Crops Analysis | July 29, 2022
Advice: We advise hedgers to claim profits on the 10% 2022-crop hedges in December futures that were entered at $6.92 on June 1. Our exit was $6.28 for a 64-cent profit.
Price action: December corn futures rose 1 cent to $6.20, up 55 3/4 cents for the week and the highest closing price since July 11.
5-day outlook: December futures rose a fifth straight session but faded late today as traders closely watched Midwest weather. World Weather continues to project a drier based weather pattern through at least Aug. 12, along with warm to hot temperatures starting next week. The forecaster warns that crop stress and declines in yield potential will likely increase quickly in the west-central Corn Belt in the coming week. However, the eastern and northern Midwest could benefit from a shift of a high-pressure ridge back to the west into the Rocky Mountains August 8-12, providing the area will cooler temperatures and showers. USDA’s weekly crop ratings Monday will be studied closely. Earlier this week, USDA reported 61% of the crop in “good” or “excellent” condition, down three percentage points from a week earlier. Silking was estimated at 62%, behind the five-year average of 70%.
30-day outlook: Corn pollination is winding down and ear fill will continue into August, keeping weather relevant to traders. Further direction will be provided with USDA’s Crop Production and Supply and Demand reports Aug. 12. USDA estimated planted acreage at the end of June, which included 4.03 million acres of corn and 15.8 million acres of soybeans that had yet to be planted as of June 1 as a result of excessive rainfall. USDA has collected updated information on 2022 acres in Minnesota, North Dakota and South Dakota, which will be included on the Crop Production report Aug. 12.
90-day outlook: The market will continue to closely monitor the progress of Black Sea shipments as “crucial” details of the agreement between Russia, Ukraine, Turkey and U.N. are said to be in progress. An increase in shipments could further reduce demand for U.S. products as the U.S. Dollar remains stable. USDA’s weekly export data for the week ended July 21, reported old-crop sales of 150,300 MT, with new-crop sales a dismal, 193,700 MT. Old-crop sales were in the middle range of expectations, while new-crop fell slightly below the lowest expected figure of 200,000 MT. Export commitments continue to run behind year ago levels by approximately 13%. Recession concerns have seemed to take a back seat to weather, but those fears could return. Outside markets, including crude oil and natural gas, will continue to impact the corn market.
What to do: Claim profits on the 2022-crop hedges. Wait on the price rally to exhaust before advancing 2021- and 2022-crop sales.
Hedgers: NEW ADVICE -- Claim profits on the 10% 2022-crop hedges in December futures that were entered at $6.92 on June 1. Our exit was $6.28 for a 64-cent profit. 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.
Cash-only marketers: You should be 90% sold on 2021-crop. You should have 50% of expected 2022-crop forward-sold for harvest delivery.
Advice: We advise soybean hedgers and cash-only marketers to sell another 10% of expected 2022-crop production to get to 60% sold in the cash market.
Price action: November soybeans rose 28 cents to $14.68 1/2, off 20 1/2 cents from today’s high but still the highest closing price since June 29. November futures soared $1.52 3/4 for the week, or 11.7%, the largest weekly percentage gain since August 1999. September soymeal fell 70 cents to $442.40 and September soyoil rose 250 points to 66.50 cents.
5-day outlook: Soybean futures rose for a sixth consecutive session on escalating concerns heat and dryness during the first half of August will pinch yield potential. Weather updates over the weekend and early next week will be key price drivers. Much of the Midwest is expected to be hotter than normal through the first half of August, with limited rainfall chances in many areas. The “most important part” of the next 10 days is the “lack of significant moisture advertised by most of the computer forecast models from Iowa, northwestern Illinois and northern Missouri northwestward into the northern Plains,” World Weather said. Late selling pressure in soybeans may have reflected updated forecasts suggesting greater rain odds. The GFS model was wetter for the Midwest Aug. 8-10, World Weather said around midday, but added “the latest run is likely too wet…. the bottom line to the two-week outlook is unchanged for the major crop growing areas in the U.S.”
30-day outlook: August weather will be the primary price driver over the month ahead, along with USDA’s Aug. 12 Crop Production Report. There’s potential for more price upside if new-crop exports remain strong and the soymeal and soyoil markets extend recent rallies. Outside markets such as crude oil and U.S. stocks appear to reflect easing recession fears and/or beliefs the Federal Reserve will eventually get inflation under control. That may spark a return to a “risk-on” mentality that prompts speculators to expand long exposure in commodities.
