Crops Analysis | August 3, 2022

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Corn ­

Price action: December corn futures rose 2 cents to $5.96 1/4, after dropping earlier to $5.87 1/2, the lowest intraday price in over a week.

Fundamental analysis: Corn futures fell initially amid forecasts for rain in the Midwest this week and expectations for continued grain shipments out of Ukraine but rebounded behind late bargain-buying. Much of the Midwest will receive “multiple rounds of timely rain through Monday that should prevent excessive dryness and significant crop stress through the next 10 days,” World Weather said today. “Exceptions to favorable crop conditions are still expected from southeastern South Dakota and southwestern Minnesota to eastern Nebraska and much of western into central Iowa.” Weather remains the key near-term price driver and may lead to more sideways, choppy trading.

Also today, StoneX estimated the U.S. corn crop at 14.417 billion bu. and the average yield at 176.0 bu. per acre. The firm’s initial crop estimates are lower than USDA’s July projections of 14.505 billion bu. on a yield of 177 bu. per acre. U.S. ethanol production averaged 1.043 million barrels per day (bpd) for the week ended July 29, up 22,000 bpd from the previous week and up 3.0% from the corresponding week last year. Ethanol stocks increased 66,000 barrels to 23.394 million barrels. USDA’s weekly export sales report Thursday is expected to show net U.S. corn sales ranging from 100,000 to 700,000 MT, compared to the prior week's total of 344,027 MT.

Technical analysis: Corn futures retain a neutral-bullish bias, reinforced by today’s rebound from initial and slightly firmer close. December futures settled around the middle of the past month’s range, defined by a high of $6.58 1/2 July 11 and low of $5.61 3/4 July 22, and matched the 10-day moving average with today’s close at $5.96 1/4. Initial resistance comes in at the 20-day moving average of $5.99 3/4, followed by last Friday’s high at $6.36 1/2. The December contract partially filled a chart gap create July 26, and bears may make another run at filling the rest of the gap, which currently ranges from $5.84 1/4 to $5.89 1/2.

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.

 

Soybeans

Price action: November soybeans fell 16 3/4 cents to $13.69 3/4, the contract’s lowest closing price since July 25. September soymeal fell $2.80 to $431.40 and September soyoil fell 51 points to 61.82 cents.

Fundamental analysis: Soybean futures erased overnight gains and fell a third consecutive session as crude oil tumbled to a six-month low and forecasts promised rain relief for parts of the Midwest. Beyond this week, the Midwest faces a “drier-biased” pattern Aug. 9-17, “but temperatures, at least initially, should not be hot outside of a few western areas and most of the Midwest should have enough soil moisture to keep crop conditions from quickly deteriorating into the middle of the month,” World Weather said. Weather concerns remain for crops in Nebraska, South Dakota and neighboring states, which may limit further price downside. “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 said.

Also today, StoneX estimated the U.S. soybean crop at 4.490 billion bu. and the average yield at 51.3 bu. per acre. The firm’s initial crop estimates are lower than USDA’s July projections of 4.505 billion bu. on a yield of 51.5 bu. per acre. USDA reported a daily sale of 135,000 MT of soymeal for delivery to Poland during the 2022-23 marketing year.

Technical analysis: Bullish momentum has faded sharply this week, with November futures down 98 3/4 cents from last Friday’s close, nearly two-thirds of last week’s gain, and settling under the 20-day moving average for the time since July 25. The new-crop contract remains around the middle of the past month’s range and could be poised for more choppy price action over the near-term. Key chart levels include the gap created on the daily bar chart July 26 and ranging between $13.49 1/4 and $13.58 1/4. Initial resistance comes in at the 10-day moving average of $13.82 3/4 and the 40-day moving average at $14.26 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.

 

Wheat

Price action: September SRW wheat fell 11 cents to $7.63 3/4, a six-month closing low. September HRW wheat fell 6 3/4 cents to $8.35 1/2. September spring wheat rose 2 cents to $8.75 1/4.

Fundamental analysis: Winter wheat extended this week’s sell-off on pressure from weakness in corn and soybean futures and easing supply concerns following the resumption of grain shipments from Ukraine. Inspection of the first ship carrying grain to leave Ukrainian ports under the recent deal between Ukraine, Russia, Turkey and the United Nation will pass through the Bosphorus “shortly,” the Turkish defense ministry said today. The ship carrying 26,527 MT of corn is headed for Lebanon.

Selling interest in spring futures may be limited in the near term due to hot and dry weather in the Northern Plains. World Weather expects limited rainfall and occasionally hot temperatures to increase crop and livestock stress over the week ahead, especially in the western half of the region where soil moisture is lowest. There will continue to be a growing need for a boost in rainfall for unirrigated fields, particularly in Montana and the western Dakotas. USDA’s weekly export sales report Thursday is expected to show net U.S. wheat sales of 200,000 to 550,000 MT.

Technical analysis: Winter wheat bears have a solid near-term technical advantage, with prices in a 2 1/2-month-old downtrend on daily charts. SRW bulls' next upside price objective is closing September futures above solid resistance at $8.50. Bears' next downside objective is closing prices below solid support at the January low of $7.38 1/4. First resistance is seen at today’s high of $7.90 1/4 and then at $8.00. First support is seen at today’s low of $7.52 and then at $7.38 1/4.

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 Tuesday’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 $8.23 1/4 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.

 

Cotton

Price action: December cotton fell 38 points to 94.43 cents per pound, nearer the session low.

Fundamental analysis: Cotton futures were under modest pressure from U.S. dollar strength and sharply lower crude oil prices. However, selling interest was limited by rally in the U.S. stock market. U.S. stock indexes are trending higher on a near-term basis, which implies consumer attitudes are more upbeat and may be inclined to spend on fall and winter apparel. Losses were also minimized by heat in Texas growing areas. World Weather said warm to hot and dry weather will be most common in the region 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.”

Traders await Thursday morning’s weekly USDA export sales report. The cotton bulls are hoping the rebound in the U.S. stock market and the U.S. dollar index backing down from its recent high encouraged some better foreign buying interest in the U.S. fiber.

Technical analysis: Cotton futures bears hold a near-term technical advantage, but recent gains still suggest a market bottom is in place and December futures are still in a fledgling uptrend on the daily bar chart, but now just barely. The next upside price objective for cotton bulls is to produce a close in December futures above technical resistance at 100.00 cents. The next downside price objective for cotton bears is to close prices below solid support at the July low of 82.54 cents. First resistance is seen at this week’s high of 96.76 cents and then at last week’s high of 97.65 cents. First support is seen at this week’s low of 91.60 cents and then at 90.00 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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