Crops Analysis | July 26, 2022
Price action: December corn futures rose 17 cents to $6.00 3/4, the contract’s highest closing price since $6.10 3/4 on July 18
Fundamental analysis: December futures gapped higher overnight and sustained gains today after USDA reported disappointing weekly crop ratings. U.S. corn acres rated “good” or “excellent” fell to 61% from 64% the previous week and worse than analysts’ expectations. The sliding ratings exacerbated market concern over forecasts for another round of extreme Midwest heat next week and Ukraine disruptions. Russia again targeted Black Sea regions of Odesa and Mykolaiv with air strikes today, damaging private buildings and port infrastructure along the country’s southern coast, according to the Ukrainian military.
USDA reported 62% of the crop was silking as of Sunday, behind the average pace of 70% and further underscoring concern that unfavorable weather during pollination could crimp yield prospects. World Weather predicts a drier-based pattern to return Friday through at least August 9, along with warmer temperatures, starting next week, leading to steady declines in soil moisture and inducing rising levels of crop stress. Areas subject to the greatest amount of stress are the west-central, south-central and southwestern Corn Belts.
Also, Consultant Dr. Michael Cordonnier lowered his average U.S. corn yield estimate by 2 bu. per acre to 175 bu. and has a neutral to lower bias, citing concern over delayed maturity, heat during pollination and high nighttime temperatures.
Technical analysis: December futures rallied for the second consecutive session, moving closer towards the 20-day moving average. A close above resistance at 5.89 1/4 as well as $5.94 1/2 and the psychological $6.00 level is favorable. Next level of resistance will be seen at $6.04 3/4. Support levels remain at $5.73 1/2 and $5.63.
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 rallied 37 3/4 cents to $13.83 3/4, the contract’s highest closing price since $14.05 on July 11. August soymeal surged $24.90 to $472.40, a lifetime-high close for the contract. August soyoil rose 41 points to 60.42 cents.
Fundamental analysis: Soybean futures gapped higher overnight and closed at the highest levels in over two weeks on lower-than-expected crop ratings and concerns a return of Midwest heat could come at an inopportune time for the crop’s development. Strength in soymeal contributed to a bullish tone in the soy complex. USDA yesterday reported 59% of the U.S. soybean crop in “good” to “excellent” condition as of Sunday, down from 61% the previous week and the sixth straight weekly decline. A number closer to 60% was expected. Based on the Pro Farmer Crop Condition Index (CCI), the soybean crop dropped 2.7 points to 350.7, which is 5.5 points below average.
A flare-up in weather concerns and the market’s sharp up-turn in recent days make it likely November soybeans established a near-term bottom last week and could continue upward. Also today, Crop Consultant Dr. Michael Cordonnier lowered his soybean yield projection by 0.5 bu. to 51 bu. per acre and he also has a neutral-to-lower bias toward soybean yields, citing concern over recent heat. “Soybeans are entering their reproductive stage, and after a brief period of improved weather, hotter and dryer weather is forecasted as we move into August,” Cordonnier said in a report. “Soybeans are going to enter August in average or slightly below average condition, but the longer-range forecast is calling for a return of hotter and dryer conditions. If a ridge rebuilds over the western Corn Belt, that would be a concern for the soybeans.”
Technical analysis: Technicals have turned more bullish in the soy complex with November soybeans possibly breaking a six-week downtrend drawn from the June 10 high. November beans also closed above the 20-day moving average, currently $13.69 1/2, for the first time since June 17. Upside targets for bulls include the April 1 low of $13.94 and the $14.00 level, as well as the July high of $14.38 1/2. Downside support includes the gap formed between Monday’s high at $13.49 1/4 and today’s low at $13.58 1/4, along with the 10-day moving average at $13.45. Key support comes in at the six-month low of $12.88 1/2 posted July 22. In August soymeal, upside targets include an intraday high of $500.30 posted July 14, based on the daily continuation chart.
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 surged 33 3/4 cents to $8.03 3/4. September HRW futures jumped 37 1/4 cents to $8.77. September spring wheat soared 44 3/4 cents to $9.28 3/4.
Fundamental analysis: Spring wheat led the markets higher in the wake of an unexpected drop in USDA’s spring wheat crop ratings and concerns over Ukrainian supplies. Late Monday, USDA reported 68% of the spring wheat crop in “good” to “excellent” condition as of Sunday, down from 71% the previous week and below analysts’ expectations for an unchanged figure. Based on the Pro Farmer CCI, the spring wheat crop fell 4.6 points to 372.5, still 45.1 points above the five-year average for the date. September SRW overnight rose to $7.92 but held within Monday’s range. Also, Russian jets hit Ukraine’s key port city of Odesa with cruise missiles again today and attacked other coastal villages and port facilities, raising concerns about the resumption of Ukrainian grain shipments.
Also today, French consultancy Agritel forecast the soft wheat crop in France to fall 5.6% this year to 33.44 MMT after adverse weather cut yields. Agritel’s estimate, based on a survey of industry players July 18-22, is slightly above its initial forecast of 33.25 MMT and well above the French ag ministry’s projection earlier this month of 32.90 MMT, down 7.2% from last year.
Technical analysis: Bears still hold a short-term technical advantage in September SRW wheat, although bulls were able to force a close above formerly stiff resistance at the contract’s 10-day moving average near $7.96 1/2, as well as the psychologically important $8.00 level. Those points now mark initial and secondary resistance levels, respectively. Look for additional resistance at the 20-day moving average near $18.28 ½, with further backing from the downtrend line drawn across the contract’s May and June highs (now near $8.56). A push above those levels would have bulls targeting the 40-day moving average near $9.40. Today’s low places initial support at $7.72 1/4, with the lows of the past two trading sessions marking additional support at $7.60 1/2 and $7.54. A close below those points would likely have bears targeting $7.00.
September HRW and spring wheat contracts also strengthened technical postures after topping 10-day moving averages, although both now face stiffer resistance at their respective 20-day moving averages near $8.87 and $9.36, respectively.
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.
Price action: December cotton rose 342 points to 94.48 cents per pound, the contract’s highest closing price since 94.84 cents on July 11.
Fundamental analysis: Cotton futures rallied to two-week highs after USDA’s weekly crop ratings showed further deterioration in the U.S. crop. Strength in grain markets also supported cotton. Late Monday, USDA reported 34% of cotton crop was rated in good-to-excellent condition as of Sunday, down from 38% a week earlier, while 30% was rated poor-to-very-poor, up from 27% a week earlier. The numbers reinforced concern over persistent dryness in key growing areas of the Southern Plains. High temperatures climbed well above 100 degrees Fahrenheit in the Plains Monday and hot, dry weather is expected into next week.
Warm to hot and dry weather will be 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 declines in yields in most areas,” with weekend rain chances diminished in the Texas Panhandle, World Weather said today. “The northern Texas Panhandle will see some light showers Friday into Saturday with the resulting rain not likely to have much of an impact on cotton or soil conditions.”
Technical analysis: Cotton futures retain a bearish bias but the near-term trend is turning more neutral with today’s strong close, with the December contract closing above the 20-day moving average, currently 92.45 cents, for the first time since June 9. December futures hit 94.90 cents today, topping last week’s high, and followthrough strength tomorrow could further embolden market bulls to target the July 11 high at 96.69 cents and the high for the month at 99.00 cents. Initial support comes in at Monday’s low of 89.50 cents and last week’s low at 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.