90-day outlook: Longer-term influencers include with late-summer weather, export demand and outside markets. Near-term export numbers have been trending bearish. USDA on Thursday reported net weekly soybean sales reductions of 58,600 MT for 2021-22, marking the fourth week in the past five with net old-crop sales reductions. The longer-term picture looks more bullish. Early today, USDA reported daily soybean sales of 132,000 MT to “unknown destinations” for 2022-23. That marked the first daily soybean sale announcement since July 20 and just the second since June 15. New-crop soybean sales commitments of nearly 14.9 MMT are up 46% from the same period last year.
What to do: Get current with advised cash sales. Hedgers should maintain the 10% short hedge position in November futures at $14.73.
Hedgers: NEW ADVICE -- Sell another 10% of expected 2022-crop production to get to 60% forward-sold for harvest delivery. You also have 10% of expected 2022-crop production hedged in short November soybean futures at $14.73. You should be 95% sold in the cash market on 2021-crop.
Cash-only marketers: NEW ADVICE -- Sell another 10% of expected 2022-crop production to get to 60% forward-sold for harvest delivery. You should be 90% sold on 2021-crop.
Price action: September SRW futures fell 9 1/4 cents to $8.07 3/4, still up 48 3/4 cents for the week. September HRW fell 15 1/4 cents to $8.74 1/2, up 54 1/4 cents for the week. December spring wheat fell 15 1/2 cents to $9.23 1/2, up 39 cents for the week.
5-day outlook: Wheat futures faded from initial gains today but still climbed for the week amid sharp gains in corn and soybean markets and uncertainty over the resumption of grain shipments from Ukraine. Rueters reported Ukraine is ready to start shipping grain from two Black Sea ports under the U.N. brokered agreement, but “crucial” details for the safe passage of vessels still needed to be worked out. Spring wheat futures were pressured by Wheat Quality Council tour estimates for strong yields in South Dakota, North Dakota and Minnesota.
30-day outlook: Traders will continue to closely follow the war in Ukraine and outside markets, including the U.S. dollar, which may remain strong after the Fed boosted its benchmark rate another 75 basis points. Dollar strength could further dampen already soft export prospects. USDA reported weekly export sales of 412,000 MT for the week ended July 21, within market expectations. For the year, export commitments are running around 1% behind a year ago. USDA’s Crop Production and Supply and Demand reports Aug. 12 will help set the market tone next month.
90-day outlook: Updates of weather in key growing areas and ultimately supply will drive the markets longer term. World demand seems strong as wheat from Ukraine has been unable to enter the market since Russia invaded the country; key importers have resorted to purchasing from other regions to fill their needs. Production uncertainties over Ukraine may keep a floor under the market.
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 53 points to 96.74 cents per pound, up 585 points for the week.
5-day outlook: Cotton prices may continue to draw support from hot, dry weather in the Southern Plains stressing the crop, along with strength in U.S. equities, the U.S. dollar pulling back from 20-year highs and crude oil futures briefly rising back $100 per barrel. World Weather said Texas crop areas may receive some showers briefly, but resulting rainfall is unlikely to be very great and it will come too late. The forecaster also commented that weather in the U.S. Delta will improve during the coming week with periods of rain and warm weather prevailing. USDA will update condition ratings Monday. As of July 24, 61% of the crop was rated “good” to “excellent.”
30-day outlook: Recession fears are taking a backseat for the time being as weather and growing conditions have become top of mind. However, as time progresses and production estimates become more certain, those fears could resume if a lack of positive economic data is not produced in the coming days. Continued strength in crude oil could help keep the cotton market supported as polyester, a product of petroleum, is a competitor to cotton. USDA updates its Supply and Demand balance sheet Aug. 12.
90-day outlook: Ideas of domestic production will be known, as well as the economic position of the U.S. Further increases in interest rates could certainly help the U.S. dollar attempt to breakout above its 20-year high, further weakening export prospects. Softening exports may weigh on the market, as USDA Thursday reported a net export sales reduction of 4,000 running bales for the latest week, a marketing year low. Export commitments are currently running approximately 8% behind a year ago.
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.
