Crops Analysis | August 17, 2022

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Corn ­

Price action: December corn rose 1 3/4 cents to $6.12 1/2, the contract’s first gain in three sessions, after falling earlier to the lowest price in over a week.

Fundamental analysis: Corn futures rebounded from early weakness in two-sided trading and posted a gain for the first session in the past three, with possible support from updated Midwest forecasts turning slightly drier for the coming week. The GFS model reduced rain from Wisconsin to north-central and northeastern Illinois Friday into Sunday, World Weather Inc. said around midday. “Some of this reduction was likely needed,” the forecaster said. Also, for early next week, the GFS model reduced expected rain from central and northern Illinois and southern Wisconsin to Michigan and central and north-central Ohio.

Accelerating grain shipments from Ukraine remained a bearish background factor for grain futures. Ukraine expected five ships to arrive at its Chornomorsk Black Sea port today for loading with more than 70,000 MT of corn, wheat and other agricultural products. The port authority said 24 ships had left Ukrainian ports so far the past 17 days. USDA’s weekly export sales report Thursday is expected to show net new-crop corn sales at 300,000 to 700,000 MT. A week ago, USDA reported weekly new-crop sales at 191,300 MT, down from 256,700 MT the previous week.

U.S. ethanol production averaged 983,000 barrels per day (bpd) during the week ended Aug. 12, down 39,000 bpd from the previous week but up 1.0% from the corresponding week last year. Ethanol stocks rose 190,000 barrels to 23.446 million barrels.

Technical analysis: Corn futures technicals are leaning neutral to bearish with the December contract breaking below a recent uptrend Tuesday and falling overnight to $6.06 3/4, the lowest intraday price since $6.01 on Aug. 8. Still, the market failed to make a sustained push under support at the 20-day moving average of $6.07. Upside objectives for bulls is to close December futures above solid resistance at the August high of $6.42 3/4. Downside targets for bears include closing prices below support at the August low of $5.87 1/2. First resistance is seen at $6.20, then at Monday’s high of $6.29 1/2. First support is at today’s low, then $6.00.

What to do: Get current with advised sales. Wait to make additional 2022-crop sales.

Hedgers: You are 100% 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 are 100% sold on 2021-crop. You should have 50% of expected 2022-crop forward-sold for harvest delivery.

 

Soybeans

Price action: November soybeans gained 9 cents to $13.90, around the middle of today’s range. September soymeal rose $4.70 to $440.60. September soyoil fell 43 points to 67.41 cents.

Fundamental analysis: Soybeans rose following two-sided trading in a corrective bounce following two days of sharp declines. Midday forecasts carrying reduced rain prospects for the Midwest later this week stirred some concern the crop may lose potential from persistent dryness in western parts of the region. Strength in crude oil also added support. Spreading action in the soy product markets boosted soymeal while pressuring soyoil.

Soybean prices may extend sideways trade around the middle of the past month’s range as traders monitor Midwest weather and outside markets, but the generally favorable weather outlook could spur another move lower. USDA’s weekly export sales report Thursday is expected to show net U.S. soybean sales for the 2022-23 marketing year at 300,000 to 650,000 MT. Last week, USDA reported net 2022-23 sales of 477,200 MT, along with a net reduction in old-crop sales for the sixth week in the past seven.

Technical analysis: Soybean market technicals lean neutral to slightly bearish after November futures on Tuesday broke an uptrend line drawn from the July low of $12.88 1/2 and closed under the 40-day moving average (currently $13.94 3/4) a second day in a row. Further weakness 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 $14.16 3/4, followed by the 50-day moving averages at 14.24 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 22 3/4 cents to $7.63 1/4, the contract’s lowest closing price since Feb. 4. September HRW wheat fell 20 3/4 cents to $8.51. Prices closed near their session lows. September spring wheat fell 19 1/4 cents to $8.83 1/2, the lowest close in over a week.

Fundamental analysis: SRW futures tumbled near a 6 1/2-month low as the market remained burdened by several bearish factors, including weaker corn and soybeans, a firmer U.S. dollar and accelerating grain shipments out of Ukraine that are easing global supply concerns. Weather in U.S. wheat country also leans overall bearish.

World Weather reported some “notable relief” from dryness is expected in the next seven days in the Texas Panhandle and Oklahoma. The moisture boost will be good for increasing topsoil moisture for improved prospects for early season wheat planting in the first week of September. Meantime, World Weather said wheat in Canada’s Prairies, the U.S. Pacific Northwest and the northern U.S. Plains is being “sped to maturity in a drier and warmer than usual environment which may cost the crop a little yield, but wheat protein levels may be increased due to the warm and dry finish to the crop.”

Traders await Thursday’s weekly USDA export sales report, which is expected to show net U.S. wheat sales of 250,000 to 650,000 MT. A week ago, USDA reported net weekly sales of 359,200 MT for 2022-23, up 44% from the previous week but down 34% from the prior four-week average. 

Technical analysis: Winter wheat bears have a solid near-term technical advantage with prices in three-month downtrend on daily bar charts. SRW bulls' next upside objective is closing September prices 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, then this week’s high of $8.10 1/2. First support is seen at the August low of $7.52, then $7.38 1/4.

HRW bulls' next upside objective is closing September futures above solid resistance at $9.50. Bears' next downside objective is closing futures below solid support at $8.00. First resistance is seen at today’s high of $8.85 1/4, then $9.00. First support is seen at today’s low of $8.41 1/4, 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 331 points to 113.54 cents and nearer the session low.

Fundamental analysis: Cotton futures fell for the first session in the past seven on profit-taking and corrective selling follow the past week’s steep rally, which was triggered by USDA pegging the U.S. cotton crop at an unexpectedly low 12.57 million bales, the smallest since 2009-10. It appears the bulls were a little spooked at mid-week, following downbeat economic coming out of China earlier this week, and still-heightened fears of a U.S. recession. Major retailers Wal Mart and Target this week reported quarterly earnings and both noted that apparel sales were not robust, possibly due to consumer worries about a U.S. economic slowdown.

Weather patterns in U.S. cotton country are also less bullish at mid-week. World Weather today reported rain is forecast the U.S. Delta, southeastern states and across Texas during the next two weeks, with Texas wettest next week. The still-strong U.S. dollar and early weakness in crude oil likely prompted some selling in cotton futures.

Technical analysis: Cotton futures bulls have a near-term technical advantage but faded badly today. Bulls need to step up and show fresh power this week to avoid more serious chart damage that would suggest a market top is in place. Prices are still in a four-week uptrend on the daily bar chart. If the cotton bulls can post a solid price recovery Thursday or Friday, they would be right back in a strong near-term technical posture.

The next upside price objective for cotton bulls is to close December futures above resistance at this week’s high of 119.59 cents. The next downside objective for cotton bears is closing December below solid support at 108.59 cents, which is the bottom of an upside price gap on the daily chart. First resistance is seen at 115.00 cents, then at 117.00 cents. First support is seen at 111.00 cents, then at 110.00 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.

 

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