Crops Analysis | August 2, 2022
Price action: December corn futures fell 15 1/2 cents to $5.94 1/4, near the session low.
Fundamental analysis: Corn market bulls have faded badly so far this week as weather concerns eased slightly, weekly crop ratings topped expectations and Ukrainian grain shipments resumed. The near-term Midwest weather outlook leans bearish for corn, with much of the Corn Belt forecast to receive timely rains through next Monday. It was also a risk-off trading day in the broader market, as U.S.-China tensions ticked up after U.S. House of Representatives Speaker Nancy Pelosi flew to Taiwan. China said it will retaliate. Also, a stronger U.S. dollar was a bearish element.
USDA late Monday afternoon reported better-than-expected U.S. ratings, with 61% of the corn crop in “good” or “excellent” condition as of Sunday, unchanged from the previous week and one percentage point above trade expectations. Also bearish for the grain markets are reports Ukraine grain exports are continuing this week after the first load of corn was shipped out of the Black Sea region earlier this week. Turkey said it expects about one grain-loaded ship to leave Ukrainian ports each day as long as an agreement that ensures safe passage holds.
Technical analysis: Corn futures bears have a near-term technical advantage and have gained power this week amid recent choppy trading. The next upside price objective for bulls is to close December futures above solid resistance at last week’s high of $6.36 1/2. 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 $6.07 1/2 and then at $6.20. First support is at today’s low of $5.92 1/2 and then at $5.84 1/4.
What to do: Wait to make additional 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.
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 fell 19 1/2 cents to $13.86 1/2, the lowest closing price since July 26. September soymeal rose $4.50 to $434.20. September soyoil fell 176 points to 62.33 cents.
Fundamental analysis: Soybean futures extended Monday’s sharp losses and closed at the lowest levels in a week after USDA’s weekly condition ratings came out better than expected. USDA late Monday reported 60% of the soybean crop in “good” to “excellent” condition as of Sunday, an unexpected improvement from 59% a week earlier. Analysts expected a drop to 58%. When USDA’s weekly ratings are plugged into the weighted Pro Farmer CCI, the soybean crop improved 3.1 points to 353.9, still 2.7 points below average.
While the near-term Midwest weather outlook appears to be less threatening, heat and dryness in parts of the region remains a concern. World Weather projects a “drier-biased” pattern Aug. 9-16, “but temperatures, at least initially, should not be hot outside of a few western areas,” the forecaster said, and most of the Midwest should have enough soil moisture to keep crop conditions from quickly deteriorating. “Crop stress and declines in yield potentials may begin expand into a larger part of the Midwest during the second half of August if rain does not increase,” World Weather added. Cordonnier lowered his soybean yield estimate, dropping his outlook 0.5 bu. to 50.5 bu. per acre. He has a neutral to lower bias toward yields.
Technical analysis: November soybean futures have given back over half of last week’s roughly $1.53 gain and fallen back to the middle of a wide range traded since the end of June. Near-term technicals still lean neutral-bullish, with November futures testing but closing above the 10-day moving average at $13.79 and the 20-day at $13.69 1/2. A push under those levels may have bears targeting the daily chart gap created July 26 and starting at $13.58 1/4. Initial resistance is seen around $14.00, followed by the 40-day moving average at $14.30 1/2.
What to do: Get current with advised cash sales. Hedgers should maintain the 10% short hedge position in November futures at $14.73.
Hedgers: You should be 60% forward-sold for harvest delivery on expected 2022-crop production. 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: You should be 60% forward-sold for harvest delivery on expected 2022-crop production. You should be 90% sold on 2021-crop.
Price action: September SRW wheat fell 25 1/2 cents to $7.74 3/4. September HRW wheat fell 24 1/4 cents to $8.42 1/4. September spring wheat futures tumbled 24 1/4 cents to $8.73 1/4.
Fundamental analysis: Winter wheat futures remained under pressure amid reports of continued Ukrainian grain shipments out of the Black Sea region, a stronger U.S. dollar and a general “risk-off” day in the broader marketplace amid escalating U.S.-China tension. Price pressure also stemmed from better-than-expected USDA crop ratings. USDA reported 70% of the U.S. spring wheat crop in good-to-excellent condition as of Sunday, up from 68% a week earlier and above analyst expectations for 67%. The U.S. winter wheat crop was 82% harvested as of Sunday, up from 77% a week earlier and slightly behind the five-year average of 85% for that date.
Technical analysis: Winter wheat bears have a solid near-term technical advantage, with prices in 2 1/2-month-old downtrends on daily bar charts. SRW bulls' next upside objective is closing September futures above solid resistance at $9.00. Bears' next downside objective is closing prices below solid support at the January low of $7.38 1/4. First resistance is seen at $8.00 and then at this week’s high of $8.20 1/4. First support is seen at today’s low of $7.72 3/4 and then at $7.65 3/4. The HRW bulls' next upside price objective is closing September prices above solid technical resistance at last week’s high of $9.15 1/4. The bears' next downside objective is closing prices below solid technical support at $8.00. First resistance is seen at today’s high of $8.60 3/4 and then at this week’s high of $8.86 1/2. First support is seen at today’s low of $8.38 1/2 and then at the July low of $8.14 1/2.
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 173 points to 94.81 cents per pound.
Fundamental analysis: Cotton futures rose for the first session in the past three, boosted by stronger crude oil and concerns over adverse weather harming U.S. production. Harvest prospects remain questionable as heat continues to grip major growing regions in the southern Plains. World Weather expects hot, dry weather to continue in Texas, saying highs today will vary from 96 to 108 degrees Fahrenheit from Texas to South Dakota, with most of the heat becoming confined to the southern Plains and southwestern Corn Belt Wednesday. By the weekend and into early next week, heat will concentrate on the southern Plains and southwestern Corn Belt, further stressing crops.
USDA’s weekly crop ratings improved but still reflect a crop under duress. Late Monday, USDA reported the cotton crop in 38% good-to-excellent condition, up from 34% a week earlier but down from 60% a year earlier and 67% for the five-year average. USDA said 89% of the crop was squaring as of Sunday and 58% was setting bolls, ahead of the five-year averages at 87% and 50%, respectively.
Technical analysis: December cotton traded a 427-point range, ending the day above the 20-day moving average, currently at 92.08 cents, maintaining near-term upside momentum. Support at 92.32 cents was tested, however second support at $90.58 remained untraded. Resistance at 96.28 and 98.50 remained out of the bulls’ reach in today’s session.
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.
