Crops Analysis | July 25, 2022

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Corn ­

Price action: Corn futures ended high-range with gains mostly around 19 cents. December corn firmed 19 1/2 cents to $5.83 3/4.

Fundamental analysis: Corn futures were initially boosted overnight by news Russia attacked Ukraine’s Odesa port over the weekend. While that remained a supportive factor, wheat slumped to mid- to low-range closes, signaling corn pulled much of its support today from weather. While rains pushed across areas of the Corn Belt over the weekend, with more expected this week along with moderate temps, next week’s outlook calls for a return of hot and dry conditions. How forecast models develop through the week will likely determine much of this week’s price action in corn futures.

USDA’s weekly corn export inspections totaled 724,124 MT (28.5 million bu.). That lowered the weekly required pace to hit USDA’s export forecast to 23.6 million bu., but it was the lowest weekly tally since early November. We also have concerns with the level of outstanding old-crop corn sales. The recent price slide needs to trigger some fresh old-crop sales or there’s risk USDA may have to lower its forecast.

Late today, USDA reported 61% of the U.S. corn crop in either “good” or “excellent” condition as of Sunday, down from 64% a week earlier and below analysts’ expectations for a combined rating of 63%.

Technical analysis: December corn futures negated Friday’s technical downside breakout by climbing back into the short-term consolidation range today. Friday’s low at $5.61 3/4 is key near-term support as a drop below that level would open the door to the next leg down – likely to at least the wintertime consolidation range around $5.40. Near-term resistance starts at the 10-day moving average near $5.90 1/2 and then the 20-day average near $6.05 1/2. Bulls would need a close above the July 11 spike high at $6.58 1/2, which lines up closely with the 40-day moving average, to regain short-term momentum.

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 soybean futures closed 30 1/4 cents higher at $13.46. September meal futures rose $15.90, closing at $415.20. September soyoil closed 51 points lower at 58.32 cents.   

Fundamental analysis: Soybeans held positive ground through the trading session on weather apprehensions as focus shifts to weather for August, the most critical month in determining yield. Soymeal and outside markets added price support as crude oil futures traded higher and the U.S. dollar was lower. World Weather says the Midwest will experience a drier based weather pattern, poised to resume this weekend and continuing through at least Aug. 8, along with warmer temperatures starting next week. Steady declines in soil moisture are expected, leading to rising crop stress. The forecaster noted crop stress and declines in yield potential may begin to expand into a larger part of the Midwest during the second week of August if rain and cooler temperatures do not return.

Soybean oil struggled throughout the day as Malaysian palm oil fell a third consecutive session amid disappointing export demand. Indonesia’s trade minister said on Friday that the world’s biggest palm oil exporter is considering removing a rule that requires palm oil companies to sell a portion of their products at home to secure export permits as high inventories have been holding back a recovery of palm oil prices.

Export inspections for week ended July 21 totaled 388,212 MT (14.3 million bu.) of soybeans, within expectations but down 48,617 MT (1.8 million bu.) from the previous week. Export inspections continue to run behind last year’s pace by nearly 9%. Historically, the month of August tends to see an increase in shipments, however, there aren’t many extra old-crop soybean export commitments on the books, meaning some fresh sales are likely needed to get to USDA’s forecast.

USDA late today reported 59% of the U.S. soybean crop in good-to-excellent condition, down from 61% the previous week and the sixth straight weekly decline. Analysts expected a number closer to 60%.

Technical analysis: November soybean futures gapped higher overnight, though the gap was eventually filled in the day session. Near-term resistance will be seen at $13.56 3/4. First and second support, untested in today’s session, remain at $12.91 3/4 and $12.67 3/4, respectively.

September meal futures tested and closed above both first and second resistance levels at $406.40 and $408.30. First and second support at $397.30 and $395.40 remained untested in today’s session.

September oil was unable to push above resistance at 59.77 cents. Next resistance stands at 60.72 cents. First and second support at 57.29 cents and 55.76 cents, respectively, remained untested.

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 closed up 11 cents at $7.70. September HRW rose 19 1/2 cents at $8.39 3/4. December Spring wheat futures closed 14 cents higher at $8.98.

Fundamental analysis: The wheat complex gapped higher in the overnight session as Russia attacked Ukraine’s port city of Odesa, not long after an agreement was signed last week to allow safe passage of grain from three Black Sea ports. Outside markets offered additional support the wheat with crude oil futures trading higher, and the U.S. Dollar fractionally lower. While grain storage areas were said to be unharmed, the attack further exacerbated trade concern over months-long disruptions to the global  grain trade due to the war. Russia and Ukraine, combined, account for approximately a third of global wheat exports.

USDA said wheat export inspections for the week ended July 21 were 475,426 MT (17.5 million bu.), in line with trade expectations, and up from last week by 191,333 MT (7 million bu.). However, shipments continue to consistently fall behind year-ago levels, currently behind by 23.5%. Late today, USDA reported 68% of the spring wheat crop in good-to-excellent condition, down from 71% the previous week and below analysts’ expectations for an unchanged figure.

Technical analysis: September wheat futures gapped 28 cents higher in the overnight session, though the gap was filled early in the day session. First and second support remains at $7.39 1/2 and $7.20 respectively, with resistance at $7.92 3/4 and $8/26 1/2. September HRW futures traded nearly a 30-cent range, testing first resistance at $8.49 3/4 early in the overnight session. Second resistance remains at $8.79 1/4. First and second support remains at $8.02 1/2 and $7.84 2/4. Respectively.

September spring wheat futures traded a 25.5 cent range, staying well above support levels of $8.83 1/4 and $8.69 3/4, as well as resistance areas of $9.22 and $9.47 1/4.

What to do: Get current with advised hedges. Wait on a corrective rebound to increase cash sales.

Hedgers: You have 15% of 2022-crop hedged in short December SRW futures at $7.83. 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.

 

Cotton

Price action: December cotton rose 17 points to 91.06 cents per pound, around the middle of the day’s range.

Fundamental analysis: Cotton futures rose modestly following two-sided range trade, supported by strength in grain and crude oil prices and in U.S. stocks, along with a softer tone in tone in the U.S. dollar. Ongoing concern over heat and dryness stressing cotton in key Texas growing areas continues to underpin the market. Traders will watch USDA’s weekly crop ratings update later today for any further deterioration. A week ago, USDA rated 38% of the U.S. cotton crop good-to-excellent, down one percentage point from a week earlier, while 27% was rated poor-to-very poor.

“Texas cotton crop prospects remain poor, despite a few showers recently,” World Weather said today, though some areas are in line for rains this week. “The Texas Panhandle will be the primary region that will get rain, along with southwestern Kansas and western Oklahoma. The Delta is also expected to see some temporary improvement in crop and field conditions later this week into early next week. U.S. southeastern cotton weather is expected to stay mostly favorable.”

Technical analysis: Cotton futures bears still hold a near-term technical advantage with prices are in a two-month downtrend on the daily chart and December futures trading under most major moving averages, with the exception of the 10-day at 90.27 cents. But the market appears to have established a near-term bottom with the July 15 low at 82.54 cents and may extend a sideways consolidation as traders watch for export updates and economic indicators, including U.S. GDP estimates. Initial support levels include last week’s low at 88.80 cents and initial resistance comes in around the 20-day moving average at 92.42 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.

 

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