Crops Analysis | August 4, 2022
Price action: December corn futures rose 10 cents to $6.06 1/4, nearer the session high.
Fundamental analysis: December futures rose a second consecutive day behind short covering in the wake of recent declines and spillover from strength in wheat and the soy complex. Weakness in the U.S. dollar also supported grain futures. Midwest weather leans slightly bearish for corn prices. World Weather Inc. today said much of the Midwest will receive multiple rounds of timely rains through early next week.
Further gains in corn may be limited by Ukrainian grain shipments continuing to move out of the Black Sea region. Turkish Defense Minister Hulusi Akar said there are plans for three ships to set out from Ukrainian ports Friday under the recent deal to unblock the country's grain exports, Reuters reported. A first vessel carrying Ukrainian grain set sail from the port of Odesa on Monday.
USDA today reported net U.S. corn export sales for 2021-22 totaling 57,900 MT during the week ended Aug. 4, down 62% from the previous week but up 31% from the four-week average. For the 2022-23 marketing year, sales totaled 256,700 MT, up from 193,700 MT the previous week.
Technical analysis: The corn futures bears have the overall near-term technical advantage. The next upside price objective for the bulls is to close December prices above solid chart resistance at last week’s high of $6.36 1/2. The next downside target for the bears is closing prices below chart support at the July low of $5.66 1/2. First resistance is seen at $6.20 and then at this week’s high of $6.25. First support is at $6.00 and then at this week’s low of $5.87 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.
Price action: November soybeans rose 48 cents to $14.17 3/4 a bushel, the highest closing price since July 29. September soymeal surged $22.10 to $453.50, a lifetime-high close for the contract. September soyoil rose 63 points to 62.45 cents per pound.
Fundamental analysis: Soybean futures rose for the first time in four sessions behind a sharp rally in soymeal and lingering concerns over dryness in parts of the Midwest, which could curb yield potential. A drier-biased weather pattern is expected Aug. 9-18 in the Midwest, World Weather said. While most of the region should have ample soil moisture to keep crop conditions from quickly deteriorating, eastern Nebraska and southeastern South Dakota to central Iowa “should see steady increases in crop stress and some declines in yields,” the forecaster said. Crop stress and declines in yield potential “may begin to expand into a larger part of the Midwest during the second half of August if rain does not increase,” World Weather said.
Also today, USDA reported net weekly soybean sales reductions of 11,000 MT for 2021-22, down 81% from the previous week and down 90% from the prior four-week average. A sales increase of 124,800 MT for China was more than offset by reductions of 229,500 MT for “unknown destinations.” That marked five of the past six weeks in which there were net old-crop sales reductions. For 2022-23, net sales totaled 410,600 MT, primarily for unknown destinations (154,000 MT) and China (144,000 MT). New-crop sales were within expectations ranging from 200,000 to 700,000 MT.
Technical analysis: Soybean bulls regained some momentum today after fading sharply the first three days of the week, though November futures are still down from last week’s close at $14.68 1/2 and settled around the middle of the past week’s range. The contract tested but failed to penetrate resistance at the 40-day moving average of $14.23 1/4. A push above that level could have bulls targeting the 50-day moving average at $14.44 1/2 and the 100-day moving average at $14.66. Initial support is seen at the 10-day moving average of $13.94 1/2 and the 20-day moving average at $13.74 3/4, followed by Wednesday’s low at $13.56.
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 rose 18 3/4 cents to $7.82 1/2. September HRW wheat rose 24 3/4 cents to $8.60 1/4. September spring wheat rose 19 cents to $8.94 1/4.
Fundamental analysis: Winter wheat futures rose for the first time in five sessions behind corrective buying following Wednesday’s drop to six-month lows and spillover from sharp gains in the soy complex. Weakness in the U.S. dollar also encouraged buyers. Further gains in corn and soybeans could buoy wheat futures but gains likely will be limited by soft export demand, strong prospects for the HRS crop and the resumption of grain shipments from Ukraine.
Early today, USDA reported net weekly wheat sales totaling 249,900 MT for 2022-23, down 39% from the previous week and down 55% from the prior four-week average. Sales were at the low end of expectations ranging from 200,000 to 550,000 MT. Also today, Taiwan purchased 50,910 MT of U.S. milling wheat. Japan purchased 122,103 MT of wheat from its weekly tender, including 54,680 MT of U.S., 32,410 MT of Canadian and 35,013 MT of Australian. Iran purchased between 180,000 and 240,000 MT of milling wheat likely to be sourced from Russia.
Technical analysis: Winter wheat technicals still lean bearish despite today’s price strength, as the market remains in a 2 1/2-month-old downtrend on daily charts. September SRW futures briefly pushed above the 10-day moving average at $7.86 3/4 but failed to close higher than that initial resistance level. Additional upside price objectives include the 20-day moving average at $8.03 and last week’s high at $8.45 3/4, as well as $8.50. Bears' downside objectives include Wednesday’s low at $7.52 and the January low of $7.38 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.
Price action: December cotton futures closed 19 points higher at 94.62 cents per pound.
Fundamental analysis: Cotton futures extended sideways consolidation as traders monitored conflicting signals from outside markets. Weakness in the U.S. dollar encouraged buyers, but upside was limited by a drop in crude oil, which closed under $90 for the first time since mid-February. Traders are also monitoring demand, as China continues Covid lockdowns, and weather in key U.S. growing areas.
According to World Weather, northern and some western Texas cotton, corn and sorghum production areas will receive rain during mid-week next week, and while the moisture will be welcome, it will come too late to change production potentials and much more rain will be needed. Additionally, the Carolinas and southeastern Georgia have dried out in the past two weeks and rain is needed, with some of the needed moisture forecasted for the August 12-18 time period.
USDA reported a net weekly sales reduction of 112,400 running bales (RB), a second consecutive marketing-year low. Reductions were primarily from China (95,000 RB), Vietnam (15,400 RB), Bangladesh (1,700 RB), Indonesia (900 RB) and South Korea (800 RB) New-crop sales were confirmed to be 71,400 RB.
Technical analysis: December cotton futures traded a 180-point range, with bears maintaining near-term control. Futures have been trading over 40 points lower than recent highs made on May 17 but may continue to the downside as history suggests market equilibrium between 60 and 80 cents per pound. A close above resistance level 95.44 would confirm a more bullish bias, with 96.45 posing a second level of resistance. Neither resistance levels were traded in todays in session. However, support at 93.56 was tested, while second support at 92.69 remained untraded.
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.
