Crops Analysis | May 27, 2022
Price action: July corn futures rose 12 1/4 cents to $7.77 1/4, down 1 1/2 cents for the week and the fourth straight weekly decline. December corn rose 11 1/4 cents to $7.30, down 2 cents for the week.
5-day outlook: Corn futures ended the week on firm note behind strength in wheat as traders monitored Midwest weather and squared positions ahead of the three-day holiday weekend. Despite today’s gains, the markets’ mindset on weather has turned bearish, with rain in coming weeks expected to aid crop development. USDA’s next weekly crop progress update, to be released Tuesday due to the Memorial Day holiday, likely will show corn planting nearing completion. Early this week. USDA reported 72% of the crop was planted as of Sunday, up from 49% a week earlier but still behind the 79% average of the previous five years.
30-day outlook: Weather and other markets, such as wheat, will be price drivers over the coming month. The Midwest weather outlook for the next two weeks “remains favorable for crops in the ground, as a mix of rain and sunshine will keep soil conditions favorable across the region,” 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.” New-crop futures may continue a 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.
90-day outlook: Export demand and summer weather will be key factors to longer-term market direction. A weather-driven rally in the U.S. is always possible, and USDA’s acreage report June 30 will be widely anticipated. Signs that high prices may be crimping foreign demand could limit market upside. USDA yesterday reported net weekly U.S. corn sales of 151,600 MT for 2021-22, down 73% from the average for the previous four weeks and a marketing-year low. For 2022-23, net sales totaled 58,300 MT, far short of expectations for sales of 200,000 to 800,000 MT. U.S. export commitments are now 14% behind year-ago, up from 13% behind last week.
What to do: Get current with advised 2021- and 2022-crop sales.
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 5 3/4 cents to $17.32 1/4, up 27 cents for the week and a lifetime-high close for the contract. November soybeans fell 3/4 cent to $15.44, up 22 1/4 cents for the week. July soymeal rose $4.10 to $432.30 per ton, while July soyoil fell 95 points to 79.57 cents per pound.
5-day outlook: Nearby soybeans faded from an early climb to three-month highs as profit-taking emerged before the long holiday weekend. Concern over reduced yield potential due to delayed planting, particularly in the northwest corner of the Midwest, will likely persist into next week. The far northwestern Corn Belt “will continue to be cool enough through the next week that drying rates will keep improvements in conditions for fieldwork gradual with little fieldwork likely when rain falls daily in parts of the region tonight through Tuesday,” World Weather said today. USDA on Tuesday likely will report another increase in seeding progress. Early this week, USDA reported U.S. soybeans were 50% planted as of May 22, up from 30% a week earlier but behind the 55% five-year average. The crop was 21% emerged, behind the 26% five-year average. This week’s strong price performance may have bulls targeting the July futures $17.41 contract high posted Feb. 24.
30-day outlook: Midwest weather and planting progress over the next month will be closely followed as traders shift focus to new-crop contracts and the summer growing season. Bullish demand fundamentals, including strong crushing and exports, should underpin the market, but the prospect higher soybean acres may weigh on new-crop futures. Earlier this week, Crop Consultant Michael Cordonnier left his U.S. soybean acreage forecast at 91 million acres but said it could increase by 1 million to 2 million acres.
90-day outlook: Longer-term price drivers include spring and early-summer weather. USDA’s acreage report June 30 will be a key market event that will play a large role in price direction over the second half of summer. The drought shortfall in South America may continue to drive export business to the U.S. Earlier this week, USDA reported net weekly soybean sales totaling 276,800 MT for 2021-22, down 48% from the prior four-week average. While old-crop sales were at the low end of trade expectations, new-crop soybeans sales commitments now total 11.8 MMT, triple the five-year average at this point in the marketing year.
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.
Price action: July SRW wheat rose 14 1/4 cents to $11.57 1/2, down 11 1/4 cents for the week. July HRW futures rose 6 3/4 cents to $12.35 1/4, down 17 1/4 cents for the week. July spring wheat rose 12 1/2 cents to $13.04 3/4, up 25 3/4 cents for the week.
5-day outlook: The wheat market bears had the better week but the bulls can argue the firmer price action today will lead to some followthrough buying Tuesday, considering strong gains in corn and soybeans. Next week’s focus will be on weather in the U.S. Northern Plains. Frequent shower and thunderstorm activity next week likely will delay fieldwork and may worsen flooding in some areas. Temperatures will also become unusually cool again next week which will limit evaporation rates. Traders will continue to monitor the Russia/Ukraine war.
30-day outlook: New-crop U.S. SRW export sales are running 38% above the five-year average. However, overall U.S. wheat exports have been underwhelming. With seasonal U.S. harvest pressure to increase, don’t look for much improvement in U.S. wheat exports in the coming weeks. With combines in the southern U.S. getting ready to roll full speed in the coming weeks, seasonal hedge pressure on the wheat markets also may limit the upside in futures prices.
90-day outlook: Even with this week’s declines, nearby wheat futures prices are trading above $11.00 in SRW and above $12.00 in HRW. While tight global supplies and Ukraine disruptions may limit downside for the near-term, the presently elevated prices will at some point return closer to historical norms. We’ll be keeping a close eye on additional pricing opportunities at historically high levels to lock in sales.
What to do: Get current with advised sales.
Hedgers: You should be 100% sold on 2021-crop in the cash market and have 65% of 2022-crop sold in the cash market. You should also have 10% of expected 2023-crop production sold for harvest delivery next year.
Cash-only marketers: You should be 100% sold on 2021-crop and 65% priced on 2022-crop production. You should also have 10% of expected 2023-crop production sold for harvest delivery next year.
Price action: July cotton fell 119 points to 139.42 cents per pound, down 285 points for the week and a four-week low, while December fell 138 points to 123.06 cents.
5-day outlook: The market’s late-week reversal shifted the advantage to the bears, with nearby July futures closing below the 40-day moving average for two consecutive days. Short-term price direction may continue lower, especially if USDA export sales reports continue to disappoint. Traders await Tuesday’s weekly USDA Crop Progress report, which will include the agency’s first condition ratings for the 2022 U.S. cotton crop.
30-day outlook: Cotton futures performed poorly late this week, considering strength in crude oil and U.S. stocks. The stock market surge implied easing recession concerns. Crude oil’s rally suggests the outlook for the commodity sector has improved, which could limit downside in cotton futures. If this week’s late losses aren’t halted or reversed in short order, fund managers may further reduce long exposure.
90-day outlook: The industry’s focus will shift to the new-crop outlook, since the 2021-22 cotton crop year ends on July 31. Export sales and shipments will continue to garner considerable attention, but weather and crop conditions, particularly in West Texas, will become the primary focus of many traders. Conditions in the Lubbock area have improved lately, but whether that will prove temporary could be key to the summer-fall outlook for cotton prices. The outside markets could serve as background for the market, but a recession could greatly reduce price prospects going forward.
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.
