Crops Analysis | May 11, 2022
Price action: July corn futures rose 13 1/4 cents to $7.88 1/2, the contract’s highest closing price since May 5. December corn gained 16 3/4 cents to $7.35 3/4.
Fundamental analysis: Corn futures rose for a second consecutive day amid ongoing concern over slow U.S. planting and tightening grain supplies a day ahead of a USDA Supply and Demand Report that’s expected to show further shrinkage in the domestic and global balance sheets. USDA is expected to lower estimated U.S. corn ending stocks for 2021-22 by about 28 million bu. to 1.412 billion bu., based on a Reuters survey. The agency’s first projection for 2022-23 U.S. ending stocks is expected to come in around 1.352 billion bu.
Warmer, drier weather in the Midwest this week is expected to speed fieldwork, but corn planting remains behind schedule and is nearing the mid-May period after which yield prospects for late-seeded crops often decline. Also today, the Energy Information Administration reported U.S. ethanol production at an average of 991,000 barrels per day (bpd) during the week ended May 6, up 22,000 bpd from the previous week and up 1.2% from the same week a year earlier. Ethanol stocks increased 253,000 barrels to 24.140 million barrels, the first increase in six weeks.
Tomorrow’s weekly USDA export sales report is expected to show net U.S. corn sales of 350,000 to 700,000 MT for 2021-22 and 150,000 to 650,000 MT for 2022-23.
Technical analysis: Corn futures’ bullish technical posture strengthened with today’s strong close. Sustained upside followthrough tomorrow, including a July close above the 10-day moving average at $7.93 1/2, could confirm a near-term bottom at this week’s $7.69 intraday low, and have bulls setting their sights on the contract high at $8.24 1/2, posted April 29. Near-term support is seen at the 40- and 50-day moving averages at $7.64 1/2 and $7.55, respectively.
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 climbed behind strength in crude oil and expectations tomorrow’s USDA Supply and Demand report will reflect shrinking supplies. USDA is expected to lower its forecast for 2021-22 U.S. ending soybean stocks to 225 million bu. from 260 million bu. and cut its global stockpiles as well. Also tomorrow, USDA’s weekly export sales report is expected to show net U.S. soybean sales at 300,000 MT to 1.05 MMT for 2021-22 and 2022-23.
Technical analysis: Soybean bulls have a near-term technical advantage, though prices are still trending down on the daily chart. The next near-term upside objective for bulls is closing July futures above solid at $17.00. The next downside objective for bears is closing prices below solid support at the April low of $15.60 1/2. First resistance is seen at today’s high of $16.15 and then at this week’s high of $16.26. First support is seen at today’s low of $15.87 1/2 and then at this week’s low of $15.78.
Soymeal bears have a near-term technical advantage with prices in a six-week downtrend on the daily bar chart. However, the market is now short-term oversold and due for a corrective upside bounce soon. The next upside price objective for the meal bulls is to produce a close in July futures above solid resistance at $420.00. The next downside price objective for the bears is closing prices below solid technical support at the January low of $385.70. First resistance comes in at today’s high of $407.20 and then at this week’s high of $415.50. First support is seen at today’s low of $397.40 and then at $395.00.
Soyoil bulls have a solid near-term technical advantage. The next upside objective for bulls is closing July prices above solid resistance at the contract high of 87.65 cents. Bears' next downside objective is closing prices below solid support at 75.00 cents. First resistance is seen at today’s high of 83.50 cents, then 85.00 cents. First support is seen at today’s low of 80.60 cents, then this week’s low of 79.10 cents.
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 rose 20 1/4 cents to $11.13, the contract’s highest settlement since April 18. July HRW wheat rose 25 1/2 cents to $12.00 1/2, the highest close since March 7. July spring wheat rallied 42 1/2 cents to $12.56, a lifetime-high close for the contract.
Fundamental analysis: HRW wheat jumped to the highest close in over two months and nearby spring wheat hit an 11-year high amid ongoing concern over adverse weather and tight global supplies. Surging crude oil futures also provided support to grains. Crops in the U.S. Plains remain stressed by drought and spring wheat planting in the Northern Plains is behind schedule due to excess moisture.
Tomorrow’s USDA Supply and Demand report could provide further impetus for market bulls. U.S. wheat ending stocks for the 2022-23 marketing year are expected to come in around 659 million bu., according to a Reuters survey of analysts, which would be down from 686 million bu. estimated for 2021-22. Tomorrow’s USDA weekly export sales are expected to show net U.S. wheat sales at 75,000 to 350,000 MT for 2021-22 and 2022-23 marketing years.
Technical analysis: Winter wheat bulls have a firm near-term technical advantage, with HRW the upside leader. SRW bulls' next upside objective is closing July futures above solid resistance at $12.00. The bears' next downside objective is closing prices below solid support at the May low of $10.34 1/4. First resistance is seen at this week’s high of $11.35, then at the April high of $11.43 1/2. First support is seen at this week’s low of $10.83, then $10.65.
HRW bulls' next upside objective is closing July prices above solid resistance at the March high of $12.59. The bears' next downside objective is closing prices below solid support at the May low of $10.86 3/4. First resistance is seen at today’s high of $12.07 1/4 and then at $12.25. First support is seen at today’s low of $11.75, then at this week’s low of $11.56 3/4.
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 gained 66 points to 143.60 cents per pound, while December advanced 58 points to 124.75 cents.
Fundamental analysis: Cotton futures gained behind broader commodity market strength led by crude oil, which rallied over $5, helping offset weakness in U.S. stocks. Crude remains the commodity leader since it’s a feed stock for many products and also fuels much of the global economy. But stock traders and investors are clearly worried about a potential recession, as indicated by the S&P 500 index dropping four out of the past five trading sessions. Given consumers’ tendency to curtail apparel purchases first during tougher economic times, this may bode ill for cotton demand.
USDA’s Supply and Demand Report tomorrow will include the agency’s first forecast of the size of the 2022 U.S. and global cotton harvests. Increased spring plantings will increase the productive potential of this year’s U.S. crop, but the drought hammering the Southwest promises to have the opposite effect.
Technical analysis: Bulls still hold the short-term technical advantage in July cotton futures. Bears have recently had very little success in trying to force the contract price below initial support at its 20-day moving average near 142.95. A decisive drop below that level would have bears targeting the 40-day moving average near $136.41, then the psychological 130.00 level. Tuesday’s high at 145.22 marks initial resistance, with strong backing from the 10-day moving average at 147.01. A breakout above that point would have bulls targeting the contract high at 155.95.
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.
