Crops Analysis | July 11, 2022

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Corn ­

Price action: December corn firmed 5 1/2 cents, closing at 6.29, only 2 3/4 cents off the low of the day.

Fundamental analysis: Corn gapped higher in the overnight trade, with the December contract reaching a high of 6.58 1/2 on concerns of returning hot, dry weather conditions throughout the Corn Belt by the latter part of the week, and continuing through next week. But outside markets curbed buyer interest as crude oil futures fell and the U.S. dollar index surged to a new 20-year high. This coupled with pre-report positioning before the release USDA’s July WASDE Report on Tuesday produced a low-range close.

World Weather is monitoring a “Disturbance in the Gulf of Mexico,” affecting the northern Delta and areas northward through the lower and eastern Midwest. “The Gulf of Mexico low pressure center could limit rainfall for the coming week and possibly longer. That does not mean it will not rain, but it does imply reduced rainfall,” the weather forecaster said.  

Export Inspections for the week ended July 7 came in at 933,725 MT (36.8 million bu.), in line with expectations of 725,000 MT to 1.1 MMT. That lowered the average weekly pace needed to hit USDA’s export forecast to 26.6 million bu. over the remainder of the marketing year.  

USDA will release the July WASDE report tomorrow at 11 a.m. CT. Average estimates from a Reuters survey expect an increase to 2022-23 ending stocks of 42 million bu. and a rise of 2 million bu. for 2021-22 carryover. Modest increases to world corn ending stocks are expected, as well.

Crop conditions out after the close are expected to remain unchanged to up one percentage point in the “good” and “excellent” categories, as a result of cooler weather and rains that occurred throughout the Corn Belt last week, providing much needed soil moisture.

Technical analysis: December corn futures traded in a 32 1/4 cent range today. The contract left a 1/4 cent gap on the daily chart from today’s low at $6.26 1/4 to last Friday’s high at $6.26, which will serve as initial support. If bulls fill the gap, they could make a run at last week’s low of $5.66 1/2. Today’s high at $6.58 1/2 is solid near-term resistance. Since July 6, December futures have seen a 92-cent range, which could lead to near-term choppy trade within that range.

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: November soybeans closed up 8 1/2 cents at $14.05 and nearer the session low. September soybean meal closed down $1.30 at $411.00 and near the session low. September bean oil closed up 93 points at 62.36 cents and near mid-range.

Fundamental analysis: The soy complex bulls were out of the gate in strong fashion overnight, but as the trading day progressed the bulls faded badly. Some beneficial rains in the western Corn Belt today may have tempered the bulls, but extended weather forecasts for the Corn Belt are calling for mostly dry and warmer conditions over the next two weeks. A strong rally in the U.S. dollar index to another 20-year high today was also a bearish weight on the soy markets. Today’s highs in soybeans and meal will now be tough resistance levels to break above.

Export inspections for U.S. soybeans totaled 356,716 MT. That was below the bottom end of the pre-report range of estimates from 375,000 to 575,000 MT. The surge in the U.S. dollar index may already be crimping foreign buyer interest in U.S. beans.

This afternoon’s weekly USDA crop progress report is expected to show the U.S. soybean crop  in 63% good to excellent condition compared to 63% last week and 59% last year at this time.

Technical analysis: The soybean bulls and bears are back on a level overall near-term technical playing field. The next near-term upside technical objective for the soybean bulls is closing November prices above solid resistance at $14.75. The next downside price objective for the bears is closing prices below solid technical support at $13.50. First resistance is seen at today’s high of $14.38 1/2 and then at $14.50. First support is seen at $14.00 and then at $13.75.

Meal bulls and bears are also on a level overall near-term technical playing field. The next upside price objective for the meal bulls is to produce a close in September futures above solid technical resistance at the June high of $442.50. The next downside price objective for the bears is closing prices below solid technical support at $400.00. First resistance comes in at $417.00 and then at $420.00. First support is seen at $410.00 and then at $405.00.

The bean oil bears still have the overall near-term technical advantage. Prices are in a steep downtrend on the daily bar chart. The next upside price objective for the bean oil bulls is pushing and closing September prices above solid technical resistance at 68.88 cents. Bean oil bears' next downside technical price objective is pushing and closing prices below solid technical support at the July low of 56.55 cents. First resistance is seen at today’s high of 63.56 cents and then at 65.00 cents. First support is seen at today’s low of 61.46 cents and then at 60.00 cents.

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 90% sold on 2021-crop. You also should be 50% forward-priced on expected 2022-crop for harvest delivery.

 

Wheat

Price action: September SRW wheat closed down 35 cents at $8.56 1/2. September HRW wheat closed down 30 1/2 cents at $9.15 1/4. Prices closed near the session lows. Spring wheat futures finished 25-plus cents lower, with the September contract down 28 cents to $9.63 3/4.

Fundamental analysis: The wheat futures markets today fell victim to a big surge in the U.S. dollar index to another 20-year high, prompting further worries about already slack U.S. wheat export demand. The wheat markets also lost more ground today when the corn and soybean futures markets backed well off their overnight highs and finished near their session lows.

Winter wheat harvest is progressing rapidly amid hot and dry weather in the central U.S. That’s prompting farmer selling and related commercial hedge pressure on the wheat futures markets.

Weekly U.S. wheat export inspections totaled 309,802 MT, in line with expectations from 250,000 to 450,000 MT.

This afternoon’s weekly USDA crop progress report is expected to show the U.S. winter wheat harvest at 67% complete as of Sunday versus 54% last week and 59% complete last year at this time. The spring wheat crop is expected to be in 67% good to excellent condition compared to 66% last week and 16% last year at this time.

Technical analysis: Winter wheat futures bears have the solid overall near-term technical advantage. Prices are in steep seven-week-old downtrends on the daily bar charts. SRW bulls' next upside price objective is closing September prices above solid technical resistance at $9.50. The bears' next downside objective is closing prices below solid technical support at the January low of $7.38 1/4. First resistance is seen at $9.00 and then at $9.25. First support is seen at $8.50 and then at $8.38 1/4. The 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 $8.00. First resistance is seen at $9.50 and then at $9.75. First support is seen at $9.00 and then at $8.75.

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.

 

Cotton

Price action: Cotton futures finished below opening levels but in the upper half of today’s range. December cotton dropped 79 points to 94.84 cents.

Fundamental analysis: Cotton futures were pressured by outside markets as the U.S. dollar surged to a new 20-year high and crude oil faced pressure. In addition, the stock market traded lower and recession concerns flared amid outbreaks of Covid in China. Given all of the outside market pressure, cotton didn’t perform too poorly, suggesting the market may be ready for an extended pause after recent price pressure. But if outside markets remain highly negative, bulls will have to work hard to defend recent support levels in cotton futures.

A tropical disturbance may push up into the north-central Gulf later this week. Depending on how that evolves, it could deliver heavy rains to areas of the Southeast. Meanwhile, hot and dry weather is expected to the west of this low-pressure ridge, including across West Texas. World Weather says cotton in Texas and Oklahoma will continue to be “seriously distressed” by the lack of rain and the heat.

Technical analysis: December cotton futures continue to show a major bear flag formation on the daily chart that if confirmed, would project the contract toward the 70.00-cent area. Last week’s low at 88.10 cents is key support as a close below that level would confirm a downside breakout from the bear flag formation. A close above 99.49 cents would signal the formation has been negated.  

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 60% forward-priced on expected to 2022-crop production for harvest delivery.

Cash-only marketers: You should be 100% sold on 2021-crop. You should also be 60% forward-priced on expected to 2022-crop production for harvest delivery.

 

 

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