Crops Analysis | July 7, 2022
Price action: December corn futures rose 11 1/4 cents to $5.96 1/4, after earlier rising as high as $6.08 3/4.
Fundamental analysis: Corn futures rose a second consecutive day as further corrective buying and short-covering contributed to a rebound from five-months lows posted earlier this week. Signs of easing recession worries across global financial markets, including strength in U.S. stocks, contributed to a firmer tone in grains and other commodities today. Traders may also be restoring some weather premium into corn prices amid forecasts for drier weather in the Midwest during mid-July.
A transition to drier weather and less favorable crop conditions will begin Saturday and will continue through at least July 18 and possibly deeper into the month, World Weather Inc. said today. “Subsoil moisture should be high enough to prevent serious crop stress in much of the Midwest during the next 10 days, but some crops in areas that miss out on significant rain this week should soon see rising levels of stress,” the forecaster said. “Pollinating corn in the driest areas will be most vulnerable to significant declines in yield potential if drier weather were to persist deeper into the second half of the month.”
USDA’s weekly export sales report Friday, delayed a day due to the July 4 holiday, is expected to show net U.S. corn sales of 200,000 to 500,000 MT for 2021-22 and zero to 300,000 MT for 2022-23, based on a Reuters survey. Last week’s sales were disappointing, with net U.S. corn sales posted a marketing year low at 88,800 MT for 2021-22.
Technical analysis: Corn futures technicals remain heavily bearish but have stabilized somewhat with yesterday’s late gains confirmed by followthrough strength today. Charts took severe damage over the past two weeks and further downside can’t be ruled out, though the market is still oversold and could see further corrective buying. Key support comes in at Wednesday’s low in December futures at $5.66 1/2 and further at $5.65, the Feb. 3 low. A push below those levels could send prices back to the $5.40 to $5.60 range from late 2021. December closed a gap in the daily chart between the July 1 low at $6.04 1/4 and Tuesday’s high at $6.02. Initial resistance includes the 10-day moving average at $6.28 1/4.
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.
Price action: August soybean futures rallied strongly Thursday, jumping 38 3/4 cents to $14.85 1/4. November beans leapt 42 3/4 cents to close at $13.65 1/2. August soyoil futures soared 3.06 cents to settle at 61.62 cents per pound, while August soymeal surged $7.90 to $423.50.
Fundamental analysis: Renewed inflation fears seemed to drive price action in the commodity markets Thursday, with crude oil leading the way with gains of well over $4.00 per barrel. The crop markets responded well to the seemingly renewed optimism, with soybean futures leading the grains higher. Bulls may also be adding a bit of a weather premium back into the markets ahead of the pollination, podding and setting to be done by the various crops in the next few weeks. Rebounding crude and palm oil prices likely spurred renewed buying in soyoil futures, whereas spreaders weren’t able to stop soymeal futures from participating in the rebound as well.
A Reuters survey of crop market analysts indicates they’re looking for old-crop soybean sales on tomorrow’s early release of the weekly USDA Export Sales report to range between -300,000 metric tons and +300,000. New-crop sales are expected to fall between 100,000 and 300,000 tons.
Industry surveys indicate traders are looking for next week’s USDA Supply and Demand and Crop Production reports to state the 2022 U.S. soybean crop around 4.522 million bushels, down substantially from USDA’s June forecast at 4.650 million. Ending stocks for the 2022-23 crop year are seen falling to 207 million bushels versus last month’s USDA figure at 280 million.
Technical analysis: Bears still own the technical advantage in August soybean futures. Today’s low places initial support at $14.48 3/4, with considerable backing from the Tuesday and Wednesday lows at $14.31 3/4 and $14.24 1/4, respectively. A followthrough drop would have bears targeting the $14.00 level, then the Jan. 18 low of $13.46 3/4. Today’s high marks initial resistance near $14.96 3/4, which likely extends up to the psychological $15.00 level. A followthrough move above that area and the 10-day moving average near $15.12 would have bulls targeting the 40-day moving average around $15.95.
What to do: Get current with advised cash sales and the 2022-crop hedge.
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.
Price action: September SRW wheat rose 32 cents to $8.36 1/2. September HRW wheat rose 37 3/4 cents to $8.89 1/4. September spring wheat rose 48 1/4 cents to $9.34 1/2.
Fundamental analysis: Wheat futures rose on short covering and corrective buying after prices hit four-month lows Wednesday. Solid gains in corn and soybeans also boosted wheat. Corn and soybeans are nearing key development phases and those markets may act as key price influences for wheat in coming weeks. Strength in crude oil and U.S. stocks contributed to a supportive tone in commodities, but wheat futures upside may be limited by harvest pressure and related commercial hedging.
Friday’s weekly USDA Export Sales report is expected to show net U.S. wheat sales for the week ended June 30 of 250,000 to 600,000 MT in the 2022-23 marketing year. Sales for the week ended June 23 were 496,719 MT.
Technical analysis: Winter wheat bears still have a solid near-term technical advantage, with prices in steep six-week downtrends on the daily bar charts. SRW bulls' next upside objective is closing September futures above solid resistance at $9.00. Bears' next downside objective is closing prices below solid support at the January low of $7.38 1/4. First resistance is seen at $8.50,then at $8.75. First support is seen at today’s low of $8.07 ¾, then at $8.00.
HRW bulls' next upside price objective is closing September futures above solid resistance at $10.00. Bears' next downside objective is closing prices below solid support at $8.00. First resistance is seen at $9.00 and then at this week’s high of $9.11. First support is seen at today’s low of $8.53 3/4, then this week’s low of $8.32 1/2.
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.
Price action: December cotton rose 327 points to 91.88 cents per pound.
Fundamental analysis: Cotton futures rose behind strength in equity markets that encouraged buying across the commodity sector amid easing recession fears. Bullish cotton traders may also suspect the market’s recent price slump may boost U.S. export sales. Continuing declines crop rating declines may also be encouraging bulls.
U.S. cotton production is expected to be reduced to an estimated 16.03 million bales, based on a survey conducted by Bloomberg ahead of USDA’s monthly Supply and Demand update July 12. That figure would be down from USDA’s June estimate of 16.50 million. U.S. exports for the 2022-23 crop year are seen falling from 14.50 million last month to 14.19 million, which likely reflects a diminished production outlook. Analysts don’t expect a significant drop in 2022-23 carryout, with the average figure at 2.87 million bales falling just 30,000 from the USDA June forecast.
Technical analysis: Bears still hold the short-term technical advantage in December cotton, but today’s rally suggests they’re going to be on the defensive. Thursday’s high marked initial resistance at 92.40, with considerable backing around Tuesday’s low of 93.48, then at the 10-day moving average near 94.80. A push above that level would open the door to a test of last week’s high at 99.49 and the psychological 100.00 level. Today’s low established initial support at 88.10, but a drop below that point would have bears targeting the contract’s December 2021 low at 85.05, then the psychological 80.00-cent level.
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.
