Crops Analysis | May 23, 2022

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Corn

Price action: Corn futures posted solid gains of 5 to 7 cents to open the week. July corn firmed 7 1/2 cents to $7.86 1/4. December corn rose 7 cents to $7.39.

Fundamental analysis: Corn futures benefited from corrective buying to start the week on spillover from strong gains in the wheat market and sharp losses in the U.S. dollar index. Weakness in the soybean and soymeal markets somewhat limited buying interest.

Fundamental support came from the strongest USDA weekly corn export inspections of the year. For the week ended May 19, corn inspections totaled nearly 1.7 MMT (66.9 million bu.). That lowers the average weekly pace needed to hit USDA’s export forecast of 2.500 billion bu. to 37.5 million bu. over the remainder of the marketing year. China was the destination on 792,998 MT (31.2 million bu.) as it looks to replace Ukrainian supplies that are virtually offline due to the war.

Weather is expected to be generally favorable for planting and crop development across much of the Corn Belt, Delta and Southeast over the next two weeks. Any rains now are likely to be viewed by the trade as crop-supportive and price-negative. The exception is the northwestern Corn Belt, where planting delays are most severe. Rains are expected to be less frequent in these areas, but planting delays remain a concern and not all of the intended acres will likely get seeded.

Technical analysis: July corn moved into the lower end of the broad, five-week trading range last week and are attempting to bounce. Key near-term support is the May 9 low at $7.69. Violation of that level would have bears targeting the $7.50 area. The contract high of $8.24 1/2 posted in late April is near-term resistance, followed by the all-time high of $8.43 3/4 on the continuation chart.

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.

 

Soybeans

Price action: July soybeans fell 18 1/4 cents to $16.87, after reaching a four-week high at $17.20 earlier in the session. July soymeal fell $7.40 to $422.50 per ton. July soyoil fell 46 points to 80.47 cents per pound.

Fundamental analysis: Nearby soybeans erased an overnight climb to four-week highs as soymeal weakness and fund-driven profit-taking from the market’s recent rally overshadowed fresh export business. Early today, USDA reported a U.S. soybean sale of 130,000 MT for delivery to Egypt during the 2021-22 marketing year. However, USDA’s weekly export inspections were at the low end of expectations at 575,781 MT (21.2 million bu.), down from 802,575 MMT the previous week. Expectations ranged from 400,000 to 900,000 MT. Still, inspections are running 13.1% behind year-ago, smaller than the 13.8% shortfall last week.

The soyoil market had a mixed reaction to reports Indonesia allowed the resumption of palm oil exports today after a three-week ban. However, shipments were unlikely to restart until details emerge on how much of the edible oil must be held back for domestic use.

USDA is expected to report a strong jump in U.S. soybean plantings last week in its weekly crop progress report later today. Analysts on average see soybean plantings at the start of this week at 49% complete, up from 30% a week ago.

Technical analysis: Bullish momentum flagged somewhat with today’s reversal lower and close under $17.00, though the July contract did not post a typically bearish “outside day” lower and the market’s two-week uptrend remains intact. Followthrough selling tomorrow could confirm a possible near-term top in the works. Bulls will likely target the April high at $17.34 and the contract high at $17.41. Initial support is seen at the 20-, 40- and 50-day moving averages, which converge around $16.51 to $16.54. July soymeal posted a bearish reversal lower, rising initially above Friday’s high before tumbling to close under Friday’s low. Further weakness Tuesday could confirm that reversal.

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.

 

Wheat

Price action: July SRW wheat rose 21 1/4 cents to $11.90. July HRW wheat rose 23 3/4 cents to $12.76 1/2. July spring wheat futures rose 19 1/2 cents to $12.98 1/2.

Fundamental analysis: Wheat futures posted a corrective rebound following sharp losses during the second half of last week. Reports last week that Russia may consider allowing grain shipments out of Ukraine due to the global food shortage were cast in a less positive light to start the trading week, which likely supported grain futures. The U.S. dollar index dropped a four-week low, which could help dollar-denominated commodities more price-competitive. Tight world wheat supplies and still-poor crop conditions in the U.S. Plains continue to be main underlying bullish elements for the wheat markets.

USDA this morning reported 309,502 MT of U.S. wheat inspected for export during the week ended May 19, in line with market expectations but down from 348,937 MT reported the previous week.

This afternoon’s weekly USDA crop progress reports are expected to show U.S. spring wheat planted at 56% complete as of Sunday versus 39% last week and 94% at this time last year, according to a Bloomberg survey. Winter wheat condition is seen at 28% good to excellent as of Sunday compared to 27% in the same category last week and 47% at this time last year.

Technical analysis: Winter wheat bulls have a firm near-term technical advantage, with seven-week uptrends are in place on the daily bar charts. SRW bulls' next upside objective is closing July futures above solid resistance at the contract high of $12.84. Bears' next downside objective is closing prices below solid support at $11.00. First resistance is seen at Friday’s high of $12.08, then $12.25. First support is seen at last week’s low of $11.68, then $11.50.

HRW bulls' next upside objective is closing July prices above solid resistance at the record high of $13.84 3/4. Bears' next downside objective is closing prices below solid support at $11.50. First resistance is seen at $13.00, then $13.25. First support is seen at today’s low of $12.59, then $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.

 

Cotton

Price action: July cotton rose 48 points to 142.75 cents per pound. December futures rose 80 points to 125.98 cents.

Fundamental analysis: Cotton futures rose moderately with support from a weaker dollar and strength in grains markets. The U.S. dollar index fell to a four-week low, easing concern that foreign buyers may be discouraged from purchasing dollar-denominated commodities. Persistent dryness in key U.S. growing areas continued to support futures. West Texas was expected to receive much-needed rain today into Tuesday and dryland areas will benefit, World Weather said. “But with no follow-up rain through at least the end of the month and higher temperatures returning this weekend, the moisture will quickly be lost to evaporation,” the forecaster said.

In other U.S. cotton areas, western Texas through the Coastal Bend and south Texas should benefit from significant rain this week, with the Blacklands wettest, meaning crops should be able to utilize the moisture for at least several days and possibly more than week before it is lost to evaporation, World Weather said.

Technical analysis: Cotton futures retain a longer-term bullish posture but upside momentum slipped over the past week. July futures fell to a three-week low at 140.83 cents earlier today before rebounding, managing to hold support at the 40-day moving average at 140.70 cents. Further weakness may have bears targeting support at the 50-day moving average at 137.08 cents and the late-April low of 132.33 cents. Upside targets include last week’s high at 151.95 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.

 

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