Crops Analysis | June 28, 2022
Price action: July corn futures rose 15 1/4 cents to $7.59 1/2, while December corn gained 6 1/4 cents to $6.59 1/4.
Fundamental analysis: Corn futures climbed as lower-than-expected USDA crop ratings stirred short covering and corrective buying. Extreme heat earlier in June may have crimped crop development, as USDA reported 67% of the U.S. corn crop in either “good” or “excellent” condition as of Sunday, down from 70% a week earlier. When USDA’s weekly condition ratings are plugged into the weighted Pro Farmer Crop Condition Index (CCI; 0 to 500-point scale, with 500 representing perfect), the corn crop fell 6.7 points to 369.5, which was 2.8 points below the five-year average.
The window for a significant weather market scare developing for the corn crop is narrowing a bit, with extended weather forecasts now reaching out into early July and showing no serious threats. Corn’s critical pollination period of growth occurs around mid-July for much of the crop. The corn crop “should remain favorably rated in much of the Midwest during the next 10 days to two weeks, as mild temperatures through the next week and at least some rain should aid establishment of newly planted crops,” World Weather Inc. said today. However, the forecaster said rains will be light and infrequent enough that many areas will dry down overall, “which is not abnormal for this time of year, and timely rain will be needed in July to keep conditions favorable for crops.”
Traders await USDA’s Acreage and quarterly Grain Stocks reports Thursday. The agency is expected to raise its forecast for U.S. corn plantings by about 370,000 acres, to 89.86 million. Trading could be more subdued on Wednesday ahead of the data.
Technical analysis: Corn bulls and bears are on a level near-term technical playing field. However, a bearish flag or pennant pattern forming on the daily bar chart. Prices are also trading way below the key 40-day moving average. The next upside price objective for the bulls is to close December prices above solid chart resistance at $7.00. The next downside target for the bears is closing prices below support at $6.00. First resistance is seen at today’s high of $6.67 3/4, then at $6.80. First support is at today’s low of $6.55 1/4, then this week’s low of $6.44 1/4.
What to do: Get current with advised 2021- and 2022-crop sales.
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: July soybeans jumped 33 1/4 cents to $16.63 3/4, while November soybeans surged 29 3/4 cents to $14.62 1/2. August soymeal gained $5.10 to $419.70 per ton and August soyoil climbed 115 points to 69.00 cents per pound.
Fundamental analysis: New-crop soybeans rose for a third consecutive day after an unexpected deterioration in USDA crop ratings fueled further corrective buying following last week’s sharp losses. Strength in crude oil and signs of improvement in China’s economic sentiment contributed to gains in the soy complex. USDA late yesterday said it rated 65% of the U.S. soybean crop good-to-excellent as of Sunday, down from 68% a week earlier and contrary to expectations the number would hold unchanged. Based on the Pro Farmer CCI, the soybean crop declined 5.4 points to 360.6, which was still 0.4 point above average.
Midwest dryness isn’t a major market concern yet, but near-term forecasts hold limited moisture potential and traders are likely to maintain some weather premium in new-crop prices as they await USDA’s Acreage and quarterly Grain Stocks reports Thursday. USDA is expected lower its estimate for 2022 U.S. soybean plantings to about 90.45 million ac., down 509,000 acres from a March forecast, based on the Reuters survey. U.S. soybean stockpiles as of June 1 are expected to come in around 965 million bu., down 196 million bu. from a year earlier.
Technical analysis: Bears retain a near-term advantage in soybeans with charts still damaged from last week’s breakdowns and November futures still under the 100-day moving average. But the market’s strength this week suggests prices may be establishing a near-term bottom as traders watch for further weather developments. Key support is seen at the near three-month low of $13.99 1/4 posted June 24, a level bears may target on the market’s next move lower, along with the April low at $13.94. Initial resistance is seen at the 10- and 100-day moving averages, both at $14.84 to $14.85. A push above that level may have bulls targeting the 40-day moving average at $15.06 1/2.
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 85% sold on 2021-crop. You should be 50% forward-priced on expected 2022-crop for harvest delivery.
Price action: September SRW wheat rose 18 1/2 cents to $9.36 a bushel, up from Monday’s four-month closing low, while September HRW wheat rose 11 1/2 cents to $9.90 1/4. September spring wheat fell 3 3/4 cents to $10.40 3/4.
Fundamental analysis: September SRW futures rose for the first time in four sessions and September HRW rose for the first day in seven as short-covering and bargain-hunting boosted wheat markets following sharp declines last week. Spillover from strength in corn and soybeans, as well as crude oil, also encouraged buyers in wheat futures. But expanding harvest pressure and weak technicals likely will limit winter wheat’s price upside. USDA reported the winter wheat harvest at 41% complete as of Sunday, up from 25% a week earlier and 6 percentage points ahead of the normal average. Harvest exceeded expectations for 40% completion. Also, USDA rated 59% of the spring wheat crop good-to-excellent, unchanged from the previous week. Based on the Pro Farmer CCI, the spring wheat crop slipped 3.8 points to 360.4, though that was still 17.9 points above the five-year average for the date.
Winter wheat futures may have exhausted price downside for now and could consolidate ahead of USDA’s widely anticipated Acreage and Grain Stocks reports Thursday. Analysts on average expect USDA to lower its forecast for U.S. all wheat seedings to 47.017 million ac. from 47.351 million ac. in its March projection.
Technical analysis: Winter wheat bears retain a firm near-term technical advantage with prices in a steep, six-week downturn and trading well-under key short- and medium-term moving averages. Monday’s low in September SRW wheat at $9.13 1/2 could mark a near-term low if prices are heading into a sideways consolidation trade. Further downside objectives for bears include closing September futures below solid support at $8.50. Near-term upside objectives include Monday’s high of $9.52 1/4 and the 10-day moving average at $9.97 3/4.
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 fell 57 points to 93.48 cents per pound, the contract’s lowest closing price since Jan. 3.
Fundamental analysis: Cotton futures continued to take pressure from concern over the economic outlook, which overshadowed erosion in government crop ratings. The U.S. Consumer Confidence report today conveyed growing pessimism over the current economic environment and conditions in the months ahead. The report sparked selling in equity markets, which weighed on commodities.
USDA’s weekly crop updates late yesterday reflected deterioration in the cotton crop. The crop’s good-to-excellent rating fell to 37% as of Sunday from 40% a week earlier; a year earlier, 52% of the crop ranked in those categories. This latest reading also marked an 11% drop from the surprisingly good figure (at 48% “good” to “excellent”) four weeks ago.
Technical analysis: Bears hold a short-term technical advantage, especially after the December contract posted its seventh straight decline (covering 25.75 cents). Still, today’s opening and low place support 92.10 and 91.20, respectively. Psychological support at 90 cents per pound may also be coming into play, especially with the contract’s Relative Strength Index having dipped below 20% (oversold). Conversely, a drop below that level would likely open the door to a test of 85.00. The lows posted during the past two sessions, at 94.05 and 97.33 probably represent initial resistance levels, with the psychological 100.00 level likely marking additional resistance. A close above that point would likely have bulls targeting 105.00.
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 50% forward-priced for harvest delivery on expected 2022-crop production.
Cash-only marketers: You should be 100% sold on 2021-crop. You should also be 50% forward-priced for harvest delivery on expected 2022-crop production.
