Crops Analysis | August 29, 2022

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Corn ­

Price action: December corn futures surged 18 3/4 cents to $6.83, the contract’s highest closing price since $6.93 3/4 on June 22.

Fundamental analysis: Corn futures gapped higher in the overnight session after Pro Farmer last week estimated the U.S. crop at 13.759 billion bu., which would be a three-year low, and a national average yield of 168.1 bu. The numbers were below USDA’s current estimates and underscored the toll taken by hot, dry weather much of the Midwest growing season. Rains beneficial for late crop development fell over much of the Midwest during the weekend, however many areas remained dry from southeastern Missouri to Kentucky and southern Indiana to eastern Michigan, along with parts of east-central and southeastern South Dakota to southwestern Minnesota and northwestern Missouri to west-central Illinois, according to World Weather, Inc. While much the U.S. corn crop is nearing physiological maturity, favorable weather could help increase grain fill prospects in the northern Corn Belt and later planted crops eastern Corn Belt.  

USDA reported weekly export inspections at 689,052 MT (27.1 million bu.) for corn, within trade expectations, but below the previous week by 132,481 MT. Corn inspections are currently running 17.4% behind year-ago levels.  Based on a Reuters poll, USDA is expected to report the corn crop at 54% “good” to “excellent” condition, down one percentage point from the previous week.

Technical analysis: December corn traded a 17 1/2 cent range, finishing near session highs and well above the 10, 20, and 40-day moving averages. A close above resistance levels at $6.70 3/4 and $6.77 1/2 suggests increased upside is attainable near term. Next level of resistance will be seen at $6.89 1/4. First support will be seen at $6.59, with second support at $6.52 1/4.

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 fell 23 1/2 cents to $14.37 3/4, near the bottom of today’s range. October soymeal fell 50 cents to $433.60 and October soyoil fell 27 points to 67.65 cents.

Fundamental analysis: The soy complex ended mostly lower, led by sharp declines in soybeans amid beliefs rains across much of the Midwest over the weekend and an outlook for mostly favorable weather will help most the crop finish strong and boost yield potential. Much of the Midwest “has adequate soil moisture in place to favorably support late crop development during the next two weeks while warm temperatures and infrequent rain will allow crop maturation to occur favorably as well,” World Weather said. “Some of the lingering dry areas in the west-central and southwestern Corn Belt likely do not have enough soil moisture to favorably support crops, but rain this late in the season would not likely have much of an impact on yields.”

Soybeans were also pressured by reports from the Pro Farmer Crop Tour last week indicating potential for a record harvest. Pro Farmer estimated the 2022 U.S. soybean crop at 4.535 billion bu., which would be a record, and the average yield at 51.7 bu. per acre. However, USDA’s weekly crop ratings later today are expected to reflect further deterioration. Analysts expect USDA to report 56% of the crop in good-to-excellent condition as of Sunday, down from 57% a week earlier.

Technical analysis: Soybean futures retain a neutral to bullish bias despite today’s losses, with the November contract still in a five-week uptrend drawn from the July 22 low. Initial support is seen at the 10- and 20-day moving averages at $14.26 1/4 and $14.20 3/4, respectively, backed by trendline support around $14.02. Initial resistance is seen at the 100-day moving average of $14.59, with key resistance at last week’s high of $14.84 1/2. November futures may be poised for sideways trade over the near-term unless enough sustained buying or selling emerges to break prices outside the recent narrow range.

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: December SRW wheat rose 37 1/2 cents to $8.42 3/4, a four-week closing high. December HRW wheat gained 30 1/4 cents to $9.12 1/2, a six-week-high. December spring wheat rose 23 3/4 cents to $9.33 1/4.

Fundamental analysis: Winter wheat futures surged as spillover strength from corn and chart-based buying after prices broke above the recent trading range overshadowed the U.S. dollar’s jump to a two-decade high. Sharp gains in crude oil and a pullback in the dollar later today also added support. USDA today reported 520,791 MT of U.S. wheat inspected for export during the week ended Aug. 25, within trade expectations but down from 594,391 MT the previous week.

This afternoon’s weekly USDA crop progress reports are expected to show the U.S. spring wheat crop at 64% in good-to-excellent condition, unchanged from last week. Spring wheat harvested is forecast at 52% complete as of Sunday, compared to 33% done in last week’s report.

Technical analysis: Winter wheat bears hold a near-term technical advantage. However, three-month-old downtrends on the daily bar charts have been negated, suggesting a bottom is in place. SRW bulls' next upside objective is closing December futures above solid resistance at $9.00. Bears' next downside objective is closing prices below solid support at the contract low of $7.43 1/4. First resistance is seen at today’s high of $8.49, then at the August high of $8.63 3/4. First support is seen at $8.25, then $8.00.

HRW bulls' next upside objective is closing December futures above solid resistance at $10.00. Bears' next downside objective is closing prices below solid support at $8.35. First resistance is seen at today’s high of $9.21 1/2, then at $9.30. First support is seen at today’s low of $8.70 1/4, then at $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.

 

Cotton

Price action: December cotton futures fell 52 points to 117.16 cents.

Fundamental analysis: Cotton futures traded on both sides of unchanged before ending lower, in part reflecting the U.S. dollar’s jump to 20-year highs. Traders continue to closely monitor weather as Texas continues to receive moisture through Thursday and rain prospects increase in the Delta through western Alabama, which will lead to poor conditions for fieldwork through Sep. 9, according to World Weather. Enhanced concerns over crop quality may increase with the wettest period expected Saturday into Tuesday of next week.  

Adverse weather in other top cotton countries is also a concern. Floods in Pakistan have killed more than 1,000 people in recent weeks as monsoonal rains swept through the country, wiping out roads, crops, infrastructure, and bridges. It is estimated that 45% of the country’s cotton washed away in the floods, with initial economic losses from the flooding to likely reach more than $10 billion.

Technical analysis: December cotton traded a 329-point range, holding above support at 115.12 and the 10-day moving average at 114.85. Upside resistance stands at 119.32 and 120.96. Cotton bulls maintain the near-term technical advantage, as traders eye prospects of reaching mid-May highs. Large speculators have increased bullish bets in the cotton market. The CFTC’s Commitment of Traders data for the week ended Aug. 23 showed the managed-money net long at 50,778 contracts, up 6,016 contracts. Commercial cotton traders were reported at 74,935 net contracts short, up from 74,118 contracts short the week prior.

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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