Crops Analysis | May 20, 2022
Price action: July corn futures fell 4 1/2 cents to $7.78 3/4, down 2 1/2 cents for the week and the contract’s lowest close since May 10. December corn fell 4 cents to $7.32, down 33 1/2 cents for the week and also the lowest close since May 10.
5-day outlook: Nearby corn futures fell for a third consecutive week on spillover from a continued slump in the wheat market and expectations for improved U.S. planting progress. The Midwest “will see a mix of rain and sunshine during the next two weeks that will disrupt planting while keeping conditions favorable for newly planted crops,” World Weather Inc. said. While rain expected this weekend and early next week may slow progress, today’s forecast is “drier in most areas for the last days of May and the first days of June.” USDA will likely report at least a decent increase in corn plantings in its weekly update Monday. Earlier this week, USDA reported 49% of the U.S. corn crop was planted as of May 15, up from 22% a week earlier but still well behind the 67% average for the past five years.
30-day outlook: The market will closely follow Midwest weather and planting progress through mid-June and beyond. While planting activity has accelerated the past two weeks, the crop remains behind schedule and concerns remain over yield potential. New-crop prices may extend sideways trade for another few weeks as the market waits for a firmer handle on acres, with the prospect for a summer weather threat likely keeping a floor under the market. Exports will also be closely followed. USDA’s export numbers this week were mixed but the longer-term demand picture remains price-supportive, with new-crop sales commitments running 45% above the five-year average, partly due to China purchases.
90-day outlook: Midwest late-spring and summer weather and early crop development will be key price drivers through mid-summer. Grain prices are already elevated as war in Ukraine disrupts supplies, and a weather-driven rally in the U.S. is always a possibility. USDA’s acreage report June 30 will be a key tone-setter. 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.
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 14 3/4 cents to $17.05 1/4, up 58 3/4 cents for the week and the contract’s highest close since April 21. November soybeans rose 7 1/4 cents to $15.21 3/4, up 23 1/2 cents for the week. July soymeal gained $4.60 to $429.90 per ton, a three-week high, and July soyoil rose 140 points to 80.93 cents per pound.
5-day outlook: Nearby soybean futures extended a nearly two-week rally to four-week highs behind bullish demand fundamentals, including stronger-than-expected exports, while resurgent soymeal also supported the soy complex. Midwest weather and planting activity will be two keys to price direction next week, with USDA expected to report another increase in seeding progress this week. Early this week, USDA reported the U.S. soybean crop was 30% planted as of May 15, up from 12% a week earlier but behind the 39% five-year average. The crop was 9% emerged as of May 15, behind the 12% five-year average. Followthrough strength early next week may have soybean bulls targeting $17.34, July futures’ April high, and the contract high at $17.41.
30-day outlook: Midwest weather and planting progress over the next month will be important price drivers as market focus shifts to new-crop contracts and the summer growing season. A big jump in corn plantings last week seemed to reduce prospects for a major acreage shift into soybeans, but crops are still behind schedule, especially in the northern Midwest. The market will also keep a close eye on crushing and export demand, both of which remain firm. We estimated U.S. crushing during the first eight months of 2021-22 was up 1.4% from the same period in 2020-21, well-above the pace needed to reach USDA’s full-year forecast. With strong processing margins through August, crush is likely to reach or exceed USDA’s forecast.
90-day outlook: Spring and early-summer weather and the ultimate corn-versus-soybean acreage balance will be of keen interest, with USDA’s acreage report June 30 likely to help set the market’s summer tone. Nearby futures will require sustained demand to hold at elevated levels in coming months, and recent USDA export sales illustrate the additional business being generated for the U.S. due to the South America drought. For 2022-23, outstanding soybean export sales total 11.4 MMT, triple the average for mid-May from the previous five years.
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 31 3/4 cents to $11.68 3/4, down 8 3/4 cents for the week. July HRW wheat fell 42 1/2 cents to $12.52 3/4, down 29 1/4 cents for the week. July spring wheat fell 51 1/2 cents to $12.79, down 46 cents for the week.
5-day outlook: Wheat futures markets plunged on heavy, technically-driven fund selling over the past three days, posting technically bearish weekly low closes. That sets the stage for followthrough pressure early next week, with the potential for further liquidation in the near term. Crop-benefitting rains are expected the U.S. Plains next week. In the Northern Plains, forecasts suggest no quick catch-up in delayed spring wheat seedings, which may reduce intended seeded acreage. Still, HRS futures’ weak price performance this week suggests slow planting and inclement weather have been factored into prices.
30-day outlook: Plains Grains, Inc. reports the HRW wheat harvest is just underway in central Texas and in Oklahoma. “Due to the extreme drought conditions, generally in the western half of the U.S., expectations are not high concerning yields,” said the firm. Harvest is expected to pick up in the next week to 10 days, “which should allow for an early read on yields and quality in Texas and southern Oklahoma,” said Plains Grains.
90-day outlook: Concern over tight global supplies due to the Russia-Ukraine war will remain high in coming months, which will limit the downside in wheat futures. Further sharp, headline-driven price moves to the upside or downside cannot be ruled out in the next few months.
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 fell 543 points to 142.27 cents per pound, down 293 points for the week and the contract’s lowest closing price since April 27.
5-day outlook: Cotton futures fell sharply this week in part on spillover pressure from a steep selloff in U.S. stocks, which have been rattled by growing concerns over potential recession and stagflation. Losses for S&P 500 index today pushed the benchmark into bear market territory, down 20% from a record high in January. Demand for new apparel is usually one of the first categories consumers cut back on in recessions. If stocks continue falling next week, look for sustained downward pressure upon old-crop cotton as well. The new-crop contracts might find underlying support if Monday’s USDA Crop Progress report indicates the Southwest drought is further reducing fall 2022 cotton harvest prospects.
30-day outlook: Export demand for U.S. cotton remains robust, but the cotton industry will be keeping an eye upon the weekly USDA Export Sales reports to see if that remains the case as the 2021-22 crop year winds down to its end on July 31. Attention will continue shifting to the new-crop outlook, especially after the USDA starts issuing cotton conditions ratings in late May and early June. The latest forecasts for the Southwest suggest improving moisture prospects for that droughty region, which might also render the market vulnerable to selling. Developments in the outside markets, particularly the equity indexes, the value of the dollar, grains and crude oil could also influence fiber prices.
90-day outlook: Late-spring and summer weather, particularly over the West Texas growing region, will exert increasing influence over the cotton market through midsummer, but recession fears and a resulting decline in cotton demand could also play big roles in the cotton outlook going forward. Shifts in the equity indexes will be watched closely, as will the value of the dollar and other commodities, as they factor into the demand outlook for cotton.
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.
