Crops Analysis | July 19, 2022

Corn ­

Price action: December corn futures fell 15 1/2 cents to $5.95 1/4, near mid-range.

Fundamental analysis: Corn futures generated little followthrough buying interest following Monday’s gains, partly due to expectations for cooler temperatures and rain in the Midwest next week. Prospects for a resumption of grain shipments out of Ukraine also weighed on corn futures. However, we’re skeptical Russia would keep its word if any deal is finalized. Better-than-expected USDA crop ratings suggest the crop will mostly complete its critical pollination phase without serious damage to yield prospects. USDA said 64% of the U.S. corn crop was in “good” or “excellent” condition as of Sunday, unchanged from a week earlier and above expectations for a drop to 63%.

Extended weather forecasts for the Corn Belt today were not quite as price-friendly as those seen Monday morning. World Weather Inc. today reported several more days of hot and dry weather will impact the U.S. Plains and western most Corn Belt before cooling begins. “The second week of the outlook, though, presents less heat and an opportunity for ‘some’ rain in the driest areas.”

Technical analysis: Corn futures bears have the firm overall near-term technical advantage. The next upside price objective for the bulls is to close December prices above solid chart resistance at the July high of $6.58 1/2. 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 $6.09 and then at this week’s high of $6.23 3/4. First support is at $5.90 and then at today’s low of $5.83.

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 fell 22 cents to $13.58 1/4 a bushel, around the middle of today’s range. August soymeal rose 50 cents to $435.00 and August soyoil fell 131 points to 61.89 cents.

Fundamental analysis: The soy complex finished mostly lower on spillover pressure from weakness in crude oil and other commodities and expectations for relief from this week’s extreme heat in the Midwest. Today’s forecast turned wetter for July 25-27, with two rounds of organized rain expected through the middle of next week, along with less heat the next two weeks, World Weather said. The expected weather “should keep conditions for crops favorable in much of the Midwest,” the forecaster said.

Continued erosion in the soybean crop’s overall condition likely will limit futures downside over the near-term. USDA late Monday rated the soybean crop 61% “good” to “excellent” as of Sunday, down from 62% a week earlier and the fifth straight weekly decline. Analysts on average expected the rating to hold at 62%. Based on the Pro Farmer CCI, the soybean crop fell 3.0 points to 353.4, 2.1 points below average and the lowest rating of the year. Cordonnier kept his U.S. soybean yield estimate unchanged at 51.5 bu. per acre but, as with corn, switched to a neutral/lower bias.

Technical analysis: Soybean futures retain a bearish bias, with the November contract trending down for over five weeks but may extend the recent sideways pattern over the near-term. Initial support in November futures includes last week’s low at $13.15 3/4 and this month’s low at $13.02 1/2. Initial resistance is seen at Monday’s high at $13.93, and further at the 20-day moving average of $13.98 1/2 and $14.00.

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 fell 1/2 cent to $8.12 1/4. September HRW futures fell 4 3/4 cents to $8.69 1/4. September spring wheat fell 8 3/4 cents to $9.30 1/4.

Fundamental analysis: The wheat complex traded mixed on the day with SRW the leader and spring wheat as the laggard. SRW futures failed to gain enough strength to close in positive territory for the third consecutive session as talks between Russia, Ukraine and Turkey continued in Tehran. Many traders note skepticism any agreement to resume grain shipments will be reached. Even if a deal happens, it could take months before the first ships sail as mines have to be cleared and ports need repairs, a German trader said.

A weaker U.S. dollar enticed buying as Egypt’s state grains buyer, GASC, issued a tender to buy wheat with traditional sources, the Black Sea region and Europe excluded. This allowed the U.S. an opportunity to sell wheat to the country for the first time in some time, and ultimately provided Egypt with the lowest offer, believed to be $395 a MT FOB. A deal was not reached with Egypt, citing that the offer prices received were higher than estimates. However, GASC has invited new offers for all origins in a private tender set to close July 20. Pakistan has also issued a tender for 200,000 MT of milling wheat for September 1-16 shipment, with the tender set to close July 25.

Progress reports out Monday afternoon showed slower-than-expected pace of winter wheat harvest at 70% complete, below expectations of 75%. The spring wheat crop reflected an improvement with the USDA increasing “good” to “excellent” rating by a percentage point, to 71%, up from 70% a week earlier.

Technical analysis: September soft red wheat traded nearly a 30-cent range today, closing a dime off the high. First and second support at $7.85 3/4 and $7.58 3/4, respectively, went untested, as well as resistance at $8.32 ¼ and $8.51 3/4.

September hard red futures traded nearly a 25-cent range, finishing 8.5 cents from the high. First and second support remained untested at $8.45 3/4 and $8.17 1/2, respectively. First and second resistance at $8.93 1/4 and $9.12 1/2 were untested as well in today’s session.

September spring wheat futures traded nearly a 22-cent range in today’s session, closing 8 3/4 cents from the high. First and second support at $9.08 1/4 and $8.77 1/2 remained untested as well as first and second resistance at $9.59 1/4 and $9.79 1/2, respectively.

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 fell 62 points to 92.38 cents, near the session high.

Fundamental analysis: Cotton futures held up relatively well considering declines in grain futures and corrective pressure following strong gains Friday and Monday. Higher crude oil prices, a sharp drop in the U.S. dollar index and solid gains in the U.S. stock market all worked to keep the sellers in the cotton market mostly squelched. Still, heightened recession worries are likely to limit the upside in cotton futures for at least the near term.

USDA late Monday reported 27% of the U.S. cotton crop in poor-to-very-poor condition and 38% good-to-excellent. Texas conditions were unchanged, but Mississippi and Arkansas conditions deteriorated. Extreme heat in the southern U.S. Plains will likely hurt cotton production, World Weather said. The northern Delta has also struggled with dryness and excessive heat and that situation will resume after a short term bout of rainfall and brief cooling early this week, thought Southeast crop areas seem to be experiencing more favorable crop weather.

Technical analysis: Cotton futures bears have the firm overall near-term technical advantage. Prices are in a two-month-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 100.00 cents. The next downside price objective for the cotton bears is to close prices below solid technical support at the July low of 82.54 cents. First resistance is seen at this week’s high of 93.50 cents and then at 95.00 cents. First support is seen at 90.00 cents and then at this week’s low of 88.80 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.