Crops Analysis | July 1, 2022
Price action: December corn futures fell 12 1/4 cents to $6.07 1/2, the contract’s lowest closing price since Feb. 28 and a drop of 66 1/2 cents for the week.
5-day outlook: New-crop corn extended Thursday’s slide and sank to the lowest closing price in over four months amid heavy fund liquidation across many ag commodities markets and improved rain chances in the Midwest. Weather over the long holiday weekend will be key to market direction early next week, and traders will watch closely for signs that extreme June heat and dryness caused further deterioration in crop ratings. USDA early this week reported 67% of the U.S. corn crop in either “good” or “excellent” condition as of June 26, down from 70% a week earlier and up from 64% on the same date in 2021.
30-day outlook: As most of the U.S. corn crop shifts into pollination over the next few weeks, Midwest weather likely will be the primary price driver. Near-term forecasts aren’t particularly concerning, but if rains fail to materialize, traders may try to build more weather premium into new-crop futures. Three rounds of organized rain expected through Thursday “will at least temporarily improve soil moisture and conditions for crops in much of the Midwest,” World Weather Inc. said today. “Notable improvements in soil moisture should occur in many areas from eastern Nebraska and eastern Kansas to southern Wisconsin, northern Indiana, and southwestern Illinois.” Still, July 11-15 should bring a transition to drier and periods of warmer weather, and less favorable crop conditions will begin from the southwestern Corn Belt to southern Illinois.
90-day outlook: Along with late-summer weather, outside markets like U.S. equities and crude oil could also influence prices, and economic readings that fuel or assuage the overall market’s high level of concern over potential recession could filter through grain futures (the recent sell-off in wheat and other commodities may be among signs that inflation could be peaking). Soft export demand could exert more downside pressure or limit rallies. USDA export numbers have been disappointing, with net U.S. corn sales for the latest week 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, down from 358,400 MT the previous week but up from the four-week average of 212,800 MT.
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 plunged 62 3/4 cents to $13.95 1/4, the most-active contract’s lowest settlement since $13.92 3/4 on Feb. 3 and a tumble of 29 cents for the week. August soymeal plummeted $13.40 to $422.10 per ton and August soyoil fell 258 points to 64.43 cents per pound, a 4 1/2-month closing low.
5-day outlook: New-crop soybeans posted a third consecutive weekly decline and ended at a five-month low behind heavy fund liquidation pressure fueled by technical weakness and an improving rainfall outlook for the Midwest. Unconfirmed rumors China purchased Brazilian soybeans and washed out some U.S. old-crop purchases also encouraged sellers. Weather over the long holiday weekend will be one key to market direction early next week and any further deterioration in weekly USDA crop ratings could generate corrective buying. Earlier this week, USDA rated 65% of the U.S. soybean crop good-to-excellent as of June 26, down from 68% a week earlier but up from 60% at the same date a year earlier.
30-day outlook: Market direction during July will hinge in large part on Midwest weather. Any extreme heat combined with continued dryness could elevate concern over yield potential with the crop’s key reproductive phases mostly in August. World Weather expects a shift to warmer weather and less favorable conditions around mid-July. Traders may try to rebuild some weather premium in new-crop futures but the substantial chart damage taken this week could leave prices vulnerable to further downside under $14.00. Signs of flagging demand could also weigh on the market. USDA reported net weekly sales reductions of 120,200 MT for 2021-22, down from 29,300 MT the previous week and a marketing-year low. For 2022-23, net sales totaled 127,600 MT.
90-day outlook: As the crop shifts into blooming and pod-setting phases, August weather will be key to market direction. USDA’s sharp reduction to estimated U.S. soybean plantings, dropping 2.12 million ac. from a March forecast to 88.325 million ac., appeared bullish on the surface. But USDA plans to re-survey three states in the northern Midwest due to delayed seeding, and if the newly collected data justifies any changes, USDA will update its acreage estimates in the Aug. 12 Crop Production Report. With 15.8 million acres of soybeans still to be planted at the time of the survey, odds favor USDA finding fewer soybean plantings when it resurveys. Outside markets like crude oil could also influence the soy complex, with recession fears weighing on commodity markets in general.
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 futures fell 38 cents to $8.46, down 90 1/2 cents for the week and a four-month closing low. September HRW wheat fell 38 1/4 cents to $9.13 1/2, down 85 3/4 cents for the week. September spring wheat fell 42 cents to $9.48, down $1.22 1/2 for the week.
5-day outlook: Today’s technically bearish weekly low closes in winter wheat futures could produce followthrough selling following the long holiday weekend. Look for wheat markets to take more direction from corn and soybeans. Historically, the period right after the July 4 holiday can see existing price trends in corn and soybeans accelerate or reverse. Plains Grains Inc. late this week reported the 2022 HRW harvest continues to wind down in Oklahoma, Kansas and Texas. “Cutting is now nearing completion in those states. Hot and windy conditions over the last two weeks have continued to allow significant progress with harvest. Yield reports continue to range from 20 to 30 bushels per acre, with some higher exceptions.”
30-day outlook: Traders will watch for further news from Ukraine on resumption of grain exports through the Black Sea, reports of which contributed to selling pressure this week. However, many market watchers remain leery of Russia allowing significant grain exports from Ukraine to occur, what with the West openly and rapidly bulking up its NATO alliance and presence in Europe. Spring wheat led the wheat complex lower this week after USDA’s higher-than-expected other spring acreage estimate on Thursday. USDA’s plan to collect more survey data in July makes spring wheat acreage a bit more uncertain at present. USDA’s July 12 crop production report will be closely scrutinized by wheat traders.
90-day outlook: U.S. wheat exports remain lackluster and a strong U.S. dollar may continue to make U.S. wheat less competitive on the world trade market. The U.S. dollar index this week rallied and is back near its recent 20-year high. If the greenback continues to appreciate, U.S. wheat exports may continue to suffer in the coming weeks/months. USDA Thursday reported net weekly U.S. wheat sales of 496,700 MT for 2022-23, up from 477,800 MT reported the previous week.
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 fell 136 points to 97.48 cents per pound, down 57 points for the week.
5-day outlook: After holding up well Thursday, new-crop cotton futures turned lower Friday amid late-week fluctuations in the U.S. dollar. The dollar’s climb to two-week highs appeared to burden cotton. Following the long holiday weekend, traders will be watching the dollar, U.S. stocks and crude oil for signals on general market sentiment and recession concern. Tuesday’s USDA Crop Progress report and Friday’s Export Sales data will also be watched.
30-day outlook: New-crop futures will increasing be in trade focus, and forthcoming USDA crop progress reports will be studied closely for signs of deterioration. The Texas crop is of particular interest, since the number of acres harvested or abandoned can have a huge impact on the final production total. Traders will continue watching export sales and shipments to judge the strength of demand. USDA’s July 12 Supply and Demand report could also move the market, especially if analysts trim their 14.5 million-bale estimate of 2021-22 U.S. cotton exports. That would boost carry-in for the new crop year beginning August 1. Shifting reads on the economic outlook and factors affecting cotton demand will also be key.
90-day outlook: The industry will get a better handle on the likely size of the fall cotton harvest when the USDA publishes its first field-based estimate of the crop total in its August 12 Crop Production report. Conditions across the South, especially in Texas, will exert a great deal of influence over the numbers. Factors affecting exports, as well as the export data, will move the market as well. Expect recession concerns to remain a major factor through summer and into fall.
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.
