Crops Analysis | July 14, 2022
Corn
Price action: December corn futures closed up 5 3/4 cents at $6.01 and near mid-range.
Fundamental analysis: The corn market bulls held their own today in the face of bearish outside market forces that included another strong rally in the U.S. dollar index to a 20-year high and a drop in Nymex crude oil prices to a three-month low of $90.56 a barrel, although crude did rebound well off that daily low. Short covering in corn futures was featured today after this week’s big price downdraft. A wobbly U.S. stock market this week that has been hit by hot inflation reports is also causing keener risk aversion, which in turn is keeping the speculative grain market bulls at bay.
Weather in the U.S. Corn Belt is leaning bullish again. Friday’s price in corn futures will be extra important and may put a weather market right back in play. World Weather Inc. today reported a few rounds of rain during the next ten days along with a lack of more than brief periods of heat in most areas should keep conditions for crops favorable in much of the Midwest, with exceptions in west-central and southwestern areas where temperatures be hotter and drier. However, “stress to crops and declines in yield potentials should steadily increase as the soil dries out,” said the forecaster. “A large part of the region should have enough soil moisture to support early pollinating corn before the soil becomes too dry to favorably support pollination that begins next week or later without an increase in rain.”
Weekly U.S. corn export sales totaled 59,000 MT for 2021-22 and 348,200 MT for 2022-23. Those numbers were in line with market expectations.
Technical analysis: The corn futures bears still have the solid overall near-term technical advantage. The next upside price objective for the bulls is to close December prices above solid chart resistance at Tuesday’s high of $6.34 1/4. The next downside target for the bears is closing prices below chart support at the July low of $5.66 1/2. First resistance is seen at today’s high of $6.08 and then at $6.20. First support is at today’s low of $5.89 1/4 and then at $5.80.
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: After coming under general pressure, the soy complex traded well off its daily lows. November soybeans settled down 8 1/2 cents at $13.41, while August bean oil lost 86 points to close at 58.14 cents per pound. August soymeal edged up $1.70, closing at $438.90.
Fundamental analysis: Soybeans struggled early on lackluster soybean sales and continued discussions of progress on reestablishing grain shipments out of Ukraine. But optimism around an agreement quickly faded as headlines of a Russian attack on the Ukrainian city of Vinnystia, killing 20 people, including children, were made.
World Weather reports that heat and stress to crops will increase and expand during the middle of next week, with the Plains states to undergo the greatest heat stress and lack of moisture. The analyst also stated that milder heat and dryness will occur from southwestern Iowa and eastern Kansas through the northern Delta, including Missouri.
Export sales for the week ended July 8 indicated net reductions of 362,900 MT for 2021/2022, a marketing year low. Exports of 440,900 MT were down 13% from the previous week and 16% from the prior 4-week average. Meal sales of 8,200 MT for 2021/2022 were reported, down 95% from the previous week and 92% from the prior 4-week average. Meal exports of 149,600 MT were down 37% from the previous week and 38% from the 4-week average. Soyoil sales were down considerably from the week prior and down 54% from the 4-week average.
NOPA is set to release June crush figures tomorrow. The average survey estimate is 164.64 million lb., down 3.8% from May, but up 8% year over year. Oil stocks are estimated to be 1,713 million pounds.
Technical analysis: Soybean bears ended the day in control, as November futures closed above support of $13.22 3/4, but failed to reach resistance of $13.69 1/4. Soymeal was the leader of the complex on the day, as August futures were able to break through resistance at $431.10 and make a run at $449.10, which is initial resistance. $432.70 remains for support for meal futures with $426.70 being second support. August oil futures broke below first support at 58.26, and made a run at second support of 56.19, resistance was tested at 59.27, second resistance remains at 60.67.
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: The wheat complex closed lower for the fourth consecutive trading session. September Soft Red Wheat ended the day 15 3/4 cents lower at $7.95. September Hard red wheat 13 1/2 lower, closing at $8.48 3/4. September spring wheat down 2 3/4 cents, closing at $9.10 3/4.
Fundamental analysis: Outside markets caused wheat to flounder after the open as the U.S dollar continued to make gains and recessionary fears remained at the forefront of trade. Optimism of a resumption of Ukrainian grain exports through the Black Sea loomed of the wheat complex as Russia and Ukraine officials made constructive comments towards a coming deal.
Ukraine’s Black Sea ports have been idle since Russia invaded on February 24 th, causing significant increases in grain prices. Chicago wheat prices are currently trading prewar levels due to the new crop in the Northern Hemisphere. According to the Turkish Defence Ministry, although the specific date is unclear, talks are set to resume on July 20 or 21. Many traders are doubtful that a mutually beneficial outcome will result from these meetings. It has been said that the Finalization of a deal would require the removal of mines near Black Sea ports. Indicating control over the situation, Kremlin spokesman Dmitry Peskov said Thursday. “If there is a need to announce results of negotiations, the military will do so.
Updated export sales for week ended July 8 unveiled a nice surprise as net sales were reported at 1,017,200 MT for 2022/2023. Exports were reported at 270,000 MT, down 6% from the previous week and 13% from the prior 4-week average.
Technical analysis: Bears remain in control of the wheat complex as September soft red futures closed below $8.00 for the first time since February 16. Bears were able to chew through support at $7.98, with $7.85 1/2 being their next target. Notable resistance will be seen at $8.19 ¼. September Hard Red futures ended the day on support levels of $8.48 3/4, with next level support seen at $831.50. First resistance is $8.68 3/4, with second resistance at $9.05 3/4. September Spring Wheat maintains first support at $8.99 1/2, with second support at $8.85 1/2. Upside resistance is shown at $9.21, with second resistance at $9.35 1/4.
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: December cotton futures closed down the 400-point daily trading limit at 83.71 cents and hit a 10-month low.
Fundamental analysis: The cotton futures market was hit hard again today by bearish outside markets that included a sharp rally in the U.S. dollar index to a 20-year high and a drop in crude oil futures to a three-month low of $90.56 a barrel, although crude did bounce off that daily low by the close. A sell off in the U.S. stock market this week and hot inflation numbers did nothing to make consumers more eager to purchase fall and winter apparel in the coming weeks.
And on the export front, news was also less than stellar for the U.S. fiber. USDA today reported weekly net U.S. cotton sales of 10,200 running bales (RB) for 2021/2022--a marketing-year low--were down 73 percent from the previous week and 68 percent from the prior 4-week average. Net sales were 139,300 RB for 2022/2023. Shipments of 312,700 RB were down 17 percent from the previous week and 14 percent from the prior 4-week average. The destinations were primarily to China (74,000 RB) and Turkey (64,800 RB).
Cotton traders today seemingly ignored worsening crop conditions in West Texas. World Weather Inc. today reported Texas crop conditions are still poor and getting poorer. “Showers will be possible periodically, but most of them will fail to counter evaporation well enough to offer much change in production potential.” The forecaster said the northern U.S. Delta cotton continues to be stressed by heat and dryness “which is liable to lower yields.”
Technical analysis: Cotton futures bears have the solid overall near-term technical advantage and gained more power today. Prices are in a steep seven-week-old downtrend on the daily bar chart. The next upside price objective for the cotton bulls is to produce a close in December futures above technical resistance at 90.00 cents. The next downside price objective for the cotton bears is to close prices below solid technical support at 80.00 cents. First resistance is seen at 85.00 cents and then at 87.00 cents. First support is seen at 83.00 cents and then at 82.00 cents.
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.
