Crops Analysis | August 18, 2022
Price action: December corn rose 3 3/4 cents to $6.15 3/4 today and near mid-range.
Fundamental analysis: Corn futures climbed behind upside price correction and bargain buying following losses earlier this week, with stronger export numbers adding support. The Midwest weather outlook still leans bearish for corn futures, with timely rains and moderate temperatures forecast the coming week. USDA reported net weekly U.S. corn export sales during the week ended Aug. 11 totaling 99,300 MT for the 2021-22 marketing year, down 48% from the previous week and down 8% from the four-week average. For 2022-23, net sales totaled 750,000 MT and were above trade expectations.
Another ship loaded with corn left a Ukrainian port, reports said. Another four vessels were expected to arrive at Ukrainian ports today to be loaded with grain. As long as grain keeps flowing out of Ukrainian ports, rally attempts in the corn futures market are likely to be only modest.
Technical analysis: Corn futures bears have a near-term technical advantage. The next upside objective for bulls is to close December futures above solid resistance at the August high of $6.42 3/4. The next downside target for the bears is closing prices below support at the August low of $5.87 1/2. First resistance is seen at today’s high of $6.20 1/2, then at $6.25. First support is at today’s low of $6.04, 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 15 1/2 cents to $14.05 1/4, toward the top end of the day’s range. September soymeal rose $8.80 to $449.40. September soyoil fell 115 points to 66.26 points.
Fundamental analysis: Soybeans futures gained a second day, recovering from overnight weakness as stronger-than-expected weekly USDA export data temporarily overshadowed bearish weather. USDA early today reported net weekly soybean sales for 2021-22 totaling 96,900 MT, primarily for China (80,800 MT, including 70,000 MT switched from unknown destinations). For 2022-23, net sales of 1.303 MMT were primarily for China (779,000 MT) and unknown destinations (273,000 MT) up sharply from the previous week’s 477,200 MT and above expectations from 300,000 to 650,000 MT. New-crop sales were the largest for either 2021-22 or 2022-23 since the end of March.
Market focus will shift quickly back to Midwest weather the remainder of August. Much of the Midwest will continue to see favorable conditions for crops through the next two weeks while rain advertised for Aug. 25-27 will be important to crops in the driest areas from southeastern South Dakota and eastern Nebraska through western and southern Iowa, eastern Kansas, and western Missouri, 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.”
Technical analysis: Soybean market technicals lean neutral to slightly bearish despite today’s gains after November futures earlier this week broke an uptrend line drawn from the July low of $12.88 1/2. The new-crop contracted managed to close back above the 20- and 40-day moving averages at $14.05 and $13.93, respectively, suggesting buying interest continues to emerge in the wake of price sell-offs. November settled around the middle of what appears to be a pennant formation and could extend sideway, choppy trade until prices decisively break higher or lower. Initial support comes in at today’s low at $13.76 1/2, just above this week’s low, while initial resistance is seen at the 10-day moving average at $14.15 1/2, just above today’s high.
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 plunged 31 3/4 cents to $7.31 1/2, the contract’s lowest closing price since Oct. 13. September HRW wheat sank 38 1/2 cents to $8.12 1/2, the contract’s lowest close since Feb. 7. September spring wheat fell 30 3/4 cents to $8.52 3/4, a nine-month low.
Fundamental analysis: SRW wheat futures tumbled to 10-month lows and the HRW market dropped to a 6 1/2-month low as eroding chart patterns fueled speculator selling and accelerating shipments from Ukraine eased supply concerns. Sluggish export demand and dollar strength also fueled bearishness. USDA early today reported net weekly U.S. wheat sales totaling 207,200 MT for 2022-23, down 42% from the previous week, down 46% from the prior four-week average and a marketing-year low. Sales were expected to range from 250,000 to 650,000 MT. IGC raised its forecast for wheat production in 2022-23 season by 8 MMT to 778 MMT. Barring an extended rally in corn or soybeans, wheat futures may extend losses further considering a host of bearish supply- and demand-related factors.
Technical analysis: Bearish momentum in wheat futures accelerated with the multi-month closes posted today, and the markets are poised for substantially more downside, possible near the $7.00 level in SRW and HRW contracts. September SRW broke under the previous August low at $7.52 and below the January low around $7.38, which puts last October’s lows around $7.23 in sight for bears, as well as September lows around $6.82. The market may eventually generate some short-term corrective buying if corn and soybean markets strengthen. Near-term upside targets for September SRW include the 10- and 20-day moving averages at $7.83 1/2 and $7.85.
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 futures fell 84 points to 112.70 cents.
Fundamental analysis: Cotton futures fell a second session on continued profit taking following the steep rally the previous week, with selling encouraged by a fifth day of strength in the U.S. dollar. Concern over recession continue to hang over the market, exacerbated by reports that China’s Customs data showed 120,000 MT of cotton imports for July, down 17% from the same month in 2021.
World Weather continues to predict significant rains Saturday through Monday in Texas and Oklahoma, after scatted showers begin today through Friday. The forecaster further states that sufficient amounts of rain will fall to bolster soil moisture from West Texas and the Texas Panhandle through much of central and southern Oklahoma to the Texas Blacklands. While the relief from the drought will be welcome, it comes too late for a serious change in 2022 production for corn, sorghum, cotton or most any other crop. However, World Weather states the Delta and southeastern U.S. will experience timely rainfall and maintain a very good environment for crop development over the next 10 days.
USDA reported net U.S. cotton export sales of 49,500 running bales (RB) for 2022-23, down from 102,400 RB the previous week. Exports for the week totaled 267,400 RB, bringing the season total to 448,633 RB. In comparison, last year’s shipments totaled 411,700 RB through the second week of the season.
Technical analysis: December cotton continues to hold well above the 10-, 20-, and 40-day moving averages, but are beginning to ease out of overbought territory. Any attempts higher will be met with resistance at 114.69 cents, with next level resistance at 116.46 cents, as bulls maintain a keen eye on the May 17 high at 133.79 cents. Downside support is seen at 110.70 cents and again at 107.87 cents. The 10-day moving average at 106.20 cents is a target for bears, and if reached would fill the gap made in the overnight session to start the week.
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.
