Crops Analysis | May 10, 2022
Price action: July corn futures rose 3 1/4 cents to $7.75 1/4. December corn rose 8 1/4 cents to $7.19.
Fundamental analysis: Corn futures rose in a modest corrective bounce from Monday’s drop to a four-week low. Prices were supported by lower-than-expected U.S. corn-planting progress, as USDA Monday afternoon reported 22% of the crop was planted as of Sunday, up from 14% the previous week but under the 50% average for the previous five years. Analysts’ expected plantings to be around 25% complete. However, planters will likely be rolling across the Corn Belt this week. Warm temperatures and a mix of rain and sunshine across the Midwest during the next 10 days should allow rapid planting progress, with the far northwestern Corn Belt continuing to see the poorest conditions for fieldwork.
Technical analysis: Corn futures bulls have a firm near-term technical advantage. The next upside price objective is to close July futures above solid resistance at $8.00. The next downside target for bears is closing July below support at $7.50. First resistance is seen at this week’s high of $7.85, then $7.95. First support is at this week’s low of $7.69, then $7.60.
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 also have 40% of expected 2022-crop production forward-sold for harvest delivery.
Fundamental analysis: Soybean futures rose after Monday’s tumble spurred corrective buying and bargain hunting amid longer-term optimism over U.S. demand combined with tighter global supplies. Concerns over slow planting progress supported new-crop futures. USDA reported 12% of the U.S. crop was planted as of Sunday, up from 8% the previous week but under the five-year average of 24%. Progress fell short of expectations for about 16%.
Crop Consultant Michael Cordonnier cut his Brazil soybean estimate by 1.0 MT to 122.0 MMT, citing continued heavy rains in Rio Grande do Sul “where farmers are significantly behind in their soybean harvest.” He maintained his U.S. soybean acreage and yield projections at 91.0 million acres and 51.5 bu. per acre, respectively. USDA, in its Supply and Demand Report Thursday, will update its U.S. and global balance sheet for 2021-22 as well as release its first projections for 2022-23. U.S. soybean stocks at the end of the 2022-23 marketing year are expected to increase to about 317 million bu. from the 260 million bu. expected on hand at the close of 2021-22, based on a Reuters survey.
Technical analysis: July soybeans saw little downside selling pressure following the sharp drop over the previous two sessions, indicating the market has found temporary support around yesterday’s low at $15.78. But technicals have turned slightly more bearish for the near-term with July futures at minimum under 50 cents from key short- and medium-term moving averages. A push under Monday’s low would have bears targeting the April low at $15.60 1/2. A close below that price and the 100-day moving average at $15.57 1/4 could signal a near-term top and trigger further liquidation that puts the February lows under $15.00 in sight. Continued weakness in soymeal, which fell for the third straight session, remains burdensome for soybeans.
What to do: Get current with advised 2021- and 2022-crop sales.
Hedgers: You should be 95% sold in the cash market on 2021-crop. You should also have 40% of expected 2022-crop production forward-sold for harvest delivery.
Cash-only marketers: You should be 85% sold on 2021-crop. You should also have 40% of expected 2022-crop production forward-sold for harvest delivery.
Price action: July SRW wheat ended unchanged at $10.92 3/4, near the middle of the day’s range. July HRW wheat rose 10 3/4 cents to $11.75. July spring wheat rose 6 3/4 cents to $12.13 1/2.
Fundamental analysis: Wheat futures rose in a modest corrective bounce from sharp declines Monday and were supported by ongoing concerns over drought-stressed crops in the U.S. Plains and delayed planting in the Northern Plains. USDA reported modest improvement in winter wheat crop conditions, with the “good” to “excellent” rating rising to 29% as of Sunday from 27% and the “poor” to “very poor” rating falling to 39% from 43%. But the crop’s production prospects remain weak, and persistent drought is likely leading to higher than usual acreage abandonment.
When USDA’s weekly crop condition ratings are plugged into the weighted Pro Farmer Crop Condition Index (0 to 500-point scale, with 500 being perfect), the HRW crop improved 5.4 points to 259.2, though that’s still 69.4 points below the five-year average for this date. The SRW crop slipped 4.7 points over the past week to 346.3, which is 13.0 points below the five-year average.
Spring wheat also faces an uncertain outlook as wet, cold conditions in the Northern Plains continue to slow seeding. The spring wheat crop was 27% planted as of Sunday, up from 19% the previous week but well behind the 47% average for that date the previous five years.
Technical analysis: Winter wheat shored up its technical posture somewhat, with July SRW and HRW futures holding support overnight above key short-term moving averages. Prices settled around the middle of the day’s ranges and the middle of the trading range that’s persisted for the past month. Winter wheat still holds upside potential, especially if spring wheat extends a rally to contract highs, but recent weakness in corn and soybeans, driven by fund liquidation, could become burdensome for prices.
July SRW wheat overnight dropped as low as $10.83 before finding support just above its 20-day moving average at $10.81 and its 50-day at $10.78 1/2. Initial resistance is seen at the three-week high of $11.35 reached Monday.
What to do: Get current with advised 2021- and 2022-crop sales.
Hedgers: You should be 90% sold on 2021-crop in the cash market. You have 10% of 2021-crop hedged in July SRW futures at $8.75 1/4. You should also have 50% of expected 2022-crop forward-sold for harvest delivery.
Cash-only marketers: You should be 90% sold on 2021-crop. You should also have 50% of expected 2022-crop forward-sold for harvest delivery.
Price action: July cotton futures rose 1 point 142.94 cents per pound, while December futures rose 54 points to $124.17.
Fundamental analysis: U.S. cotton planting accelerated last week, USDA reported plantings in the 15 major states were 24% complete, up from 16% the week-prior figure and matching the five-year average. But traders were more interested in condition ratings, especially in drought-hit Texas. Weather reports indicate severe dryness across West Texas and forecasts imply little chance of near-term relief. The possibility of sustained drought through early summer is likely supporting the new-crop contracts. Old-crop futures more likely reflect industry concerns about the outlook for U.S. cotton exports, as well as prospects for the equity markets, inflation and global economy.
USDA’s next monthly Supply and Demand update Thursday is expected to indicate new-crop production at about 16.89 million bales, up from 17.62 million currently. Exports are seen rising only slightly from the old-crop figure of 14.75 million bales to 14.79 million next year. U.S. ending stocks are projected to rise from 3.5 million to 4.5 million bales. Global carryout for 2022-23 is expected to edge up from 83.38 to 83.74 million bales.
Technical analysis: Bulls still own a technical advantage in July futures, with bears unable to force a drop below support at the contract’s 20-day moving average near 142.64 cents today. Additional support persists at the contract’s 40-day moving average near 135.70 cents. A drop below that level would open the door to a test of psychological support at 130.00 cents and 125.00 cents. Today’s high implied initial resistance at 145.22 cents, then at the 10-day moving average near 147.47 cents. A bullish breakout would have bulls targeting the May 4 high at 155.95 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 50% forward-priced for harvest delivery on expected 2022-crop production.
Cash-only marketers: You should be 90% priced on 2021-crop. You should also be 50% forward-priced for harvest delivery on expected 2022-crop production.
