Crops Analysis | August 5, 2022

Corn ­

Price action: December corn futures closed up 3 3/4 cents at $6.10 and for the week lost 10 cents.

5-day outlook: After a dismal start to the trading week, the bulls finished stronger, suggesting some follow-through technical buying interest from the speculators early next week. Traders will continue to monitor vessels loaded with Ukrainian grain in the Black Sea region. Any Russian interference with the Ukrainian grain shipment process would very likely put a quick bid back into corn futures prices. Corn traders will continue to monitor Midwest weather, but the window is rapidly closing on a summer-related weather scare re-developing in corn futures. World Weather Inc. today reported timely rain by next Tuesday across the Midwest along with a lack of heat through the next week will keep conditions for crops mostly favorable through at least the next week to ten days, with some exceptions in the west. Prices for most of next week may settle into a quieter mode as traders await USDA’s Aug. 12 Crop Production and Supply and Demand Reports. We expect the agency next Friday will forecast U.S. corn production at 14.5 billion bu., down 615,000 bu. from 2021.

30-day outlook: The coming weeks will likely see a clearer picture of the size of this year’s U.S. corn crop. Softening demand fundamentals, due to the prospect of slowing global economic growth,  and continued Ukrainian grain exports may make it tough to hold corn futures prices above $6.00. The next few weeks will see corn traders looking more to the soybean market for price direction. With most of the U.S. soybean crop’s critical growth phases occurring in August, there is still some time for a weather market to push bean prices higher. If so, corn would likely see some degree of a price updraft, following soybeans.

90-day outlook: Nymex crude oil futures today hit a 4.5-month low of $87.01 a barrel. The raw commodity sector leader now sees its price trending lower on the daily chart, to suggest more price pressure to come. The Wall Street Journal late this week reported the large (fund) speculators have mostly abandoned their bullish bets on raw commodity markets, including the grains. Without speculative fund buying interest occurring regularly, and if crude oil prices continue to trend down, corn futures will very likely find their prices trending sideways-to-lower in the coming weeks or few months.

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 closed down 9 cents at $14.08 3/4 Friday, and down 59 3/4 cents from a week ago. September soyoil futures closed up 2.55 cents at 65.00 cents per pound, but down 1.5 cents from last week. September meal futures fell $16.00 to $437.50, down $5.00 on the week.

5-day outlook: November futures were able to hold steady in overnight trade, continuing to pivot around the psychological $14.00 mark, ultimately reaching $14.28 3/4 before setting back. Momentum into the morning hours faded as beneficial rains are expected over the western Corn Belt, an area that has been consistently dry throughout the growing season. However, the relief is likely to be temporary as World Weather states that models are suggesting a return of hot, dry weather in the region for the 7-10 days immediately following. The forecaster also predicts continued rain in the eastern Corn Belt, with cooling throughout the Midwest next week reducing evaporation rates and decreasing crop and animal stress. Near-term direction will also come from ongoing geopolitical tensions as China continues to denounce House Speaker, Nancy Pelosi’s recent visit to Taiwan. China regarded the visit “vicious” and “provocative,” and has since demonstrated obstinance through military drills around Taiwan, announcing that Beijing will cease cooperation around climate change, and imposing sanctions on the House Speaker.

30-day outlook: Weather throughout the end of August and into early September will remain largely a focus as the soybean crop, having a particularly longer reproduction period, progresses through its critical growth phase. Soybeans have historically proven asymmetric yield responses to precipitation, showing larger declines in yields where moisture is lacking through July and August, than the increases resulting from higher-than-average rainfall. USDA will also produce updated supply, demand and production estimates on August 12. Variances in acreage from June figures could result as a result of a re-survey of North Dakota, South Dakota, and Minnesota due to a large number of unplanted acres by the end of the original survey. Changes in yield estimates will also remain a focal point.

90-day outlook: Continued exports will be important as the calendar progresses. However, new crop export sales reported this morning to both China and unknown destinations provided the market little support. USDA’s weekly export data, reported on Thursday revealed an additional week of old-crop sales reductions of 11,000 MT. New crop sales, however, were noteworthy, but in the middle of market expectations at 410,600 MT (15 million bu.), mainly to unknown destinations and China. Continued attempts to the upside made by the U.S. Dollar could continue to reduce demand for U.S. ag products in the global market, hindering export prospects. USDA did report exports Thursday, at 527,600 MT, which was up 33% from the previous week and 19% above the prior 4-week average.

