Crops Analysis | June 14, 2022

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Corn

Price action: July corn futures fell 1 cent to $7.68 1/4, around the middle of the past week’s trading range. December corn fell 1/4 cent to $7.21 1/4.

Fundamental analysis: Corn futures posted mild declines in sympathy with sharp losses in wheat and general pressure on commodity markets from a slumping U.S. stock market and the U.S. dollar’s surge to 20-year high. USDA crop ratings indicated slight deterioration over the past week but the crop is nearly 100% plant and still in generally good condition. Late Monday, USDA reported 72% of U.S. corn in “good” to “excellent” condition, down from 73% a week earlier. When USDA’s weekly condition ratings are plugged into the weighted Pro Farmer Crop Condition Index (CCI; 0 to 500-point scale, with 500 representing perfect), the corn crop dropped 2.8 points to 379.7, though that was still 5.8 points above the five-year average.

Price pressure on new-crop future may be limited by extreme heat gripping much of the Midwest, with temperatures expected to approach 100 degrees Fahrenheit today and the next few days. Warm to hot temperatures through at the middle of next week “will cause some stress to crops while a restricted rainfall pattern and rapid drying is expected Thursday through June 28,” World Weather Inc. said today. “Although the topsoil will quickly dry down during the next two weeks, subsoil moisture will adequately support crop development and most crops should remain favorably rated during the period.”

Technical analysis: Corn bulls still have a firm near-term technical advantage. However, prices are trading below the key 40-day moving average, which is strong overhead chart resistance. The next upside objective for bulls is to close July futures above solid resistance at $8.00. The next downside target for bears is closing prices below support at the June low of $7.20 1/2. First resistance is seen at today’s high of $7.71, then $7.80. First support is at this week’s low of $7.58 1/2, then $7.50.

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 have 50% of expected 2022-crop forward-sold for harvest delivery and a 10% hedge in December corn futures at $6.92. 

Cash-only marketers: You should be 90% sold on 2021-crop. You should have 50% of expected 2022-crop forward-sold for harvest delivery.

 

Soybeans

Price action: July soybeans fell 9 cents to $16.98 1/2, the contract’s lowest closing price since June 3, while November futures fell 8 1/2 cents to $15.25 1/4. July soymeal sank $4.10 to $411.00 per ton and July soyoil fell 123 points to 78.28 cents per pound.

Fundamental analysis: Soybean futures fell a third consecutive session on spillover pressure from weakness in grains and crude oil, and a continuing U.S. stock market slide that’s fueled growing fears of a potential recession that would curb demand for commodities. Strong demand continues to support soybean prices, though farmers have caught up on delayed planting and USDA condition ratings indicate the crop is off to a strong start. Additionally, a collapse in crush margins is raising concern over demand and the prospect that meal supplies will be at minimum ample.

USDA’s initial soybean ratings of the season had 70% of the crop at “good” or “excellent,” meeting trade expectations, while the crop was 88% planted as of Sunday, matching the five-year average. The soybean crop started the growing season with a 370.9 CCI rating, 12.9 points above last year at this time and 3.2 points above the five-year average. Also today, Cordonnier raised his Brazilian soybean crop estimate by 1 MMT, to 123 MMT, noting better-than-expected yields in Rio Grande do Sul and northeastern states. In Argentina, Cordonnier raised his soybean estimate by 1 MMT, to 42 MMT, citing favorable yields in northern areas.

Technical analysis: Soybean market technicals have eroded this week with July posting its third straight lower close and settling under the 20-day moving average (currently $17.07) for the first time since May 13. The recent uptrend still appears to be in place, but continued price weakness may have bears targeting key support levels, such as the 40- and 50-day moving averages at $16.81 1/4 and $16.73 1/2, respectively. Upside targets include the 10-day moving average at $17.20 1/2 and the contract high of $17.84 posted June 9.

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.

 

Wheat

Price action: July SRW wheat fell 20 3/4 cents to $10.50 1/4, the contract’s lowest closing price since June 3. July HRW wheat fell 19 1/2 cents to $11.42 1/4. July spring wheat fell 13 1/4 cents to $12.08 1/2.

Fundamental analysis: Winter wheat futures fell amid accelerating harvest pressure and continued broad commodity weakness stemming from the slumping U.S. stock market and escalating concern over a possible recession. The U.S. dollar index’s surge to a 20-year high also weighed on grain futures. Near-completion of spring wheat planting is also a source of pressure. USDA reported spring wheat planting 94% complete as of Sunday, up from 82% last week, while the winter wheat harvest was 10% complete, up from 5% a week earlier and 2 percentage points behind the five-year average.

Still, concern over lagging development and lackluster crop conditions helped limit declines in spring wheat. USDA listed 54% of the spring wheat crop good-to-excellent, up from 37% a year earlier. But a high percentage of crops in Montana and South Dakota are in poor condition, and the first overall spring wheat CCI rating was 2.8 points below average for the date.

Technical analysis: Winter wheat technicals took a slightly bearish turn with today’s soft closes. July SRW futures remain near the middle of the trading range that’s persisted most of this month but is nearing some key support areas, including last week’s low at $10.44 1/4 and the June intraday low of $10.27 1/4. Further support is seen at the 100-day moving average at $10.18 1/2. Initial resistance is seen at yesterday’s high of $10.93 1/2 and the 50-day moving average at $11.03 3/4.

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.

 

Cotton

Price action: July cotton fell 218 points to 143.48 cents per pound, while new-crop December fell 216 points to 120.65 cents.

Fundamental analysis: Cotton futures held up well in the face of Monday’s equity market breakdown, especially considering U.S. stock index have tumbled into a bear market amid growing recession worries. Today’s drop also reflected U.S. dollar strength and a turn lower in crude oil futures. USDA ratings indicated a slight decline in the condition of the U.S. cotton crop. The percentage of acres rated “good” to “excellent” as of Sunday dipped from 48% to 46%. That compares to 45% at this time last year. When the numbers are plugged into the Pro Farmer Crop Condition Index (CCI: 0 to 500-point scale, with 500 representing perfect) it states the current crop at 351.00, versus 356.2 last year and the five-year average at 345.60. Thus, despite the severe drought over West Texas early this year, the current national average is slightly above the recent norm.

Technical analysis: Bulls still hold a slight short-term technical advantage since bears couldn’t force a move below the July contract’s 40-day moving average at 142.89. That’s backed by its 20- and 10-day moving averages at 142.04 and 141.48, respectively. A drop below those levels would have bears targeting last week’s low at 136.10, then the June 2 low of 134.12. Today’s high places initial resistance at 145.92, with strong backing from last Friday’s high at 147.70. A bullish breakout would have bulls targeting the May 17 high at 151.95, then the May 4 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.

 

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