Crops Analysis | July 28, 2022

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Corn ­

Price action: Corn futures gained 14 to 16 cents, with December up 16 cents to $6.19, the contract’s highest closing price since July 11.

Fundamental analysis: December corn rose a fourth consecutive session, boosted by rallying soybeans and forecasts for hot, dry conditions across much of the Midwest the first 10 days of August. Crop stress and declines in yield potential may expand into a larger part of the Midwest during the second week of August if rain and cooler temperatures do not return, World Weather Inc. said today.

The outlook for the safrinha corn crop in Brazil’s Paraná state was lowered for the second month in a row, with the state’s agriculture department estimated the crop at 14.7 MMT, down from a previous estimate of 15.4 MMT. Also today, USDA’s weekly corn export sales for the week ended July 21 were in the middle range of trade expectations at 150,300 MT for 2021-22. New crop sales totaled 193,700 MT, missing expectations ranging from 200,000 to 625,000 MT. Exports are running approximately 13% behind year-ago levels.

Technical analysis:  December corn futures traded an 18 cent range, reaching new highs late in the session and holding above the 20-day moving average. First, second and third resistance was traded at $6.08 1/4, $6.13 1/2 and $6.20 3/4. First and second support at $5.95 3/4 and $5.88 1/2 remained untested throughout today’s session.

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: Soybeans surged 29 to 34 cents, with November rising 30 1/2 cents to $14.40 1/2, the new-crop-contract’s highest closing price since June 30.

Fundamental analysis: Soybean futures rose for a fifth straight session and settled at a four-week high on concern an impending Midwest heat wave will stress soybean acres and crimp yield prospects just as the crop begins critical reproductive phases. The Midwest will experience drier-biased weather Friday through at least Aug. 11 along with warm to hot temperatures, leading to steady declines in soil moisture that should induce rising crop stress, World Weather said today.

“Stress to crops and declines in yield potentials should increase quickly in the west-central Corn Belt next week when temperatures warm with increasing stress likely to occur later in the week in the southwestern and south-central Corn Belt as the soil dries down again,” the forecaster said. “Crop stress and declines in yield potentials may begin expand into a larger part of the Midwest during the second week of August if rain and cooler temperatures do not return.”

Also today, USDA reported net weekly soybean sales reductions of 58,600 MT for 2021-22, marking the fourth week in the past five with net old-crop sales reductions. For 2022-23, net weekly sales totaled 748,800 MT, primarily for China (538,000 MT) and “unknown destinations” (199,000 MT). New-crop sales topped expectations ranging from 100,000 to 500,000 MT. Soyoil futures were supported by the Sustainable Aviation Fuel tax credit in the reconciliation deal, though it still needs to pass Congress.

Technical analysis: Soybeans technical posture turned increasingly bullish with the sharp gains over the past week, which sent the November contract to a breakout from the trading range from most of the past month. November soybeans also closed above the 40-day moving average, currently $14.38 3/4, for the first time since June 17. Upside targets for bulls include the 50- and 100-day moving averages at $14.55 and $14.69 1/4, respectively, along with the July high at $14.70 3/4. Key downside levels include the 20-day moving average at $13.65 and Tuesday’s chart gap from $13.58 1/4 to $13.49 1/4. Filling that gap would give bears encouragement to challenge support in the $13.00 to $12.90 range.

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 wheat rallied 26 3/4 cents to $8.17, the contract’s highest closing price since July 20. September HRW wheat gained 28 cents to $8.89 3/4, a 2 1/2-week closing high. September spring wheat rose 18 cents to $9.28.

Fundamental analysis: SRW wheat futures rose a fourth consecutive day and HRW also climbed behind spillover strength from sharp, weather-driven gains in the soybean market. Strength was more limited in spring wheat amid strong yield estimates from a crop tour. With the U.S. harvest mostly completed, winter wheat is following other markets as traders watch for developments on Ukraine. The first shipment of grain from a Ukrainian Black Sea port could depart as early as Friday, but “crucial” details for the safe passage of vessels were still being worked out, Reuters reported, citing a U.N. official.

Scouts on the annual Wheat Quality Council spring wheat tour estimated the average yield in North Dakota, the top producing state, at 49.1 bu. per acre, as favorable weather and adequate moisture boosted harvest prospects. The figure was above the crop tour's five-year average of 39.4 bu. per acre and its highest since 2015, but short of the U.S. Agriculture Department's latest 2022 spring wheat yield estimate for the state of a record 51.0 bu. per acre.

Also today, USDA reported net weekly wheat sales of 412,000 MT for 2022-23, down 19% from the previous week and down 29% from the average for the previous four weeks. Sales were within trade expectations ranging from 250,000 to 625,000 MT.

Technical analysis: Winter wheat technicals turned slightly more bullish as September SRW closed above its 20-day moving average, currently $8.15 1/2, for the first time since May 27. Still, the near-term trend leans sideways-neutral with prices still within the range of the past three weeks. Bulls may now target last week’s September SRW high at $8.43 1/2 and $9.00, though the high for the month, $9.40 1/4, appears out of reach for now. Initial support is seen at the 10-day moving average of $7.96 3/4 and last week’s low at $7.54.

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 rose 114 points to 96.21 cents per pound, the contract’s highest closing price since 97.48 cents on July 1.

Fundamental analysis: Cotton futures rose a fourth straight session and settled near a four-week high amid gains in U.S. stocks and escalating concerns extreme heat and dryness in top U.S. growing areas of the Plains will harm production. Hot, dry weather continued in most of the Southern Plains, though several locations in the Texas Panhandle and a part of south Texas received enough rain in a few irrigated areas to improve conditions for cotton, World Weather said today. Still, there appears to be small odds for longer-term relief, with highs through next week in the middle 90s to lower 100s Fahrenheit in much of the Pandhandle. “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.

Also today, USDA reported net weekly U.S. cotton export sales reductions of 4,000 running bales (RB) for 2021-22, a marketing-year low. For 2022-23, net sales totaled 55,700 RB, with lead buyers including Vietnam (26,000 RB).

Technical analysis:  Cotton technicals continued to strengthen though retain a neutral near-term bias, with prices still trading within the range of the past month. The recent price gains may embolden bulls to take a run at the July high at 99.00 cents and the June 30 high at 99.49 cents. Initial support comes in at the 10- and 20-day moving averages at 92.62 cents and 92.46 cents, respectively, followed by last week’s low at 89.55 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.

 

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