Crops Analysis | June 30, 2022
Price action: December corn futures plunged 34 cents to $6.19 3/4, the most-active contract’s lowest closing price since $6.12 on March 3.
Fundamental analysis: New-crop corn futures ended at the lowest price in almost four months after USDA boosted estimates for U.S. plantings and domestic stockpiles more than expected, easing some concern over tight supplies. In its Acreage Report today, USDA estimated U.S. corn plantings at 89.921 million ac., up from 89.49 million ac. in the agency’s March Prospective Plantings Report and above the average analyst projection of about 89.861 million ac. This year’s estimated plantings are still down about 3.44 million ac. from 2021. Also today, USDA’s quarterly Grain Stocks Report pegged June 1 inventory at 4.346 billion bu., about 3 million bu. above expectations and 235 million bu. above the year-earlier number.
Today’s market action delivered a substantial blow to market bulls, with expanding supply prospects and slower demand increasingly favoring bears. Near-term Midwest weather forecasts aren’t especially concerning, though continued dry conditions into mid-July as the crop heads into pollination could still spur short-term weather rallies. Also today, weekly USDA export numbers were disappointing, with net weekly U.S. corn sales of 88,800 MT for 2021-22 down 72% from the average for the previous four weeks and a marketing-year low. For 2022-23, net sales totaled 119,300 MT.
Technical analysis: Charts took a significantly bearish turn today with December futures settling near a four-month low and prices in a steep two-week downtrend. Bears may be targeting key support levels at early-March lows from $6.00 to $6.05, along with the late-February low at $5.77 1/4. Futures have dropped into oversold territory, with December closing today with a Relative Strength Index reading of 27.4, so some short-term corrective buying could develop ahead of the long holiday weekend. Upside levels to watch include today’s high at $6.53 3/4 and the 10-day moving average at $6.77 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: August soybeans fell 11 cents to $15.60 1/2, while new-crop November fell 20 1/4 cents to $14.58. August soyoil plunged 249 points to 67.01 cents per pound, while August soymeal advanced $6.20 to $435.50 per ton.
Fundamental analysis: Soybean futures ended lower as higher than expected quarterly stockpiles and sharp declines in corn outweighed unexpectedly low U.S. plantings. USDA lowered its estimate of 2022 U.S. soybean plantings from 90.966 million ac. in March to 88.325 million ac. in today’s Acreage report, far under expectations averaging 90.446 million. An initial price upswing may have been muted by ideas a significant shift in state-by-state plantings will boost the national average yield this fall, as the largest downward revisions in the state acreage totals occurred in states with lower average yields (such as North Dakota and Minnesota), whereas an upward revision came in high-yielding Illinois and Iowa lost just 100,000 acres. Ideas that summer 2022 weather will be conducive to larger yields may also have mitigated the bullish reaction.
USDA reported June 1 U.S. soybean stockpiles at 971 million bushels, which modestly exceeded the average pre-report forecast at 965 million. At first glance the 202 million-bushel increase from the year-ago total could be viewed as bearish, but implied disappearance for the third quarter of the 2021-22 marketing year at 960 million bushels represented a 21% annual increase.
Technical analysis: Today’s price action kept the short-term technical advantage in August soybeans with the bears. Bulls’ inability to mount a serious challenge of strong resistance at the conjunction of the contract’s 20- and 40-day moving averages near $16.06 1/2, followed by a lower close, likely increased the bears’ advantage. The late drop made the contract’s 10-day moving average near $15.66 initial resistance. Still, a bullish breakout would have bulls targeting the June 9 high at $16.89 1/2. Initial support at today’s low of $15.52 3/4 is backed by Tuesday’s low at $15.31 3/4, then the psychological $15.00 level and eventually last Friday’s low at $14.94 3/4. A drop below that point would have bears targeting the $14.50 area.
Today’s August soyoil reversal likely has bears targeting the June 9 low at 64.84. A drop below that level would open the door to a test of the psychological 60.00-cent level. In contrast, bulls hold the technical advantage in August soymeal futures. Although they couldn’t force a breakout above standing resistance around $442.10, they are likely targeting the $455.00 area at this juncture.
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 tumbled 46 cents to $8.84 and September HRW wheat fell 39 1/2 cents to $9.51 3/4, both near four-month closing lows. September spring wheat fell 38 1/2 cents to $9.90.
Fundamental analysis: Wheat futures came under strong selling pressure following reports Ukraine shipped its first grain through the Black Sea in months. Reports said a cargo ship left the Russian-occupied Ukrainian port of Berdyansk after Russia said the port had been cleared of mines and was ready to resume grain shipments, Reuters reported. Sharp losses in corn futures also weighed on wheat prices, after USDA hiked estimated corn acreage more than expected.
USDA’s Acreage and quarterly Grain Stocks reports held few surprises for wheat. Estimated all U.S. wheat plantings were lowered to 47.092 million ac. from 47.351 million ac. from a March report, but still slightly above the average analyst estimate of about 47.017 million ac. Other spring wheat acres were 266,000 above trade expectations and 90,000 below the March report. U.S. all-wheat stocks on June 1 were 5 million bu. above the average pre-report estimate but down 22% from year-ago.
Net weekly U.S. wheat sales of 496,700 MT for 2022-23 were up from 477,800 MT reported the previous week and at the high end of trade expectations.
Technical analysis: Winter wheat futures bears have a firm near-term technical advantage. Prices are in five-week-old downtrends on the daily bar charts. SRW bulls' next upside objective is closing September futures above solid resistance at $10.00. The bears' next downside objective is closing prices below solid support at $8.00. First resistance is seen at $9.25 and then at today’s high of $9.39 1/2. First support is seen at today’s low of $8.91 3/4 and then at $8.75.
HRW bulls' next upside objective is closing September futures above solid resistance at $10.50. The bears' next downside objective is closing prices below solid technical support at $9.00. First resistance is seen at $10.00 and then at this week’s high of $10.10. First support is seen at $9.50 and then at $9.25.
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: December cotton gained 136 points to 98.84 cents per pound.
Fundamental analysis: Cotton posted a surprisingly robust performance in the face of generally bearish developments. USDA’s weekly export sales report listed old-crop sales for delivery by the July 31 end to the 2021-22 crop year at 48,100 running bales. However, new-crop sales reached just 46,300 bales, down sharply from huge sales the two weeks prior. And while the export figure at 365,400 running bales was quite large, the industry probably needs to be averaging over 400,000 bales per week in order to justify USDA’s 2021-22 U.S. cotton export forecast at 14.5 million bales. Thus, the chances of seeing a downward revision to that figure, and an increase in old-crop carry-out, are increasing.
USDA revised its estimate of 2022 U.S. cotton plantings up 244,000 acres from the agency’s March Prospective Plantings report figure to 12.478 million ac., higher than analysts’ expectations for 12.3 million ac. December futures’ strength despite apparently bearish acreage data may have reflected weakness in the U.S. dollar.
Technical analysis: Bearish traders still seem to own the short-term technical advantage in December cotton futures, although the sheer size of the collapse suffered over the past two weeks is likely causing active short-covering. Today’s high places initial resistance at 99.49, with backing from psychological resistance at the 100.00 level. The 10-day moving average implies additional resistance near 102.61. A move above that point would have bulls targeting the 105.00 and 110.00 levels. Initial support emerged at today’s low of 95.56, with backing from Wednesday and Tuesday lows at 93.23 and 91.20, respectively. Bears are likely targeting the psychological 90.00-cent level, then 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.
