Crops Analysis | August 1, 2022
Price action: December corn futures fell 10 1/4 cents to $6.09 3/4, near mid-range.
Fundamental analysis: Corn futures fell in sympathy with a sharp drop in the soy complex, as Midwest weather forecasts appeared slightly less threatening compared to late last week. World Weather Inc. today said the Corn Belt forecast “is wetter and not quite as hot through next Monday than what was advertised late last week.” Futures were also pressured by news the first grains ship left a Ukrainian port under a recent agreement to provide a safe shipping channel, raising hopes global supplies may loosen.
A big drop in crude oil prices today also weighed on the grain futures markets, as did reports that U.S. House Speaker Nancy Pelosi plans to stop in Taiwan on Tuesday, seemingly adding more negative fuel to already-tense U.S.-China relations. Early today, USDA reported 856,938 MT of U.S. corn inspected for export during the week ended July 28, up from 753,793 MT a week earlier. However, the risk is for slower U.S. corn sales during the month of August. This afternoon’s weekly USDA crop progress report is expected to show the U.S. corn crop in 60% good to excellent condition, compared to 61% last week and 62% last year at the same time.
Technical analysis: Corn futures bears have the overall near-term technical advantage amid recent very choppy trading. The next upside price objective for the bulls is to close December prices above solid chart resistance at last week’s high of $6.36 1/2. The next downside target for the bears is closing prices below chart support at the July low of $5.66 1/2. First resistance is seen at $6.10 and then at $6.20. First support is at today’s low of $5.97 1/4 and then at $5.90.
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.
Price action: November soybeans fell 62 1/2 cents to $14.06. September soymeal plunged $12.70 to $429.70. September soyoil declined 241 points to 64.09 cents.
Fundamental analysis: The soy complex fell sharply with the November soybeans dropping under psychological support at $14.00 despite forecasts for hot, dry Midwest weather. Traders took profits after November soybeans gained the previous six sessions. Reports of Chinese authorizations of soymeal exporters in South America contributed to pressure, as the Brazilian Agriculture Minister said approvals could be granted in the space of two months. Last week, the Brazilian government confirmed China has opened its market to soybean meal produced in the South American country.
World Weather reported this morning the northwestern U.S. Corn Belt is still drying out and is unlikely to get large amounts of rain in the coming week with brief periods of very warm to hot temperatures to occur in conjunction with minimal rainfall, further stressing crops. Conditions in the southwestern Belt are also expected to be hot and dry, leading to crop stress later this week if rain fails to develop.
Earlier today, USDA reported 555,083 MT (20.4 million bu.) of soybeans inspected for export during the week ended July 28, up from 392,480 MT the previous week and around the middle of trade expectations. Inspections continue to lag last year’s pace, but narrowed the gap to approximately 8% from 10% the previous week.
USDA’s soybean crop ratings are expected to deteriorate further as much of the Midwest endured excessive heat through much of last week. A Reuters poll indicated the average analyst guess to be a single percentage decrease in soybean conditions, with the range of guesses at 56-59. Last week’s rating was estimated at 59% “good” to “excellent,” which was below expectations.
Technical analysis: November soybean futures traded an 85 1/2 cent range, dipping below $14.00, but mustering a close above the psychologically significant level. Support at $14.39 and $14.10 were both tested, with the final close below both levels. Bears will continue to eye the next level of significance, between $13.85 and $13.90, the 200-day moving average. Resistance to the upside can be seen at $14.93 and $15.17 3/4.
September meal futures fell sharply, trading a $21.00 range, ultimately ending the session below first support at $435.70, but above second support of $429.00. Resistance at $455.0 and $468 remained untraded as bears were in the driver seat.
The September oil contract traded a 330-point range, falling below support levels of 64.39, but holding above second support at 62.29 cents per pound. Resistance levels at 67.75 and 69.01 were left untested in the session.
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 fell 7 1/2 cents to $8.00 1/4. September HRW settled 8 cents lower at $8.66 1/2, while December spring wheat fell 8 1/4 cents to $9.10 1/4.
Fundamental analysis: The wheat complex ended lower as the departure of a grain shipment from the Ukrainian port of Odesa raised optimism over global supplies. This comes just over a week after an agreement was signed to unblock deep seaports after three months of talks and discussions. Ukraine’s minister of infrastructure stated there are 16 more ships waiting and that have been blocked since Russia’s invasion of Ukraine. The minister added that in the coming weeks, Ukraine plans to reach full capacity for transshipment of agricultural products with the help of international partners. However, Reuters reports that standard operating procedures for vessels still need to be worked out and there are issues about crewing that still need to be resolved.
USDA’s weekly export inspections as of July 28 were on the low end of trade expectations, indicating reductions 218,925 MT (8 million bu.) from the previous week’s figure. Shipments are running 24.9% behind a year ago, compared with 18% behind, last week. An increase in shipments from the Black Sea could further reduce export prospects, increasing bearish sentiments.
A Reuters poll indicates analysts project winter wheat harvest to be 85% complete, compared to 77% last week and the five-year average of 91%.
Technical analysis: September SRW traded a 39-cent range, closing below the 20-day moving average at $8.08 1/2, but holding steady above support levels of $7.90 ½ and $7.73. Resistance at $8.35 1/4 and $8.62 3/4 remained untraded in today’s session. September HRW futures traded a 41 1/4 cent range and also closed below its 20-day moving average of $8.68 1/4 but was able to hold above support levels of $8.58 1/4 and $8.42. Resistance levels at $9.03 and $9.31 1/2 were untraded in the session. December spring wheat futures traded a 30-cent range, closing above support levels of $9.00 and $8.81 3/4. Resistance levels remain at $9.48 and $9.77 3/4.
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 fell 268 points to 94.06 cents per pound, the lowest closing price since July 25.
Fundamental analysis: Cotton futures fell sharply on pressure as crude oil fell sharply and weak manufacturing data in several countries stirred concern over demand. South Korea's factory activity fell for the first time in almost two years, Japan posted its slowest growth in 10 months and activity in China also slowed, despite the country’s recent easing of domestic COVID-19 restrictions. Front-month U.S. crude futures fell nearly $5 to $93.86, the lowest closing price since late February.
Cotton price downside may be limited by persistent heat and dryness that’s curtailing production prospects in top U.S. growing regions. The Texas Panhandle received heavier-than-expected rain over the weekend but key cotton areas in West Texas were left dry or received only light rain, World Weather said today. “Warm to hot and dry weather will be most common during the next two weeks and the few rounds of showers that occur should be too light and infrequent to prevent continued drying and declines in yields in most areas,” the forecaster said. Traders will check USDA’s weekly condition ratings later today for further deterioration. A week ago, USDA reported 34% of cotton crop in good-to-excellent condition as, down from 38% a week earlier, while 30% was rated poor-to-very-poor.
Technical analysis: Cotton retains a bullish bias, though today’s slide came close to breaking a brief uptrend that began in mid-July. Bulls may be encouraged by the December contract’s close today above the 10-day moving average at 93.53 cents and may also try to defend further support at the 20-day moving average at 92.19 cents. Initial resistance comes in around last week’s high at 97.65 cents, with further resistance at 99.05 cents.
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.
