Crops Analysis | July 21, 2022
Corn
Price action: December corn futures fell 16 1/2 cents to $5.73 1/2, the contract’s lowest settlement since $5.68 1/4 on Feb. 3.
Fundamental analysis: Grain markets fell sharply in part on late reports Russia has agreed to allow Ukrainian grain exports through the Black Sea and that a deal may be signed Friday. A resumption in Ukraine exports would be near-term bearish for grain futures, but today’s late losses could turn out to be a knee-jerk reaction. Grain traders remain skeptical Russian President Vladimir Putin will live up to his word. Sharply lower crude oil prices today also worked against the grain market bulls.
Weather in the Corn Belt also leans bearish. World Weather Inc. expects a couple more days of hot and dry weather in the Corn Belt before cooling begins. The second week of the outlook “presents less heat and an opportunity for ‘some’ rain in the driest areas.” Also today, USDA reported disappointing net U.S. corn sales during the week ended July 14, at 33,900 MT for the 2021-22 marketing year, down 43% from the previous week and down 82% from the four-week average. For 2022-23, net sales totaled 570,200 MT, up from 348,200 MT the previous week and above trade expectations.
Technical analysis: Corn bears hold a near-term technical advantage and gained more power today. The next upside objective for bulls is to close December futures above solid resistance at this week’s high of $6.23 3/4. The next downside target for bears is closing prices below support at the July low of $5.66 1/2. First resistance is seen at today’s high of $5.91, then $6.00. First support is at today’s low of $5.70, then $5.66 1/2.
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 plunged 30 3/4 cents to $13.01 1/2, the new-crop contract’s lowest closing price since $12.84 on Jan. 18. August soymeal fell $2.10 to $434.40 and August soyoil fell 143 points to 58.60 cents.
Fundamental analysis: New-crop soybeans extended an overnight slide and tumbled to a six-month low close on expectations Midwest rain over the next week will provide a boost just as the crop enters key reproductive phases in August. A drop of nearly $4 in crude oil futures also burdened the soy complex. Weekly USDA export numbers were slightly above expectations but still conveyed a bearish trend.
USDA reported net weekly soybean sales totaling 203,500 MT for 2021-22, primarily for China (146,900 MT, including 125,000 MT switched from unknown destinations). That snapped a three-week string of net old-crop sales reductions. For the third consecutive week, independent of the reported sales for the current week, there were negative adjustments to a previous week. For 2022-23, net soybean sales totaled 254,700 MT, up from113,900 the previous week and within trade expectations and also primarily for China (136,000 MT).
Technical analysis: The soybean market’s bearish technical inclinations accelerated today with the November contract’s break under $13.00 and six-month low close. November futures remain in a steep, six-week downtrend that may have bears targeting the January low of $12.76. Longer-term, the December down at $12.04 3/4 also looms as a target. Near-term resistance is seen at today’s high of $13.41 3/4 and the 10-day moving average at $13.54 3/4.
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 13 1/4 cents to $8.06 1/4 and September HRW wheat fell 10 cents to $8.67 3/4. September spring wheat fell 11 3/4 cents to $9.12 1/2.
Fundamental analysis: Wheat futures were pressured by spillover weakness from sharp declines in corn, soybeans and crude oil, though largely kept to the sideways trading range of the past couple weeks. Late pressure stemmed from reports that Ukraine, Russia, Turkey and U.N. Secretary-General Antonio Guterres will sign a deal Friday to resume Ukraine's Black Sea grain exports, Turkish President Tayyip Erdogan's office said. Weakness was offset to some degree by concerns over extreme heat stressing crops in Europe. Fading U.S. harvest pressure may limit price downside in winter wheat, which appears to have established a near-term bottom.
Export readings remained soft. USDA reported net weekly U.S. wheat sales of 511,100 MT for 2022-23, down 50% from the previous week and down 10% from the prior four-week average. Sales fell within trade expectations ranging from 300,000 to 850,000 MT. Export commitments are running 0.1% behind year-ago, compared with 0.6% behind last week. USDA projects exports in 2022-23 at 775 million bu., down 3.7% from the previous marketing year.
Technical analysis: Winter wheat bears retain the near-term technical advantage, with prices in steep two-month downtrend, but the market has entered a consolidation phase and a near-term bottom may have been established. SRW bulls' upside objectives include resistance at Wednesday’s high of $8.43 1/2 and the 20-day moving average around $8.52. Key support comes in at last week’s low of $7.65 3/4, with further objectives including the January low of $7.38 1/4.
What to do: Be prepared to reestablish hedges if support at the mid-July low is violated.
Hedgers: 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 futures fell 121 points to 91.60 cents per pound.
Fundamental analysis: Cotton futures lost steam through the morning, with point losses in triple digits, after reaching a high of 93.80 cents. Outside markets were significant contributing factors, as crude oil futures retreated for the second day, continuing below $100 per barrel. Weaker-than-expected U.S. economic data also weighed on commodities, with crude oil dropping nearly $4.
Weather in the Delta and southern Plains continues to be of interest as hot, dry conditions have persisted over much of those regions throughout the growing season. According to World Weather, the Delta through northern Alabama will see mostly stressful conditions for crops during the next two weeks as temperatures will be warm to hot, soil moisture is mostly short, and rain during the period will be too infrequent and light to induce more than temporary improvements in condition for crops. The forecaster expects favorable soil moisture and scattered showers most days over the course of the next two weeks from south-central Mississippi to Georgia and northern Florida to southern Virginia, providing the area with enough soil moisture to support crop development.
USDA’s weekly Export Sales report showed old-crop sales of 54,100 running bales, up considerably from the week prior and up 93% from the previous four-week average. New-crop sales at 113,200 bales weren’t as impressive, marking the lowest total in three weeks. According to the data for the week ended July 14, 2022, export commitments are 3% behind year-ago levels, compared to 3.1% last week.
Technical analysis: Since gapping higher in the open to begin the week, December cotton has been short-term overbought. The range between 88.71 and 98.80 will remain in the bears’ sights as outside markets and economic activity cast a shadow over the cotton market. Resistance at 93.50 was tested in today’s session, but the contract ended up posting a low range close, but still above the psychologically important 90-cent level.
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.
