Crops Analysis | June 9, 2022
Price action: July corn rose 8 1/2 cents to $7.73, the lead contract’s highest closing price since May 27. December futures faded from earlier gains to end 1 cent lower at $7.16 3/4.
Fundamental analysis: July corn rose for the fourth straight day and posted a two-week high as the market extended a weeklong technical resurgence, with the help of forecasts for hot, dry weather in the Midwest and from the soybean market’s rally near decade highs. High temps will reach the mid- to upper-90s in some southwestern and south-central areas of the Midwest next week, with a broader area of heat possible in the western Corn Belt late next week into the following weekend, World Weather Inc. said today. “Many areas will dry down significantly next week through June 23 and subsoil moisture will adequately support crop development, but greater rain will be needed soon to keep production potentials from declining,” the forecaster said.
Corn rallied despite sluggish weekly export readings. USDA reported net U.S. corn sales of 280,400 MT for 2021-22 for the week ended June 2, up 51% from the previous week and up 19% from the average for the previous four weeks. For 2022-23, net sales of 73,500 MT, including 58,300 MT for “unknown destinations,” were up from last week’s 48,700 MT. USDA in its monthly Supply and Demand update Friday is expected to slightly reduce its estimate for U.S. corn ending stocks for 2021-22 and 2022-23.
Technical analysis: Corn bulls continued to strengthen a near-term technical advantage, likely breaking a five-week downtrend drawn from the contract high of $8.24 1/2 posted April 29. Bulls are likely targeting a close above the 40-day moving average, currently at $7.82, as well as the $8.00 level and the May high at $8.10 1/2. Initial support is seen at Wednesday’s low of $7.56 and at the 10-day moving average at $7.52, with further support at last week’s low of $7.20 1/2.
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 have 50% of expected 2022-crop forward-sold for harvest delivery.
Price action: July soybeans surged 29 cents to $17.69, the highest close for a nearby contract since September 2012. November soybeans rose 14 1/4 cents to $15.82 1/4, a lifetime-high close for the contract. July soymeal rose $11.90 to $427.50, near a two-week high. July soyoil fell 31 points to 82.63 cents.
Also today, USDA reported net weekly U.S. soybean sales totaling 429,900 MT for 2021-22, nearly quadruple the previous week’s 111,600 MT tally and up 41% from the prior four-week average. Top buyers included China (128,900 MT, including decreases of 10,900 MT). For 2022-23, net soybean sales totaled 595,300 MT, with top buyers including Pakistan (297,000 MT) and China (261,000 MT). Both old-crop and new-crop sales were on the high end of expectations. In its Supply and Demand update tomorrow, USDA is expected to lower its projection for U.S. 2021-22 ending soybean stocks by about 17 million bu. to 218 million bu.
Technical analysis: Soybean bulls extended upside leadership with a strong breakout above the past three months’ trading range, pushing July futures above resistance including $17.65 and to a high of $17.84, a contract high for the second straight day. The next upside target is the all-time high of $17.94 3/4, posted in September 2012, and beyond that level, the $18.00 mark. Initial support is seen at Wednesday’s low at $17.26 1/2 and at the 10-day moving average at $17.19 1/2.
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 be 50% forward-priced on expected 2022-crop for harvest delivery.
Cash-only marketers: You should be 85% sold on 2021-crop. You should be 50% forward-priced on expected 2022-crop for harvest delivery.
Price action: July SRW wheat fell 3 1/2 cents to $10.71 1/4. July HRW wheat fell 1 1/4 cents to $11.53 3/4. July spring wheat fell 10 1/2 cents to $12.24.
Fundamental analysis: Today’s tepid price action in wheat markets, in contrast to solid gains in corn and soybean futures, is a worrisome signal for the wheat market bulls. Traders are still mulling a potential re-opening of grain shipments from war-torn Ukraine, although many wheat market watchers do not expect any truthful agreement from Russia on the matter.
USDA reported weekly U.S. wheat sales totaled 451,000 MT for the 2022-23 marketing year, which began June 1. Sales were at the high end of trade expectations. U.S. exports for the 2021-22 marketing year that ended May 31 totaled 18.7 MT, down 25% from the prior marketing year. Tomorrow’s monthly USDA Supply and Demand report is not expected to carry large changes for wheat. However, any surprises in corn and soybean numbers could significantly move those markets.
Technical analysis: Winter wheat futures bulls have the slight overall near-term technical advantage. SRW bulls' next upside price objective is closing July prices above solid technical resistance at $11.57 1/4. The bears' next downside objective is closing prices below solid technical support at last week’s low of $10.27 1/4. First resistance is seen at Thursday’s high of $10.89 and then at $11.00. First support is seen at $10.50 and then at the June low of $10.27 1/4. The HRW bulls' next upside price objective is closing July prices above solid technical resistance at $12.50. The bears' next downside objective is closing prices below solid technical support at $10.86 3/4. First resistance is seen at this week’s high of $11.84 3/4 and then at $12.00. First support is seen at today’s low of $11.30 and then at the June low of $11.12 1/2.
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: Cotton futures seemed to break out to the upside Thursday, as July futures rose 589 points to 146.51 cents per pound and December jumped 239 points to 124.93 cents.
Fundamental analysis: USDA’s weekly export sales today proved the strong results in last week’s report were no fluke. While old-crop sales for the week ended June 2 fell 27% from the huge figure posted the week prior, the 259,200 running-bale total topped the four-week average (which included the previous week’s result) by 96%. Again, old-crop sales made at this point are expected to ship by the end of July. Moreover, new-crop (2022-23) sales reached 102,900 bales, with China accounting for 66,100 of that total. The shipments figure at 335,900 bales doesn’t seem terribly impressive until one remembers that one of the days last week was Memorial Day.
Tomorrow’s USDA Supply and Demand update likely will hold few changes to the old-crop estimates, but recent beneficial rains over much of the Texas cotton-growing region may have persuaded USDA to boost their forecasts for 2022-23 U.S. cotton production. The average industry estimate for tomorrow is 16.77 million bales, as opposed to the May forecast at 16.50 million. The most likely cause of such a shift would be a big reduction in USDA’s initial acreage abandonment figure, which was quite large. Analysts expect a bump in new-crop exports to 14.59 million bales from 14.50 million last month. But they’re also looking for carry-out to rise from last month’s 2.90 million-bale projection to 3.11 million.
Technical analysis: Bulls clearly own the technical advantage in the wake of today’s price surge. July futures swamped resistance at the 40-day moving average near 142.67, thereby making it initial support. The contract closed very near its high of 146.82, so resistance at that level looks quite tentative. Look for bulls to be targeting the psychological 150.00 level, then the May 17 high of 151.95. A close above that point would have them targeting the May 4 contract high at 155.95. Look for additional support at the July contract’s 10-day moving average near 139.29, with a drop below that level likely opening the door to a retest of the June 2 low at 134.12, then 130.00.
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.
