Crops Analysis | July 18, 2022
Price action: Corn futures ended mostly 6 to 8 cents higher, with the December contract finishing up 7 cents at $6.10 3/4.
Fundamental analysis: Corn futures posted solid gains to start the week, but all things considered, it was a relatively disappointing finish for bulls, as the December contract ended midrange and near opening levels. The late paring of gains means fresh bullish news is likely needed to see active follow-through buying overnight and Tuesday.
Weather supported corn as forecasts call for hot and dry conditions across western and southern production areas. Northern and eastern areas of the country are expected to get enough rain to somewhat counteract the heat. Crops will be stressed in the driest locations, but areas that received beneficial rains over the weekend or are expected to get showers this week could benefit from heat.
Outside markets were highly supportive as it was a broad risk-on day. Crude oil traded sharply higher, while the U.S. dollar index pulled back from its recent 20-year highs. It would take sustained moves along today’s lines to support fresh buying in the corn market.
USDA weekly corn export inspections totaled 1.074 MMT (42.3 million bu.). That lowers the needed pace to hit USDA’s export forecast of 2.450 billion bushels. While that seems doable, any late-season cancellations of slowed shipments could reduce the export forecast. There are also some potential concerns with corn-for-ethanol production coming in shy of USDA’s forecast if the pace holds around recent levels.
Technical analysis: The two-week trend in December corn futures is neutral, with the contract near the middle of the range from the July 6 low of $5.66 1/2 to the July 11 high at $6.58 1/2. The longer the contract holds within that range, the stronger the eventual breakout is likely to be. The trend since mid-June strongly favors bears.
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.
Price action: November soybeans rose 38 cents to $13.80 1/4. August soymeal ended $3.50 higher at $434.50. August soybean oil finished up 312 points at 63.20 cents.
Fundamental analysis: Soybean futures rose sharply amid concern extreme Midwest heat this week will stress crops, with further support stemming from crude oil futures pushing back above $100, helping boost vegoil markets. USDA weekly export inspections showed soybean sales at 362,622 MT (13.3 million bu.), within the range of expectations of 100,000 to 575,000 MT. But that increased the required pace to hit USDA’s export forecast to 26.4 million bushels. Given recent export sales cancellations, there isn’t much cushion unless there are some new sales.
The soybean crop condition rating this afternoon is expected to remain unchanged to down a point compared with last week in the “good” to “excellent” categories. As we progress toward August, growing conditions for soybeans will become particularly important as most of the crop will be reaching a crucial development stage. World Weather states, “The expected weaker jet stream late this summer is likely to allow the ridge of high pressure to finally anchor itself in the Plains and western fringes of the Corn Belt. That should be around the second or third weeks in August. From that point onward through the first half of September the ridge will not move around as much and that will bring on a more steady diet of warmer and drier than usual weather in the U.S.”
Technical analysis: November soybean futures dipped below support at $13.43 3/4, with second support at $13.15 3/4. But the contract was able to close above the previous session’s first resistance at $13.57, as well as second resistance at $13.71 3/4. The next level of resistance is $13.85, which was spiked today but the contract failed to close above it.
August soybean meal futures held steadily above first and second support levels at $423.60 and $419.10, respectively. First resistance at $434.20 was cleared as the contract was able to muster a close above the level. Next level of resistance will be at $440.10.
With a boost from outside markets, August soybean oil futures traded and closed above both first and second level resistance at 61.10 and 62.13 cents per pound. A third level of resistance was tested at 63.85 cents as the contract touched 64.00 cents late in the trading session.
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.
Price action: September SRW wheat rose 36 cents to $8.12 3/4 and September HRW wheat rose 36 1/2 cents to $8.74, both near session highs. September spring wheat jumped 32 1/4 cents to $9.39.
Fundamental analysis: Winter wheat futures rose on short covering and corrective buying after the market hit five-month lows Friday, with solid gains in corn and soybeans also supportive. Sharp gains in crude oil futures and a continued pullback in the U.S. dollar also encouraged buyers. Look for wheat traders to follow the lead of corn and soybean markets in the near term, amid the potential for another weather market scare in the Corn Belt. Early today, USDA reported a disappointing 185,989 MT of U.S. wheat inspected for export during the week ended July 14, down from 310,002 MT the week before.
This afternoon’s weekly USDA crop progress report is expected to show the U.S. winter wheat crop at 75% harvested compared to 63% reported last week. The spring wheat crop is seen in 70% good to excellent condition as of Sunday, which is unchanged from last week.
Technical analysis: Winter wheat bears hold a solid near-term technical advantage, with prices still in a steep two-month downtrends on daily bar charts. SRW bulls' next upside price objective is closing September prices above solid technical resistance at $9.00. 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 $8.25 and then at $8.40 1/2. First support is seen at $8.00 and then at today’s low of $7.78 1/2.
HRW bulls' next upside price objective is closing September prices above solid technical resistance at $10.00. The bears' next downside objective is closing prices below solid technical support at $8.00. First resistance is seen at today’s high of $8.84 1/4 and then at $9.00. First support is seen at $8.50 and then at today’s low of $8.36 3/4.
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.
Fundamental analysis: Cotton futures gapped higher on the daily bar chart and rose sharply as general commodity strength and a continued pullback in the U.S. dollar index from 20-year highs encouraged buyers. U.S. crude oil futures rallied nearly $5 per barrel amid concern over reduced supplies from Russia. Higher oil prices make polyester, a substitute for cotton, more expensive. Persistent heat and dryness in key U.S. growing areas continues to be a concern, despite recent improvement in USDA crop ratings. Conditions remained hot and dry in the Southern Plains over the weekend, World Weather said. “Warm to hot and dry weather will be most common during the next two weeks and the few rounds of showers that occur should be too light and infrequent to prevent continued drying and increases in crop stress in most areas,” the forecaster said. USDA will update crop ratings later today. A week ago, USDA rated the crop 39% good-to-excellent, up from 36% the previous week.
Technical analysis: Cotton technicals took a bullish turn as December futures followed an outside-day higher close Friday with a gap higher strong upside followthrough today, suggesting the market may be establishing a near-term bottom. Upside targets include the 20-day moving average at 96.50 cents and last week’s high at 96.69 cents. Initial support is seen at today’s chart gap between 88.71 cents and 88.80 cents, followed by Friday’s 10-month low at 82.54 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.
