Crops Analysis | June 22, 2022

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Corn

Price action: July corn futures rose 7 1/4 cents to $7.68, while December corn fell 7 3/4 cents to $6.93 3/4, the new-crop contract’s lowest closing price since June 3.

Fundamental analysis: Nearby corn futures rose with support from bull spreading, while new-crop December fell near a three-week low on continued strong crop ratings and an outlook for less-threatening Midwest weather. While weekly USDA ratings eroded slightly as temperatures soared into the 90s Fahrenheit this month, some corn likely benefitted as heat accelerated growth for the late-planted crop. Rapid drying will continue in many areas outside of the northwestern Corn Belt through Saturday as temperatures remain warm to hot, World Weather Inc. said today. However, “most areas will see little to no rain of significance before a welcome period of milder temperatures occurs Sunday through next week,” the forecaster said.

USDA late Tuesday reported 70% of the U.S. crop in “good” or “excellent” condition as of Sunday, down from 72% from a week earlier and meeting expectations. 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 fell 3.5 points to 376.2, though that was still 4.4 points above the five-year average.

Technical analysis: July corn technicals were shored up to some extent as the contract closed back above the 20-day moving average. However, December futures chart postured turned more bearish as the contract closed under its 40-day moving average, currently $7.14, for the second straight day. Grain futures upside momentum has slowed substantially over the past week, and further declines in wheat markets could weigh on corn. Initial support in July corn is seen at Tuesday’s low at $7.52 1/4, and further at the 100-day moving average around $7.35. Initial resistance is seen at the 10-day moving average of $7.72. Further price weakness may have bears targeting the June low at $7.20 1/2. December corn overnight fell as low as $6.90, the contract’s lowest intraday price since $6.88 1/2 on June 3.

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

Advice: We advise hedgers to hedge 10% of expected 2022-crop production in short November soybean futures. Our fill was $14.73.

Price action: November soybeans fell 34 cents to $14.76 1/2, a six-week low. August soymeal fell 60 cents to $415.30. August soyoil fell 279 points at 68.88 cents, a 2 1/2-month low.

Fundamental analysis: Soybean and soyoil futures fell sharply amid less-threatening Midwest weather forecasts and steep declines in crude oil and Malaysian palm oil. Midwest crops “will benefit from mild temperatures Sunday through next week, but rain through July 6 will not be great enough to prevent continued drying that 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. The crude oil market’s tumble to six-week lows weighed heavily on the raw commodity sector amid growing notions the U.S. and possibly other major economies will slip into recession that could curb demand.

Weekly crop ratings slipped more than expected but corn and soybean acreage is still considered in strong shape. USDA’s “good” to “excellent” rating for soybeans fell to 68% as of Sunday from 70% a week earlier and about 1 percentage point lower than expected. Based on the weighted Pro Farmer CCI, the soybean crop dropped 4.9 points to 366.0, though that was still 5.5 points above average for the date. The soybean crop was 94% planted as of Sunday, up from 88% a week earlier and one percentage point ahead of the five-year average.

Technical analysis: Soybean bulls still have a near-term technical advantage but have faded badly and need to show fresh power soon to avoid more serious chart damage. The next near-term upside technical objective for the soybean bulls is closing November prices above the contract high of $15.84 3/4. The next downside price objective for the bears is closing prices below solid technical support at the May low of $14.38 1/4. First resistance is seen at $15.00 and then at today’s high of $15.15 1/4. First support is seen at today’s low of $14.70 and then at $14.50.

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 August futures above solid technical resistance at the May high of $431.20. The next downside price objective for the bears is closing prices below solid technical support at the June low of $397.90. First resistance comes in at today’s high of $418.50 and then at the June high of $425.40. First support is seen at today’s low of $412.20 and then at $410.00.

Soyoil bears have a near-term technical advantage with prices in a steep downtrend on the daily bar chart. The next upside objective for bulls is closing August prices above solid resistance at 75.00 cents. Bears' next downside objective is closing prices below solid support at 62.50 cents. First resistance is seen at 70.00 cents and then at 71.00 cents. First support is seen at today’s low of 68.50 cents and then at 68.00 cents.

What to do: Get current with advised cash sales and the 2022-crop hedge.

Hedgers: NEW ADVICE -- Hedge 10% of expected 2022-crop production in short November soybean futures. Our fill was $14.73. You should be 50% forward-priced on expected 2022-crop for harvest delivery. You should be 95% sold in the cash market on 2021-crop.

