Crops Analysis | September 12, 2022
Price action: December corn rose 11 cents to $6.96, the contract’s highest closing price since $7.01 1/2 on June 21.
Fundamental analysis: Corn futures rallied near a three-month closing high after USDA lowered its estimate for the U.S. corn crop more than expected, further illustrating the impact of drought in parts of the Midwest this summer. USDA, in its monthly Crop Production Report today, reduced the estimated crop by 415 million bu. to 13.944 million bu., down 1.171 billion bu., or 7.7%, from last year’s crop and the smallest since 2019. The national average yield was reduced 2.9 bu., to 172.5 bu., while harvested acreage was trimmed by 996,000 acres from June. Estimated U.S. ending stocks for 2022-23 were lowered to 1.219 billion bu., down 169 million bu. from an August estimate and a 10-year low. Reductions in usage for the 2022-23 crop indicated a 250 million bu. decline from August, with feed & residual lowered by 100 million bu., FSI use down 50 million bu., and exports by 100 million bu.
Also today, Farm Service Agency acreage estimates as of Sep. 2 indicated farmers enrolled 86.818 million acres vs. 86.768 million last month in U.S. crop subsidy programs, including failed acres for 2022. Prevent planted acres were increased slightly from 3.148 million last month to 3.15 million acres. Weekly export inspections totaled 446,620 MT (17.6 million bu.) for corn during the week ended Sep. 8, at the low end of trade expectations ranging from 325,000 to 825,000. Export inspections so far in 2022-23 are running ahead of last year’s pace by 340,080 MT.
USDA corn crop ratings this afternoon are expected to remain unchanged at 54% “good” to “excellent,” with an estimated 4% of the nation’s corn harvested.
Technical analysis: December futures traded a 23 3/4-cent range, gaining traction by holding a close above the 100-day moving average at $6.71 1/4, as well as the 10-day moving average at $6.75. Resistance was also tested and held at $6.90 3/4, with second resistance at $6.96 1/2 slightly out of reach for bulls. Psychological resistance continues at $7.00, just above today’s high of $6.99 1/2. A push above the $7.00 level would likely meet resistance at $7.07 1/2. A reversal to the downside will see support at the aforementioned 10-day and 100-day moving averages, as well $6.90 3/4 and $6.79 3/4, and again at $6.74.
What to do: Get current with advised sales. Wait to make additional 2022-crop sales.
Hedgers: You should have 50% of 2022-crop sold for harvest delivery.
Cash-only marketers: You should have 50% of 2022-crop sold for harvest delivery.
Price action: November soybeans soared 76 cents to $14.88 1/4, the contract’s highest closing price since $15.10 1/2 on June 10. October soymeal surged $25 to $439.80, a lifetime-high close for the contract. October soyoil rose 166 points to 68.34 cents.
Fundamental analysis: November soybeans rallied to a three-month closing high and soymeal and soyoil also rose sharply after USDA made a larger than expected cut to its crop production estimate, underscoring the toll taken by extreme heat and dryness in parts of the Midwest over the summer. USDA, in its monthly Crop Production report, estimated the U.S. soybean crop at 4.378 billion bushels, with an average yield of 50.5 bu. per acre. Analysts, on average, expected production of 4.496 billion bu. and an average yield of 51.5 bushels per acre, based on a Reuters poll. In August, the USDA estimated the harvest at 4.531 billion bushels and the yield at 51.9 bushels per acre. The smaller crop will lead to historically tight soybean supplies next year, even with usage expected to decline, based on USDA numbers. In its monthly Supply and Demand Report, also released today, USDA cut estimated U.S. 2022-23 soybean ending stocks by 45 million bu. to 200 million bu., a seven-year low.
Also today, USDA reported 329,225 MT (12.1 million bu.) of soybeans inspected for export during the week ended Sept. 8, down from 500,286 MT the previous week and below trade expectations ranging from 400,000 to 650,000 MT. Weekly U.S. soybean crop ratings are expected to hold stable, with analysts expecting USDA to report a good-to-excellent figure around 57%, unchanged from a week ago.
Technical analysis: Soybean futures gained considerable bullish momentum with today’s strong performance, as the November contract closed above both the 100-day moving average at $14.51 3/4 and the July intraday high at $14.89. Upside targets for market bulls include $15.00, a late-June high at $15.07 3/4 and the contract high of $15.84 3/4, posted June 9. Downside levels to watch include the August high at $14.84 1/2 and $14.50.
