Crops Analysis | July 20, 2022
Corn
Price action: December corn futures fell 5 1/4 cents to $5.90, the contract’s lowest closing price since $5.86 1/2 on July 12.
Also today, the Energy Information Administration reported U.S. ethanol production for the week ended July 15 increased 29,000 barrels per day (bpd) to 1.034 million bpd, up 0.6% from the corresponding week last year. Ethanol stocks dropped 53,000 barrels to 23.553 million barrels.
Technical analysis: Corn futures retain a bearish bias, with December futures in a month-long downtrend and potentially forming a “bear flag” since posting a near-term bottom at $5.66 1/2 on July 6. Sideways trade may prevail the next few days as traders eye weather and Ukraine. Upside targets for bulls include closing December futures above solid resistance at the July high of $6.58 1/2. Downside targets for bears includes closing December below support at the July low of $5.66 1/2. Initial resistance is seen at the 10-day moving average of $6.03 and initial support is seen at Tuesday’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.
Price action: November soybeans dropped 26 cents to $13.32 1/4, the contract’s lowest closing price since July 6. August soybean oil tumbled 186 points to 60.03 cents per pound, while August soymeal inched up $1.50 to $436.50 per ton.
Fundamental analysis: The comparatively benign weather covering the central Corn Belt this week, along with forecasts for moderating temperatures and increased moisture next week, pulled the soy complex lower. The prospect of improved conditions prior to the arrival of the critical August pod-setting and filling period probably persuaded many in the industry to sell. Bullish sentiment wasn’t helped by ongoing talk of recession, setbacks in the equity indexes and crude oil or by today’s strong bounce in the value of the dollar.
Underlying soybean fundamentals seemed supportive today, particularly after the first daily system announcement of a soybean export sale since early June. USDA announced the sale of 136,000 metric tons (MT) to China in the 2022-23 crop year this morning. Palm oil prices also rose modestly after having seemingly found support in the wake of a three-month drop this past weekend.
Traders are expect USDA’s weekly export sales report Thursday to show old-crop soybean sales between negative-200,000 MT and 200,000 MT. New-crop bean sales are seen between zero and 500,000 MT.
Technical analysis: Bears own the short-term technical advantage in August beans, especially after bulls proved unable to challenge of resistance at the contract’s 10-day moving average near $14.83 3/4. Today’s high puts initial resistance at $14.77, with backing from the 10-day moving average. The 20-day moving average places additional resistance around $15.02, with a close above that level likely having bulls targeting the pivotal 40-day moving average near $15.70. Today’s low marks initial support at $14.46, with strong backing from last week’s low of $14.44 3/4. A drop below that level would have bears targeting the July 6 low at $14.24 1/4, then the psychological $14.00 level.
August soyoil futures continued downward after failing near the contract’s 20-day moving average near 63.97 yesterday. Bears are likely targeting last week’s six-month low at 57.65. August soymeal futures again respected stout support at the contract’s 10-day moving average near $432.60. Bulls are probably hoping to challenge last week’s high at $448.10 and trigger a bullish followthrough to the upside.
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.
Advice: We advise wheat hedgers to claim profits on the 15% 2022-crop hedges held in December SRW futures. Our exit was $8.32 for a $1.90 profit.
Price action: September SRW wheat rose 7 1/4 cents to $8.19 1/2, the contract’s highest closing price since July 11. September HRW wheat rose 1 1/4 cents to $8.70 1/2. September spring wheat fell 5 1/2 cents to $9.24 1/4.
Fundamental analysis: Winter wheat futures continued to stabilize and correct higher following last week’s drop to five-month lows. Traders kept an eye on the outcome of Egyptian wheat purchase negotiations and on talks on a possible deal to boost grain exports from war-torn Ukraine. Turkish President Tayyip Erdogan said he wants a general agreement reached between Ukraine, Russia, Turkey and the United Nations on a U.N.-led plan to resume Ukrainian Black Sea grain exports to be put in writing this week. There appear to be somewhat better prospects a deal may be reached to resume Ukraine grain exports and that has muted bullish enthusiasm in grain markets. However, many traders remain skeptical Russia would actually comply with any agreement reached on the matter.
Traders await Thursday morning’s weekly USDA export sales report and look for U.S. wheat sales of 300,000 to 850,000 MT in the 2022-23 marketing year.
Technical analysis: Winter wheat futures bears have a solid near-term technical advantage, with prices in steep two-month downtrend. SRW bulls' next upside price objective is closing September prices above solid resistance at $9.00. The bears' next downside objective is closing prices below solid support at the January low of $7.38 1/4. First resistance is seen at today’s high of $8.43 1/2 and then at $8.50. First support is seen at $8.00 and then at this week’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 $9.00 and then at $9.25. First support is seen at $8.50 and then at this week’s low of $8.36 3/4.
What to do: Claim profits on the 15% 2022-crop hedges held in December SRW futures. Be prepared to reestablish hedges if support at the mid-July low is violated.
Hedgers: NEW ADVICE -- Claim profits on the 15% 2022-crop hedges held in December SRW futures. Our exit was $8.32 for a $1.90 profit. You should be 85% sold in the cash market on 2022-crop. You should be 30% forward-priced on expected 2023-crop for harvest delivery next year.
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.
Price action: December cotton rose 43 points to 92.81 cents and near mid-range after reaching the highest intraday price in over a week.
Fundamental analysis: Price action the past four trading sessions has been encouraging to the cotton bulls, suggesting a near-term market bottom is in place. Prices scored a big reversal up Friday then produced good followthrough strength Monday. The past two sessions have seen normal price consolidation. Rebounding U.S. stock indexes have lifted trader and investor risk appetite and also somewhat eased worries about an impending U.S. economic recession, including cotton bulls’ worries about reduced demand for apparel this fall. Nymex crude oil prices have pushed back well above $100 a barrel and that’s also friendly for the cotton market.
Weather in U.S. cotton country favors the bullish camp. World Weather today reported the southern U.S. Plains “continue to bake dry and will suffer the consequences with lower cotton production. 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. Southeastern U.S. crop areas seem to be experiencing the best crop weather and that may not change for a while. “
Thursday’s weekly USDA export sales report will be closely examined by cotton traders. Bulls are hoping for a better sales performance from last week, when the agency reported net U.S. sales of 10,200 running bales for 2021/2022--a marketing-year low, down 73% from the previous week and down 68% from the four-week average. Shipments lately have been good, however.
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 today’s high of 94.85 cents and then at 96.69 cents. First support is seen at today’s low of 91.16 cents and then at 90.00 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.
