Crops Analysis | June 21, 2022

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Corn

Price action: July corn futures fell 24 1/4 cents to $7.60 1/4, a two-week low, while December corn fell 27 1/4 cents to $7.03 3/4, the contract’s lowest closing price since June 3.

Fundamental analysis: Corn futures tumbled on spillover from sharp losses in wheat markets and an outlook for less-threatening weather in the Midwest. The next week will be hot in the Corn Belt but not as hot as in recent days. Some scattered rains are also in the forecast over the next week. World Weather Inc. today said the high-pressure ridge responsible for weekend heat and dryness will break down over the coming week, but cooling will be gradual and temperatures are unlikely to drop below average. No widespread rains are forecast for the Corn Belt through at least the weekend. It’s likely the recent heat has accelerated the growing progress of the corn plants. Farmers are “watching it grow” said one Corn Belt ag radio commentator.

USDA crop ratings later today were seen falling slightly from last week, likely reflecting stress from the recent heat wave. The agency was expected to rate 70% of the corn crop good-to-excellent, down 2 percentage points from a week ago. Also today, USDA reported 1.184 MMT of corn inspected for export during the week ended June 16, down from 1.221 MMT the previous week, in line with market expectations.

Technical analysis: July corn gapped lower on the daily bar chart today, and while bulls still hold a near-term technical advantage, upside momentum has faded as a near-term uptrend has stalled out. Prices are trading below the key 4-day moving average. The next upside objective for bulls is to close July futures above solid resistance at $8.82 1/4, which is the top of today’s downside price gap on the daily chart. 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 $7.70, then at today’s high of $7.78 1/4. First support is at today’s low of $7.59 1/4, 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 21 cents to $16.81, the contract’s lowest settlement since May 25, while November soybeans fell 27 cents to $15.10 1/2, the lowest close since May 31. July soymeal fell $6.80 to $431.30 per ton. July soyoil fell 42 points to 73.37 cents per pound, a two-month low.

Fundamental analysis: New-crop soybean futures tumbled to three-week lows on spillover from slumping corn and wheat and an outlook for crop-friendlier weather in the Midwest. After another round of temperatures well into the 90s this week across the Midwest, conditions are expected to moderate next week, though crops will still need moisture in the wake of this month’s extreme heat. “Crops will benefit from mild temperatures Sunday through next week, but rain into July 5 will be minimal in most areas and the drying expected will leave crops…vulnerable to quick increases in stress and declines in yield potentials if hot and dry weather returns later in July,” World Weather said today.

Soybeans held up better than corn, reflecting greater weather risk due to delayed planting and expectations for slight deterioration in USDA crop ratings out later today. The combined good-to-excellent rating for soybeans is expected to slip to 69% at the start of this week from 70% a week earlier, based on the Reuters survey. The crop is expected to be about 95% planted, up from 88% a week earlier. Also today, USDA reported 427,344 MT (15.7 million bu.) of soybeans inspected for export during the week ended June 16, down from 608,116 MT the previous week. Expectations ranged from 300,000 to 625,000 MT. Inspections are running 11.1% behind year-ago, compared to 11.5% last week.

Technical analysis: Technicals continued to erode after July soybeans gapped lower at the start of overnight trading (the gap was filled later today) and last week broke a month-long uptrend that began in early May. The lead contract closed slightly above the 40- and 50-day moving averages, both around $16.80 1/2, but is still vulnerable to further chart-based selling pressure from funds, especially if corn and wheat continue to slide. Downside targets for bears include a late-May low around $16.65 and the 100-day moving average around $16.45. Upside targets include today’s high at $17.02 and the 20-day moving average at $17.09 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.

 

Wheat

Price action: July SRW wheat plunged 59 cents to $9.75 1/4, the contract’s lowest closing price since March 1. July HRW wheat sank 63 3/4 cents to $10.41 1/4, the lowest close since April 4. July spring wheat fell 51 3/4 cents to $11.17 3/4, a two-month low.

Fundamental analysis: Winter wheat futures fell sharply to the lowest levels in over three months as accelerating harvest pressure fueled long liquidation. Futures’ weakness indicates traders believe farmers made a good jump in harvest progress last week, with hot, dry conditions across the Plains encouraging further progress. Winter wheat harvest was expected to be about 23% complete at the start of this week, up from 10% a week earlier, based on a Reuters survey. Spring wheat planting was seen 99% finished as of Sunday (6/19), up from 94% a week earlier.

Also today, USDA reported 331,328 MT (12.2 million bu.) of wheat inspected for export during the week ended June 16, down from 411,916 MT the previous week, and near the low end of expectations ranging from 300,000 to 500,000 MT. Shipments are running 22.4% behind year-ago, compared with 11.4% behind year-ago last week.

Technical analysis: Winter wheat charts are breaking down with nearby SRW futures closing below $10.00 for the first time since April 1, based on the daily continuation chart. Prices are at risk for further downside as funds shed long positions. Large speculators by mid-June had already reduced their bullish bets in the SRW wheat market to the lowest level in 3 1/2-months, data from the Commodity Futures Trading Commission showed, and further selling this week could shift funds to a net short position. Downside targets in July SRW include the March low at $9.67 1/4 and the $9.00 area. Upside chart levels to watch include the 100-day moving average at $10.28 1/4 and the 10-day moving average at $10.54 3/4.

The managed money net long in SRW futures and options shrank 5,736 contracts during the week ended June 14 to 6,939 contracts, the fourth straight weekly decline and the smallest net long since the week ended March 1.

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: Old- and new-crop cotton futures diverged, with the July contract edged up 6 points to 143.51 cents per pound, while most-active December futures tumbled 444 points to 113.85 cents.

Fundamental analysis: Cotton futures ended mostly lower even as U.S. stocks strengthened and the U.S. dollar index declined. Sharp losses in grain markets, driven by chart-based fund selling, may have encouraged sellers in cotton. Ultimately, recessionary talk appears to have surpassed a critical point for cotton traders, with the deferred losses apparently reflecting a growing belief that the U.S. and/or global economies will have entered a recession by the fourth quarter of this year.

Cotton futures could still find support if today’s USDA Crop Progress report indicates a decline in cotton growing conditions. Also looming over the market is the June 30 USDA Acreage report. If U.S. cotton plantings fall short of expectations, that might easily boost the market, as could a surprisingly large abandonment figure (abandonment = plantings minus harvested acreage). The trade will obviously be keeping an eye on the weekly Export Sales reports from the USDA as well.

Technical analysis: Today’s chart breakdown flipped the short-term technical advantage to the bears. Rally attempts from this point will face strong resistance at today’s high of 117.93, with considerable backing from the contract’s 10-, 20- and 40-day moving averages at 120.25, 121.14 and 123.44. Still, a push back above those levels would have bulls targeting the contract high at 133.79. Initial support stands at today’s low of 113.27. A sustained drop would have bears targeting the April 4 low at 111.00, then the March 28 low of 108.75. A breakdown from that point would likely open the door to a test of the psychological 100 level.

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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