Crops Analysis | July 12, 2022
Corn
Price action: July corn futures fell 48 1/2 cents at $7.32 3/4. December corn futures closed down 42 1/2 cents at $5.86 1/2. Prices closed near their session lows.
Fundamental analysis: The corn futures market was hit hard by a bevy of bearish elements today that sent the bulls reeling and gave the speculative bears renewed confidence to try to press prices even lower in the near term. Corn prices early today were already under pressure from a strong U.S. dollar index that again today hit a 20-year high and by Nymex crude oil futures dropping close to $8.00 a barrel. And then the monthly USDA supply and demand report just before midday came out with no friendly news for the corn bulls. USDA increased old-crop corn carryover by 25 million bu., which is 22 million bu. above the average pre-report trade estimate. New-crop corn carryover is up 70 million bu. from last month and 28 million bu. above the average pre-report trade estimate. USDA also increased U.S. harvested acres based on the June acreage report and left the national average yield projection unchanged from last month at 177 bu. per acre. The result is a crop projection of 14.505 billion bu., up 45 million bu. from last month.
Updated Corn Belt weather forecasts also leaned a bit less bullish today. World Weather Inc. at midday reported its forecast is wetter for Thursday through next Monday “and by Monday much of the Midwest, outside of some west-central and southwestern areas, will have received rain that will be beneficial for pollinating corn while buying crops more time before stress due to a lack of soil moisture increases.” Right now it appears the latest weather market scare in corn lasted just two trading sessions.
Technical analysis: The corn futures bears have the solid overall near-term technical advantage and gained more power today. The next upside price objective for the bulls is to close December prices above solid chart resistance at today’s high of $6.34 1/4. 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 $6.00 and then at $6.10. First support is at $5.80 and then at $5.75.
What to do: Get current with advised 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 and a 10% hedge in December corn futures at $6.92.
Cash-only marketers: You should be 90% sold on 2021-crop. You should have 50% of expected 2022-crop forward-sold for harvest delivery.
Soybeans
Price action: November soybeans closed down 62 cents at $13.43. September Soybean meal $4.20 lower, closing at $400.9. September bean oil down $3.49 at $58.57
Fundamental analysis: Pressure from outside markets and pre-report positioning loomed over the soy complex overnight into the open. The Early morning session found the U.S Dollar making a second consecutive attempt at new 20-year highs, while crude oil futures plummeted below $100 per barrel.
USDA’s July WASDE continued the downward price action in soy from increases in 21/22 carryover by 10 million bushels from June, 7 million bu. above pre-report estimates. Reductions of 50 million bu. were made to 22/23 carryout, but still 19 million bushels above estimates. Harvested bean acres were lowered 2.6 million from last month, based on the June Acreage Report, with yield remaining unchanged at 51.5 bu. per acre. Production is now seen at 4,505 million bushels, down 135 million bushels from June. Projected new crop soybean exports were revised lower by 65 million bu. to 2135, with crush reduced by 10 million bu. from June’s estimate.
Soybean conditions unexpectedly declined 1% yesterday to 62% “good” to “excellent.” Seven states, mostly in southern areas, reported deteriorating conditions due to prolonged hot, dry weather. Eleven states noted improvement. Top rated states include Louisiana, Wisconsin, Iowa, Indiana, and North Dakota.
Weather through the end of July and into August will be crucial for the continued development of soybeans. Production areas of concern continue in the central and southern Plains along with the Delta and southwestern Corn Belt. Missouri, Kansas, southwestern Iowa, Nebraska and parts of South Dakota will be closely watched as the growing season progresses.
Technical analysis: November soybean futures closed below technical support of 13.50, suggesting continued downward to sideways trade in the near term. Near term resistance can be seen at $13.75.
Soymeal was able to hold above technical support levels of $400.00. Near term resistance is seen at $410.00.
Soy oil continued its downtrend but was able to maintain support above 56.55. Resistance can be seen at 61.46.
What to do: Get current with advised cash sales and the 2022-crop hedge.
Hedgers: You have 10% of expected 2022-crop production hedged in short November soybean futures at $14.73. You should be 50% forward-priced on expected 2022-crop for harvest delivery. You should be 95% sold in the cash market on 2021-crop.
