3/4 may have bulls targeting $17.34, the high for the full month, and the contract high at $17.41. Initial support is seen at the 20-, 40- and 50-day moving averages, which converge around $16.50 to $16.52. July soymeal closed above its 20-day moving average for the first time since April 21 and is poised to end with a sharp gain for the week, suggesting the market has established a near-term bottom.
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 30 1/4 cents to $12.00 1/2. July HRW wheat fell 29 1/4 cents to $12.95 1/4. July spring wheat futures tumbled 22 1/4 cents to $13.30 1/2.
Fundamental analysis: Wheat futures fell on a second day of heavy profit-taking following the rally to contract highs early this week. Better rain chances in the Plains states were also a negative for the wheat markets today. World Weather expects rainfall in the HRW region in the coming week “will be enough for some increase in topsoil moisture in most areas.” Rain in Kansas and Nebraska would help the HRW crop during the reproductive and filling stages. Still, as of May 17, 66% of the U.S. winter wheat crop area was in drought, according to the U.S. Drought Monitor.
Weekly USDA export sales data encouraged sellers. Net weekly U.S. wheat sales totaled 8,500 MT for 2021-22, a marketing-year low, down 40% from the previous week and down 82% from the prior four-week average. Net sales for 2022-23 were much stronger, totaling 325,600 MT. Crop scouts on the second day of the annual Wheat Quality Council HRW tour found an average yield of 37 bu. per acre in western and southern Kansas, down from 56.7 bu. last year and a five-year average of 47.1 bu.
HRW bulls' next upside price objective is closing July prices above solid resistance at the record high of $13.84 3/4. The bears' next downside objective is closing prices below solid technical support at $12.00. First resistance is seen at $13.25 and then at today’s high of $13.45 1/4. First support is seen at today’s low of $12.77 1/2 and then at $12.50.
What to do: Get current with advised 2021- and 2022-crop sales.
Hedgers: You should be 100% sold on 2021-crop in the cash market. You should have 50% of expected 2022-crop forward-sold for harvest delivery.
Cash-only marketers: You should be 100% sold on 2021-crop. You should have 50% of expected 2022-crop forward-sold for harvest delivery.
Price action: July cotton futures rebounded strongly from midweek losses, closing up 323 points to 147.70 cents per pound. New-crop December fell 96 points to 128.22 cents.
Fundamental analysis: Wednesday’s equity market dive spooked commodity markets, particularly cotton futures, as traders worried about potential recession. Cotton prices remained under pressure overnight as the financial markets worried about an accelerating equity market breakdown, and while stocks remained under pressure today, the market had recovered much of the initial declines. That seemed to spur renewed buying in nearby cotton futures, with reports also citing mill buying and U.S. dollar weakness for a significant portion of July futures’ strong bounce.
Weekly USDA export sales were price-supportive, with net 2021-22 U.S. sales more than tripling from the previous week to 110,900 running bales. New-crop sales at 25,400 bales likely disappointed bulls, which may help explain the continued slippage posted by the December contract. Export shipments at 343,200 bales were also supportive for both old- and new-crop prices, since traders view the strong totals as confirming export demand whether the product is shipped before or after the July 31 end to the 2021-22 crop year.
Technical analysis: Today’s reaffirmed the short-term technical advantage owned by bullish traders, since it pushed the July contract price back above the pivotal 144.78 level. Look for initial resistance around the psychological 150.00 cent per pound level, then for stiffer resistance at the contract high of 155.95. A breakout above that point would have bulls targeting 160.00. Support at 144.78 is likely backed by Wednesday’s low at 141.12, then by the contract’s 40-day moving average at 140.06.
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.