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.

Wheat

Price action: September SRW futures closed down 6 3/4 cents at $7.75 3/4, and down 32 cents from last week. September HRW finished 12 cents lower at 8.48 1/4, down 26 1/4 on the week. December spring wheat fell 8 1/4 cents, closing at $9.00 1/2, down 18 cents from a week ago.

5-day outlook: The wheat complex continued sideways-to-lower on the week as traders kept a keen eye on the progress of resumed exports of Ukrainian grain out of Black Sea ports. So far, corn has been the primary commodity shipped from the ports of Odesa and Chornomorsk, with the expectation of new-crop wheat exports to begin in September. Reuters reports that Ukraine hopes in several months to increase shipments of grain through the route to between 3 million and 3.5 million tonnes per month from 1 million tonnes expected in August, further stating that such volumes will allow Ukraine to receive enough funds so it does not have to reduce its sowing plans. However, the vast majority of the nation’s stockpiles are said to be scattered across the country, with farm silos crammed full and farmers repurposing cow barns and workshops to store supplies; moving those inventories may prove a logistical challenge as the war continues.

30-day outlook: Traders will continue to closely monitor the conflict in Ukraine as well as outside markets, particularly the U.S. Dollar, as both will remain key drivers for the wheat complex. Updated production estimates on USDA’s August 12 reports will provide further guidance and help set the tone for the next month. A robust U.S. harvest could lead to considerable increases, perhaps adding a longer-term bearish outlook for the wheat market.

90-day outlook: Exports and weather affecting global production will be of importance in the coming months. With key wheat exporter, Ukraine, out of the market up to this point, world demand has been considerable. However the U.S. has missed business as the U.S. Dollar has risen substantially over the course of the past 5 months. USDA’s weekly export sales data for the week ended July 28 showed sales in the amount of 249,900 MT (9.1 million bu.), which was on the low end of market expectations. Sales were primarily for Indonesia and Mexico. Currently, export commitments are running 2% behind a year ago, compared with 1.3% behind last week. Exports were reported at 288,400 MT, down 17% from the previous week, but up 10% from the prior 4-week average.

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 futures closed up 151 points at 96.13 cents, at a technically bullish weekly high close, and for the week lost 61 points.

5-day outlook: The U.S. Labor Department shocked the marketplace Friday morning with a very strong U.S. non-farm payrolls growth figure of 528,000 in July—double the rise analysts had expected. The unemployment rate also dropped to 3.5%. Today’s jobs numbers do not seem to portend a looming U.S. economic recession.  Cotton traders took today’s jobs data as a bullish clue for future price action. As the fall and winter apparel season approaches, more upbeat U.S. economic data would likely have consumers in better buying moods. Conversely, if the Federal Reserve remains very aggressive at raising interest rates to tamp down inflation, such could put the brakes on economic growth and in turn put clothing shoppers in a dour mood in the coming months, including the holiday season.

The Aug. 12 USDA supply and demand report (next Friday) will see the agency provide its first survey-based forecast of the size of the U.S. cotton crop.

Traders will continue to monitor the condition of the Texas cotton crop in the near term. World Weather Inc. today reported “warm to hot and dry weather will be most common in Texas cotton regions during the next two weeks and the regular rounds of showers that occur should be too light and too poorly distributed to prevent continued drying and declines in yields in most areas.”

30-day outlook: Nymex crude oil futures today hit a 4.5-month low of $87.01 a barrel. The oil market’s price deterioration recently suggests slowing global economic growth in the coming months. The crude oil bears this week took technical control of this very important “outside market” and re-established a price downtrend on the daily bar chart. If sector leader crude oil continues to trend down in the coming weeks, cotton and other raw commodity markets will find sustained buying interest much more difficult.

90-day outlook: USDA in its weekly export sales data Thursday reported U.S. cotton sales reductions of 112,400 running bales (RB)--a second consecutive marketing-year low. New-crop sales were 71,400 RB. If cotton futures prices are to hold their present levels in the coming weeks and months, sales and shipments of the U.S. fiber abroad will have to show marked improvement from the figures seen recently. 

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.