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

Advice: We advise all wheat producers to sell another 20% of 2022-crop to get to 85% sold in the cash market. We also advise hedgers to add a 15% hedge in short December SRW futures to get to 100% covered. Our fill on that position was $10.22. In addition, hedgers and cash-only marketers should sell another 20% of expected 2023-crop for harvest delivery next year to get to 30% forward-priced.

Price action: December SRW wheat rose 1/2 cent to $10.04 1/4 and December HRW wheat fell 3 cents to $10.55 1/2, near three-month lows. December spring wheat fell 13 cents to $11.13 1/4.

Fundamental analysis: Wheat futures generated a corrective bounce in overnight trading today but gave up those gains by today’s close amid commercial hedge pressure and farmer selling in cash market as winter wheat harvest accelerates. USDA said the winter wheat harvest was 25% complete as of Sunday, up from 10% a week earlier. Reports of a Russian military strike on the Ukrainian port city of Mykolaiv may have helped to stabilize the wheat futures markets today—possibly hampering already fragile talks among Russia, Ukraine and the U.N. on a way to get Ukrainian grain shipments out of the region and onto the world market.

Wheat market bulls were also hand-cuffed today by a sharp drop in crude oil prices. The recent big losses in the crude oil market have the speculative bulls in raw commodity markets squeamish.  Increasing concern the U.S. economy will slip into recession are also weighing on grain markets this week.

Technical analysis: Winter wheat bears have a near-term technical advantage with prices in five-week downtrends on daily bar charts. SRW bulls' next upside objective is closing December prices above solid resistance at $11.00. Bears' next downside objective is closing prices below solid support at $9.25. First resistance is seen at today’s high of $10.35 1/4 and then at $10.50. First support is seen at today’s low of $9.89 3/4 and then at $9.75.

HRW bulls' next upside objective is closing December prices above solid resistance at $11.75. Bears' next downside objective is closing prices below solid support at $10.00. First resistance is seen at today’s high of $10.82 1/2, then $11.00. First support is seen at today’s low of $10.42 3/4 and then at $10.25.

What to do: Get current with advised sales and hedges.  

Hedgers: NEW ADVICE -- Sell another 20% of 2022-crop to get to 85% sold in the cash market. Add a 15% hedge in short December SRW futures to get to 100% covered. Our fill on that position was $10.22. You should also sell another 20% of expected 2023-crop for harvest delivery next year to get to 30% forward-priced. You should be 100% sold on 2021-crop in the cash market.

Cash-only marketers: NEW ADVICE -- Sell another 20% of 2022-crop to get to 85% sold. You should also sell another 20% of expected 2023-crop for harvest delivery next year to get to 30% forward-priced. You should be 100% sold on 2021-crop.

 

Cotton

Advice: Cash-only marketers should sell the final 10% of old-crop inventories to get to 100% sold.

Price action: July cotton slipped 19 points to close at 143.32 cents per pound, while new-crop December plunged 578 points to 108.07 cents.

Fundamental analysis: Concern that a potential recession could hurt apparel demand weighed on new-crop cotton futures. The old-crop situation still looks comparatively tight, with short-term demand remaining strong through the end to the 2021-22 crop year. U.S. fiber production will likely increase this fall, but a resumption of heat and dryness in the Southwest could reduce the projected harvest.

Inflation now seems to be holding much less sway over traders, as indicated by the sizeable decline suffered by crude oil futures lately. The new concern for traders rather clearly points to the potential for a recession in the near future, which in turn could substantially reduce consumer demand for apparel. Traders will have to wait an extra day this week for the weekly Export Sales report from the USDA, since the Juneteenth holiday delayed its release until early Friday morning.

Technical analysis: Bears hold a strong technical advantage in December cotton futures, since today’s dive carried the market well below recent support levels. The contract’s inability to hold above tentative support at the March 21 high of 108.18 made that level initial resistance. A rebound above that point wouldn’t face well-defined resistance below the 110.00 level. A sustained bullish push would likely have bulls targeting the 115.00 level. Look for modest support around the March 22 low of 106.52, with a drop below that point likely having bears targeting the psychologically important 100-cent 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: NEW ADVICE -- Sell the final 10% of old-crop inventories to get to 100% sold. You should also be 50% forward-priced for harvest delivery on expected 2022-crop production.

 

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