Crops Analysis | May 25, 2022

( )

Corn

Price action: July corn futures rose 1/2 cent to $7.72 1/4 after dropping near a seven-week low earlier, while December futures fell 2 cents to $7.23 1/4, a two-week low.

Fundamental analysis: Corn futures erased much of an early downturn as the wheat market rebounded from sharp initial declines. Grain futures tumbled overnight following reports Russia is ready to provide a humanitarian corridor for vessels carrying food to leave Ukraine in return for the lifting of some sanctions. A sharp increase in U.S. corn plantings the previous two weeks, along with forecasts for favorable weather, are also bearish elements. The next two weeks remain “favorable for crops in the ground as a mix of rain and sunshine will keep soil conditions favorable while some of the drier areas benefit from increases in soil moisture,” World Weather Inc. said today. “Rain will fall frequently enough that planting will be interrupted regularly, but there will be breaks between rounds of rain that allow fieldwork to advance.”

Corn futures remain underpinned by strong demand fundamentals, which may have encouraged late buying today that lifted prices off early lows. U.S. ethanol production averaged 1.014 million barrels per day (bpd) during the week ended May 20, up 23,000 bpd from the previous week and up 0.3% from the corresponding week last year. Ethanol stocks declined 79,000 barrels to 23.712 million barrels, the smallest inventory since the week ended Jan. 14. USDA’s weekly export sales report Thursday is expected to show net U.S. corn sales of 150,000 to 500,000 MT for 2021-22 and 200,000 to 800,000 MT for 2022-23.

Technical analysis: Near-term technicals in corn have turned at least slightly bearish with the July contract settling under the 40-day moving average, currently $7.80 1/4, for the second day in a row. Today’s late rebound was encouraging for bulls, but the market will need to show followthrough strength over the next two days or bears may press their case before the long holiday weekend. Initial support for July futures comes in at today’s low of $7.55, the contract’s lowest intraday price since the contract’s lowest intraday price since $7.45 1/2 on April 8. A push under $7.55 may have bears targeting $7.50, with potential for further downside toward $7.00.

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 12 cents to $16.81, the lowest close in a week. July soymeal fell $2.90 to $424.20 per ton. July soyoil fell 120 points to 78.92 cents per pound, the contract’s lowest closing price since April 20.

Fundamental analysis: The soy complex took spillover pressure from weak corn and wheat markets, as well as broader demand concerns. China’s soyoil consumption is expected to plunge as Covid lockdowns shutter restaurants, curbing soybean demand. Demand for all edible oils in 2021-22 is forecast to drop 8.5% from a year ago to 39 MMT, according to state-run National Grain & Oils Information Center. Also, India’s palm oil imports could drop by nearly a fifth as cheaper soyoil takes more market share following Indonesia’s curbs on palm oil exports, dealers said. The country’s palm oil imports this year are expected to fall 19% to 6.7 MMT, the lowest since 2010-11.

With over half of U.S. corn and soybean crops planted, the Midwest weather outlook is increasingly being viewed as bearish, with expected rains the next two weeks boosting soil moisture and enhancing early crop development. Thursday’s weekly USDA export sales report is expected to show net U.S. soybean sales at 200,000 to 800,000 MT for 2021-22 and sales of 100,000 to 600,000 MT for 2022-23.

Technical analysis: July soybean futures bulls appear to have run out of gas after breaching the $17.00 price level on Monday. That’s the fourth time in four months July beans have quickly backed off after pushing above $17.00. The next near-term upside technical objective for soybean bulls is closing July prices above solid resistance at the contract high of $17.41. The next downside price objective for bears is closing prices below solid support at $16.00. First resistance is seen at $16.90 and then at $17.00. First support is seen at today’s low of $16.65 1/2 and then at $16.50.

Soybean meal bulls and bears are on a level overall near-term technical playing field. The next upside price objective for the meal bulls is to produce a close in July futures above solid technical resistance at $440.00. The next downside price objective for the bears is closing prices below solid technical support at the May low of $395.00. First resistance comes in today’s high of at $428.60 and then at this week’s high of $433.20. First support is seen at today’s low of $418.60 and then at $414.00.

The bean oil bulls still have the overall near-term technical advantage but are fading. The next upside price objective for the bean oil bulls is pushing and closing July prices above solid technical resistance at the May high of 84.64 cents. Bean oil bears' next downside technical price objective is pushing and closing prices below solid technical support at 75.00 cents. First resistance is seen at today’s high of 80.56 cents and then at this week’s high of 82.05 cents. First support is seen at today’s low of 78.45 cents and then at 77.50 cents.

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

Advice: We advise all wheat hedgers and cash-only marketers to sell an initial 10% of expected 2023-crop production for harvest delivery next year.