What to do: Get current with advised cash sales. Hedgers should maintain the 10% short hedge position in November futures at $14.73.
Cash-only marketers: You should be 60% sold for harvest delivery on 2022-crop production.
Price action: December SRW wheat fell 10 3/4 cents at $8.58 3/4. December HRW wheat dropped 2 1/4 cents at $9.27. Prices hit two-month highs early on today. December spring wheat futures fell 1 cent to $9.26 1/2.
Fundamental analysis: A mildly bearish monthly USDA supply and demand report pressured wheat futures today. USDA made no changes to the supply or demand sides of the 2022-23 wheat balance sheet. USDA puts the national average on-farm cash wheat price for 2022-23 at $9.00, down 25 cents from last month. However, global carryout was a bit bearish, at 275.67 MMT for the 2021-22 marketing year--down from 276.35 MMT in August, but at 268.57 MMT for 2022-23--up from 267.34 MMT in the August report.
USDA reported 736,515 MT of U.S. wheat inspected for export during the week ended Sept. 8, up from 538,329 MT the previous week and above trade expectations.
This afternoon’s weekly USDA crop progress report is expected to show U.S. spring wheat harvest at 83% complete versus 71% last week and 100% last year at this time. Meantime, U.S. winter wheat planted is expected at 9% as of Sunday, compared to 3% last week and 12% at the same time last year.
Technical analysis: Winter wheat futures bulls have started fledgling price uptrends on the daily charts but need to show more power soon to keep them alive. SRW bulls' next upside price objective is closing December prices above psychological resistance at $9.00. The bears' next downside objective is closing prices below solid technical support at the September low of $7.91 1/4. First resistance is seen at today’s high of $8.78 and then at $9.00. First support is seen at today’s low of $8.48 1/2 and then at last Friday’s low of $8.26. The HRW bulls' next upside price objective is closing December prices above solid technical resistance at $10.00. The bears' next downside objective is closing prices below solid technical support at $8.50. First resistance is seen at today’s high of $9.36 1/4 and then at $9.50. First support is seen at today’s low of $9.14 1/4 and then at $9.00.
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 87 points to 105.71 cents, the contract’s highest settlement since Sept. 1.
Fundamental analysis: Cotton futures rose as strength in crude oil and U.S. equities helped offset USDA’s higher than expected increase in its U.S. cotton production forecast. USDA, in its monthly Crop Production Report today, hiked the estimated crop by 1.262 million bales from August to 13.832 million bales. Analysts expected an increase of about 200,000 bales. Harvested acreage was increased to 7.129 million acres, up from last month by 747,000 acres, but estimated yield was reduced by 3 lbs. to 843 lbs. per acre. Particularly large yield cuts were made for Texas, down 18 lbs. to 616 lbs. per acre, while Georgia’s yield was reduced by 28 lbs. to 900 lbs. per acre.
In its monthly Supply and Demand Report, also out today, USDA pegged U.S. carryover for 2022-23 at 2.7 million bales, up from the August estimate by 900,000 bales and 840,000 bales above pre-report estimates. Usage estimates were increased, as exports were boosted by 600,000 bales to 12.6 million, and 20,000 bales were added to unaccounted use. Old-crop carryover was also increased by 250,000 bales from last month to 3.75 million bales, and estimated exports were cut by 30,000 bales to 14.62 million with unaccounted use cut to 220,000 bales. Global carryover for 2022-23 was increased to 84.75 million bales, up from August’s estimate at 82.77, in addition to the 2021-22 crop, which was pegged at 84.79 million bales, up from last month’s 84.72.
Technical analysis: December cotton traded a 608-point range and ended the session mid-range. Resistance at 105.79 and 106.75 were tested as well as 107.66 and the 10-day moving average at 107.37, with both levels just slightly below the top end of the trading range. Support at 103.92, 103.01, and 102.05 was also tested, as well as the 40-day moving average at 103.39. Such a reaction to bearish USDA figures suggests that a near-term bottom was established last week around 101.20 cents and will act as strong support going forward.
What to do: Get current with advised 2022-crop sales.
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.
