Crops Analysis | June 29, 2022
Price action: July corn futures rose 10 3/4 cents to $7.70 1/4, the contract’s highest closing price since June 17. December corn fell 5 1/2 cents to $6.53 3/4, near the bottom of today’s range.
Fundamental analysis: July corn gained and deferred contracts slipped amid bull spreading and positioning ahead of USDA’s Acreage and quarterly Grain Stocks reports tomorrow. Increased rainfall prospects for the Midwest sent December corn near the three-month closing low posted early this week. In its Acreage update, USDA is expected to raise its forecast for U.S. corn plantings by about 370,000 acres, to 89.86 million, based on a Reuters survey of analysts. June 1 corn stocks were expected at 4.343 billion bu., up 232 million bu. from a year earlier.
The near-term Midwest weather outlook appears to be unthreatening, though dryness could become a concern. No excessive heat is expected in the heart of the Midwest for the next couple of weeks, but many areas will need rain, World Weather Inc. said. Low soil moisture remains in parts of the U.S. Midwest and timely rain “will be extremely important over the next couple of weeks,” the forecaster said today. “Most forecast models are offering some timely rain, but its distribution may not be ideally suited leaving some areas drier biased while others get a little boost in moisture.”
Tomorrow’s weekly USDA export sales report is expected to show net U.S. corn sales at 200,000 to 700,000 MT for the 2021-22 marketing year and 100,000 to 500,000 MT for 2022-23.
Technical analysis: Corn bulls and bears remain on a level near-term technical playing field, though a bearish flag or pennant pattern may be forming on the December futures daily bar chart and prices remain well below most major moving averages. Upside price objective for bulls include closing December futures above solid resistance at $7.00. Downside targets for bears include closing prices below support at $6.00. First resistance is seen at Tuesday’s high of $6.67 3/4, then $6.80. First support is at this week’s low of $6.44 1/4.
December corn overnight rose as high as $6.62 1/2 after gaining 6 1/4 cents Tuesday following lower-than-expected USDA crop ratings.
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: November soybeans rose 15 3/4 cents to $14.78 1/4, the contract’s highest closing price since $15.10 1/2 on June 21. August soymeal rose $9.60 to $429.30 per ton, a two-month closing high. August soyoil rose 50 points to 69.50 cents per pound.
Fundamental analysis: New-crop soybeans rose for the fourth consecutive session, boosted by short covering ahead of a USDA report that’s expected to show farmers planted fewer soybean acres than projected earlier this spring. USDA, in its Acreage report tomorrow, is expected lower its estimate for 2022 U.S. soybean plantings to about 90.45 million ac., down 509,000 acres from a March forecast, based on the Reuters survey. June 1 soybean stocks were projected at 965 million bu., up 196 million bu. from a year earlier.
The near-term Midwest weather outlook remains mostly unthreatening but dryness could become a bigger concern, with soybeans’ key reproductive phases still weeks away. Crops “should remain favorably rated in much of the Midwest for at least another next 10 days as mild temperatures through Monday and at least some rain should aid establishment of newly planted crops with shallow root systems,” World Weather said today. “More advanced crops will have adequate subsoil moisture to support crop development.” However, “a transition towards less favorable crop conditions will occur next week as temperatures will warm and showers and thunderstorms will become less frequent July 6-13.”
Technical analysis: Soy complex technicals turned more bullish today with strong closes in soyoil and soymeal bolstering November soybeans’ firm gains so far this week. The market’s strength this week suggests prices may be establishing a near-term bottom as traders watch for further weather developments. Near-term upside targets for November soybeans include the 10-day moving average at $14.80 1/4, around today’s high, and the 100-day moving average at $14.85. Key support is seen at the near three-month low of $13.99 1/4 posted June 24, a level bears may target on the market’s next move lower, along with the April low at $13.94.
What to do: Get current with advised cash sales and the 2022-crop hedge.
Hedgers: You have 10% of expected 2022-crop production hedged in short November soybean futures at $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.
Price action: September SRW wheat fell 6 cents to $9.30 and September HRW wheat rose 1 cent at $9.91 1/4, both nearer session lows. September spring wheat tumbled 12 1/4 cents to $10.28 1/2.
Fundamental analysis: Wheat futures traded mixed and in narrow ranges ahead of tomorrow’s USDA quarterly Grain Stocks and Acreage reports. Analysts expect USDA to lower its forecast for U.S. all wheat seedings to 47.017 million ac. from 47.351 million ac. in its March forecast. Any bigger price moves in the corn and/or soybean futures markets in the wake of Thursday’s key USDA data could also impact wheat futures. A stronger U.S. dollar this week has limited buying interest in wheat futures, and accelerating U.S. winter wheat harvest and related commercial hedge pressure are also price-negatives for winter wheat at present.
Tomorrow’s weekly USDA export sales report is expected to show U.S. wheat sales in the 2022-23 marketing year at 200,000 to 600,000 MT.
Technical analysis: Winter wheat futures bears have the overall near-term technical advantage. Prices are in five-week-old downtrends on the daily bar charts. SRW bulls' next upside price objective is closing September prices above solid technical resistance at $10.50. The bears' next downside objective is closing prices below solid technical support at $8.50. First resistance is seen at today’s high of $9.56 and then at $9.73. First support is seen at this week’s low of $9.13 1/2 and then at $9.00.
HRW bulls' next upside price objective is closing September prices above solid technical resistance at $11.00. The bears' next downside objective is closing prices below solid technical support at $9.00. First resistance is seen at today’s high of $10.10 and then at $10.25. First support is seen at this week’s low of $9.77 1/2 and then at $9.65.
What to do: Get current with advised sales and hedges.
Hedgers: You should be 85% sold in the cash market on 2022-crop, with the remaining 15% hedged in short December SRW futures at $10.22. You should be 30% forward-priced on expected 2023-crop for harvest delivery next year. You should be 100% sold on 2021-crop in the cash market.
Cash-only marketers: You should be 85% sold on 2022-crop. You should also be 30% forward-priced on expected 2023-crop production for harvest delivery next year. You should be 100% sold on 2021-crop.
Price action: July cotton surged 416 points to 104.28 cents per pound, while December futures surged 400 points to 97.48 cents.
Fundamental analysis: Today’s market action didn’t seem at all conducive to cotton market strength, with the equity indexes trading mixed and the U.S. dollar climbing and threatening a fresh bullish breakout to the upside. Those factors hold negative implications for domestic and export cotton/apparel demand, respectively, so the strong rise looked very impressive from that standpoint. Having the grain/soy complex trade in mixed fashion, along with weak energy futures, also suggested little support for the cotton outlook.
Possible optimism ahead of tomorrow’s USDA weekly export sales and Acreage reports may have encouraged buyers, though a likely sizeable portion of the advance reflected short covering, with August futures down over 25 cents in the seven previous trading sessions and extremely oversold. Whether the market can build upon today’s rebound is open to question.
Technical analysis: Bears still hold the short-term technical advantage in December cotton futures. Look for initial resistance around Monday’s high of 98.05, then at the psychological 100.00 level. A close above that level would have bulls targeting the 10-day moving average near 104.95. Today’s low places initial support at 93.23, then at Tuesday’s low-for-the-move at 91.20. Look for additional support around the psychological 90.00-cent level, with a drop below that point likely opening the door to a test of 85.00.
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 100% sold on 2021-crop. You should also be 50% forward-priced for harvest delivery on expected 2022-crop production.