Price action: July SRW wheat fell 6 1/2 cents to $11.48 1/4, the contract’s lowest closing price since May 11. July HRW wheat fell 4 1/2 cents to $12.33 1/4. July spring wheat rose 3 1/4 cents to $12.80 1/2 after dropping as low as $12.39 1/4 earlier.

Fundamental analysis: Winter wheat futures recovered much of an early selloff triggered by the possibility of increased shipments from the Black Sea region. Russia is ready to provide a humanitarian corridor for vessels carrying food to leave Ukraine, in return for the lifting of some sanctions, the Interfax news agency cited Russian Deputy Foreign Minister Andrei Rudenko as saying. Expectations that recent Plains rainfall may boost the drought-stressed winter wheat crop also weighed on futures.

For spring wheat, there appears to be little relief ahead from the excessive moisture that’s led to the slowest planting pace on record. A return of more frequent rain is expected Friday through early next week in the Northern Plains, likely resulting in new delays. This raises the potential for at least some abandonment. Only 49% of the spring wheat crop was planted as of May 22, compared to a five-year average of 83%.

Thursday’s weekly USDA export sales report is expected to show net U.S. wheat sales at negative-50,000 to 100,000 MT for 2021-22 and 100,000 to 400,000 MT for 2022-23.

Technical analysis: Today’s high-range closes in winter wheat futures suggest the bears may now be exhausted. If the wheat market bulls can at least stabilize prices to end the trading week, they will retain the firm chart advantage by keeping near-term price uptrends in place. SRW bulls' next upside objective is closing July prices 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 today’s high of $11.58 1/2, then at $11.80. First support is seen at today’s low of $11.14 1/2, then $11.00.

HRW bulls' next upside price objective is closing July prices above solid technical resistance at the contract high of $13.79 1/4. The bears' next downside objective is closing prices below solid technical support at $11.50. First resistance is seen at $12.50 and then at $12.75. First support is seen at $12.00 and then at today’s low of $11.92.

What to do: Sell an initial 10% of expected 2023-crop production. Get current with advised sales.

Hedgers: NEW ADVICE -- Sell an initial 10% of expected 2023-crop production for harvest delivery next year. You should be 100% sold on 2021-crop in the cash market. You should also have 65% of 2022-crop sold in the cash market.

Cash-only marketers: NEW ADVICE -- Sell an initial 10% of expected 2023-crop production for harvest delivery next year. You also should be 100% sold on 2021-crop and 65% priced on 2022-crop production.

 

Cotton

Price action: July cotton rose 362 points to 145.16 cents per pound, while new-crop December rose just 83 points to 124.61.

Fundamental analysis: Renewed optimism about the economic outlook sparked a significant morning rebound in the equity indexes, which in turn seemed to spur strong cotton gains. The old-crop July contract proved able to sustain much of its advance despite the afternoon setback suffered by the equities, but the resurgent economic pessimism seemed to undercut the new-crop contracts.

The cotton market seemed vulnerable to a followthrough breakdown from recent losses early Wednesday, with the July contract resting on support the past two days and starting at that level again today. Then it turned sharply higher and seems likely to develop upward momentum, especially if tomorrow’s weekly USDA export sales indicates demand remains robust. Ultimately, cotton prices have proven extremely resilient over the past year. However, the danger of a recession is looming over the market, since apparel demand would almost surely suffer.

Technical analysis: Today’s action renewed the short-term technical advantage enjoyed by cotton market bulls. After testing support at its 40-day moving average near 141.14 the past two days, July futures began today resting at that point as well. A drop below that level would have opened the door to a test of the psychological 140.00 level, then the April 25 low at 132.33 and later the 130.00 level. However, bulls couldn’t sustain a move above the confluence of the 10- and 20-day moving averages at 145.31 and 146.20, respectively, which with today’s high at 147.14 represent a zone of stiff resistance. A breakout above that range would open the door to a test of the May 17 high of 151.95, then the contract high at 155.95.

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.

 

Latest News

H&P Report negative compared to pre-report expectations
H&P Report negative compared to pre-report expectations

Nearly every category topped the average pre-report estimates.

After the Bell | March 28, 2024
After the Bell | March 28, 2024

After the Bell | March 28, 2024

Pro Farmer's Daily Advice Monitor
Pro Farmer's Daily Advice Monitor

Pro Farmer editors provide daily updates on advice, including if now is a good time to catch up on cash sales.

PF Report Reaction: Bullish USDA data for corn
PF Report Reaction: Bullish USDA data for corn

Corn planting intentions and March 1 stocks came in lower than expected.

Report Snapshot: USDA shows lighter-than-expected corn acres and stocks
Report Snapshot: USDA shows lighter-than-expected corn acres and stocks

USDA reported corn acres of 90.036 million acres for 2024 and March 1 stocks of 8.347 billion bu., both well below trade estimates. Soybean acres were slightly lower than expectations, while stocks were higher.