Crops Analysis | August 16, 2022
Price action: December corn futures dropped 18 cents to $6.10 1/4, the lowest closing price since Aug. 8 and nearer the session low.
Fundamental analysis: Corn futures fell sharply for the second straight session as a generally favorable Midwest weather outlook and declines in crude oil encouraged selling by speculators, some of whom may be expanding new short positions on expectations for further price downside. Significant rainfall amounts over much of the Corn Belt the past couple days and more in the forecast also had the buyers in corn futures standing on the sidelines today. Recent weakness in Chinese economic readings and accelerating grain shipments out of Ukraine fueled bearish momentum in grains. Late Monday, USDA reported the U.S. corn crop condition at 57% “good” or “excellent” as of Sunday, down from 58% a week earlier but one percentage point higher than the trade expected.
Technical analysis: December corn negated a three-week uptrend on the daily bar chart, handing market bears a near-term technical advantage. The next upside objective for bulls is to close December prices above solid resistance at the August high of $6.42 3/4. The next downside target for bears is closing prices below support at the August low of $5.87 1/2. First resistance is seen at $6.20, then at today’s high of $6.29 1/2. First support is at today’s low of $6.07 3/4, then $6.00.
What to do: Get current with advised sales. Wait to make additional 2022-crop sales.
Cash-only marketers: You are 100% sold on 2021-crop. You should have 50% of expected 2022-crop forward-sold for harvest delivery.
Price action: November soybeans fell 31 cents to $13.88, the contract’s lowest closing price since Aug. 3. September soymeal fell $16.30 to $435.90, also the lowest close since Aug. 3. September soyoil fell 110 points to 67.84 cents.
Fundamental analysis: Soybean futures extended Monday’s sharp declines and dropped to the lowest levels in nearly two weeks on expectations a mostly favorable weather outlook for the Midwest will boost yield prospects. Crude oil futures sank to a 6 1/2-month low to further pressure the soy complex, with soymeal and soyoil also tumbling. “Much of the Midwest will continue to see favorable conditions for crops through the next two weeks while the driest areas from southeastern South Dakota and eastern Nebraska through western and southern Iowa and Missouri will benefit from additional and important rain today and Aug. 25-27,” World Weather said today. “Nearly all of the Midwest will see multiple rounds of rain during the next two weeks along with a lack of heat for at least 10 days while soil moisture in place today is adequate to favorable in most areas.”
The latest weather outlooks suggest the soybean crop will reverse a multi-week slide in USDA crop ratings. USDA late Monday reported 58% of the soybean crop in “good” to “excellent” condition, down from 59% a week ago and in-line with trade expectations. Based on the Pro Farmer CCI, the soybean crop declined by 2.1 points to 349.1, the second straight weekly decline and now 5.1 points (1.4%) below the five-year average. Cordonnier kept his soybean yield at 50.5 bu. per acre and adopted USDA’s harvested acreage figure of 87.2 million, which puts his production estimate at 4.40 billion bushels. “Cooler temperatures and chances of rain are in the forecast for much of the Corn Belt for the next one to two weeks, which should be beneficial for pod filling,” he wrote.
Technical analysis: Soybean market technicals took a bearish turn as the November contract closed below an uptrend line drawn from the July low of $12.88 1/2. November futures also closed under the 40-day moving average (currently $13.97 3/4) for the first time in over a week, which may have bears targeting the August low at $13.56, followed by $13.00 and the July low at $12.88 1/2. Another potential target is a gap on the daily bar chart created July 26 between $13.49 1/4 and $13.58 1/4. Initial resistance is seen at the 10-day moving average around $14.15, followed by the 50-day 100-day moving average at 14.27 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 14 3/4 cents to $7.86. September HRW wheat fell 11 cents to $8.71 3/4. September spring wheat futures fell 8 cents to $9.02 3/4.
Fundamental analysis: Wheat futures continued to follow the lead of outside markets, as corn and soybean markets fell and crude oil tumbled. Softer economic measures from China and accelerating grain shipments out of Ukraine weighed on prices. Five additional ships left Ukrainian ports carrying corn and wheat, three from Chornomorsk and two from Pivdennyi, under a U.N.-brokered grain export deal, Reuters reported, citing Turkey's defense ministry. Also, Russia's 2022 wheat crop may rise to 94.7 MMT, according to Russian consultancy Sovecon, up from 90.9 MMT in a previous forecast.
USDA late Monday reported 64% of the U.S. spring wheat crop in good-to-excellent condition as of Sunday, unchanged from a week earlier and one percentage point above expectations. The spring crop was 16% harvested as of Sunday, down from the five-year average of 35%.
Technical analysis: Winter wheat bears have a solid near-term technical advantage with prices in three-month downtrends on the 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 $8.00 and then at today’s high of $8.10 1/2. First support is seen at this week’s low of $7.78 and then at $7.65.
HRW bulls' next upside objective is closing September prices above solid resistance at $9.50. Bears' next downside objective is closing prices below solid support at $8.00. First resistance is seen at today’s high of $8.92 3/4, then $9.00. First support is seen at this week’s low of $8.58, then $8.50.
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 326 points to 116.85 cents per pound, the contract’s highest closing price since June 17.
Fundamental analysis: Cotton futures gapped higher for the second session as the market extended a post-USDA report rally from last week. USDA last Friday estimated the U.S. cotton crop at an unexpectedly low 12.57 million bales, the smallest since 2009-10, exacerbating market concerns over extreme heat in dryness in the key Southern Plains growing area. Forecasts suggesting some relief for drought-stricken Texas cropland failed to stem upside momentum in futures. World Weather predicted showers in West Texas, the Texas Blackland, and the Texas Panhandle late Wednesday into Friday, with further rain August 22-24. However, any rain may arrive too late to bring meaningful improvement in the production outlook, although there will be some new plant growth and eventually new cotton boll setting.
USDA late Monday reported improvement in cotton ratings, as the good-to-excellent category picked gained 3 percentage points to 34%. Kansas, Louisiana, and Oklahoma saw deteriorating conditions, while Texas and Georgia each improved a point.
Technical analysis: Cotton bulls continue to hold the upper hand, as December futures reached expanded price limits for the second session in a row. A notable increase in volume boosted December futures to a close above resistance at 116.34 cents. Bulls may now be targeting the June high at 126.00 cents and the contract high of 133.79 cents, posted May 17. Key support is seen at 116.34 cents and 114.96 cents.
What to do: Get current with advised 2022-crop sales. Our next upside sales target is the 105.00-cent to 110.00-cent range in December cotton futures.
Hedgers: You should be 70% forward-priced for harvest delivery on expected 2022-crop production.
Cash-only marketers: You should be 70% forward-priced for harvest delivery on expected 2022-crop production.