Cash-only marketers: You should be 90% sold on 2021-crop. You also should be 50% forward-priced on expected 2022-crop for harvest delivery.
Wheat
Price action: September SRW futures closed 42 1/4 cents lower at $8.14 1/4. September HRW down 47.50 at $8.67 ¾. September spring wheat futures tumbled 45 cents to settle at $9.18 3/4.
Fundamental analysis: Overnight trade found the wheat complex trading lower as the U.S. Dollar made a new 20-year high. Continued negativity persisted into the open on pre-report positioning and headlines of a meeting between Turkey, Russia, Ukraine, and U.N. to discuss grain exports. The downtrend continued as USDA’s July Supply and Demand report confirmed production estimates and carryover above survey averages. Hard red wheat led the complex lower into the close, finishing near lows for the second consecutive trading session.
All wheat production was increased from June by 44 million bushels, 36 million bu. more than the market was anticipating. USDA estimates the all-wheat yield at 47.3 bu. per acre, up 0.4 bu. from June’s projection. Harvested acres were seen at 37.6 million acres, up 500,000 from last month. 2021-22 carryover was seen at 660 million bushels (MB), up 5 MB from June. New crop wheat carryover was up 12 MB, 1 million bu. above pre report estimates.
According to Monday’s USDA Crop Progress report, 63% of winter wheat harvest is complete, compared to the 5-year average of 61%. Hot, dry weather in winter wheat country has allowed for considerable progress as well as continued hedge pressure. Spring wheat conditions were seen at 70% “good” to “excellent” compared to an expected 67% and the 5-year average at 77%.
Technical analysis: Bears are in control and look likely to take a run at technical support at $7.85 1/4 on the September SRW chart, with resistance to the upside at former support around $8.50. HRW support remains near $8.50, with resistance at $9.50
What to do: Get current with advised sales and hedges.
Hedgers: You should be 85% sold in the cash market on 2022-crop, with the remaining 15% hedged in short December SRW futures at $10.22. You should be 30% forward-priced on expected 2023-crop for harvest delivery next year. You should be 100% sold on 2021-crop in the cash market.
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. You should be 100% sold on 2021-crop.
Cotton
Price action: December cotton closed down the 400-point daily limit at 90.84 cents. The daily limit will expand to 500 points on Wednesday.
Fundamental analysis: The cotton futures market succumbed to the strong U.S. dollar index that hit another 20-year high today and further calls into question the competitiveness of U.S. cotton exports on the world market. Big losses of over $8.00 a barrel in the Nymex crude oil futures today also pressured the cotton market. Strong losses in grain futures also had the cotton futures bulls mostly standing on the sidelines today. Recession fears and a wobbly U.S. stock market remain underlying bearish elements for the fiber.
Today’s monthly USDA supply and demand report was a bit friendly for cotton futures, as new-crop carryover is down 500,000 bales from last month and 470,000 bales below the average pre-report trade estimate. USDA adjusted planted cotton acres up 250,000 from last month based on the June Acreage Report. Harvested cotton acres, however, were lowered 590,000 acres from last month. The national average cotton yield was raised 3 lbs. per acre. The result was a 1-million-bale cut to the estimated 2022 U.S. cotton crop.
World Weather Inc. today reported Texas crop conditions “are still poor and getting poorer. Showers will be possible periodically, but most of them will fail to counter evaporation well enough to offer much change in production potential. The rain will be more of a tease than a benefit, although the moisture will help hold temperatures back a bit.“ Meantime, the northern Delta cotton continues to be stressed by heat and dryness.
Technical analysis: Cotton futures bears have the solid overall near-term technical advantage. Prices are in a steep seven-week-old downtrend on the daily bar chart. The next upside price objective for the cotton bulls is to produce a close in December futures above technical resistance at 100.00 cents. The next downside price objective for the cotton bears is to close prices below solid technical support at 85.00 cents. First resistance is seen at 92.50 cents and then at 95.00 cents. First support is seen at 90.00 cents and then at the July low of 88.10 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.
