Crops Analysis | May 16, 2022

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Corn

Price action: Corn futures posted strong gains, with the July contract up 28 1/4 cents at $8.09 1/2 and December up 16 3/4 cents to $7.65 1/2.

Fundamental analysis: Corn futures rode the explosion higher in the wheat market today. Additional strength came from outside markets, as crude oil futures firmed and the U.S. dollar index weakened. Price action in the wheat market will likely continue to guide corn on Tuesday, though traders may react to this afternoon’s crop progress data that will update the corn planting pace as of May 15.

Last week’s initial 2022-23 projections from USDA are also supportive. While projected new-crop ending stocks came in a little higher than traders anticipated, USDA started with a yield projection that is 4-bu.-per acre below trendline, reflecting the delayed plantings. That may not encourage strong buyer interest, especially if the planting pace catches up by the end of the month, but it should help limit seller interest.

USDA’s weekly corn export inspections declined significantly from the previous week to 1.037 MMT (40.8 million bu.), though that reduced the average weekly pace needed to high USDA’s forecast of 2.5 billion bu. to 39.4 million bu. over the remainder of the marketing year.

Technical analysis: Bulls continue to maintain solid control in corn futures. Near-term trading boundaries for July futures are last week’s low at $7.69 and the contract high at $8.24 1/2. An upside breakout from that range would have bulls targeting the all-time high at $8.43 3/4 on the continuation chart. A downside breakout would point the contract toward a 50% retracement of the rally from late March to late April around $7.59 1/2, with backing from the psychological $7.50 mark.

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 also have 40% of expected 2022-crop production forward-sold for harvest delivery.

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.

 

Soybeans

Price action: July soybeans rose 10 cents to $16.56 1/2, the contract’s highest closing price since April 29. November soybeans gained 13 3/4 cents to $15.12, also a two-week high. July soymeal rose $4.30 to $413.60 per ton and July soyoil fell 80 points to 82.99 cents per pound.

Fundamental analysis: Nearby soybeans rose for a fifth straight day as strengthening technicals and export optimism combined with spillover from a rally in wheat. Concerns over planting delays continued to support new-crop futures. USDA is expected to show the U.S. soybean crop 29% planted as of Sunday, up from 12% the previous week but below 61% a year ago.

The soybean crush pace dropped by more than expected in April but remains strong, according to National Oilseed Processors Association (NOPA) data. NOPA members crushed 169.8 million bu. of soybeans last month, down 6.6% from March but up 5.9% from the April 2021. It was the second-largest April crush on record for NOPA members, behind only 2020. NOPA implies a full April crush at 181.0 million bushels. For the first eight months of the 2021-22 marketing year, we estimate crush at 1.492 billion bu., up from 1.471 billion in 2020-21. Crush over the final four months of the crop year would need to total 723 million bu. to reach USDA’s forecast of 2.215 billion bushels.

Weekly soybean export inspections 784,187 MT (28.8 million bu.) of soybeans inspected for export during the week ended May 12, up from 504,441 MT the previous week. The weekly pace needs to average 18.9 million bu. through the end of the marketing year to hit USDA’s export forecast of 2.14 billion bushels.  

Technical analysis: Soybean technicals grew more bullish with today’s strong closes, which pushed July futures above the 20-, 40- and 50-day moving averages. Followthrough strength may have bulls targeting the May high at $16.88 3/4, the late April high at $17.04 3/4 and the high for all of April at $17.34. Key support is seen at last week’s low of $15.78. Nearby soymeal rose sharply for a second straight day, suggesting a possible near-term bottom that could further encourage bulls in soybean futures.

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.

 

Wheat

Price action: July SRW wheat futures rose the 70-cent daily trading limit to $12.47 1/2, a two-month closing high. July HRW wheat also closed limit-up at $13.52, the highest on the continuation chart since February 2008. Expanded daily trading limits for SRW and HRW Tuesday are now $1.40. July spring wheat rallied 60 cents to $13.85 and posted a contract high for a fourth consecutive day, reaching $13.85.

Fundamental analysis: Futures soared after India’s banned most wheat exports to manage domestic food security and prices, further stoking already heightened global supply concerns stemming from drought in the U.S. and South America and the war in Ukraine. India said it would still allow exports backed by already issued letters of credit and to countries that request supplies “to meet their food security needs.”

Traders will closely monitor the annual Wheat Quality Council tour of U.S. HRW wheat country that runs Tuesday through Thursday, mostly in Kansas. The tour will be extra important after USDA last week estimated the HRW crop at just 590 million bu., which would be the smallest since 1963-64, including a Kansas crop of 364 million bushels.

Wheat market watchers were awaiting this afternoon’s weekly USDA crop condition reports as of Sunday. The trade looked for U.S. winter wheat condition to be in 29% “good” to “excellent,” the same as last week and compares to 48% in that category last year. Forty percent of the U.S. spring wheat crop is expected to be planted as of Sunday, compared to 27% last week and 85% last year at this time.

Technical analysis: Wheat market bulls have a strong near-term technical advantage. Six-week-old price uptrends are in place on the daily bar charts for winter wheat futures. SRW bulls' next upside objective is closing July futures above solid resistance at the contract high of $12.78 1/4. Bears' next downside objective is closing prices below solid support at $11.00. First resistance is seen at $12.78 1/4, then at $13.00. First support is seen at today’s low of $12.22 1/4, then at $12.00.

HRW bulls' next upside objective is closing July prices above solid resistance at $13.00. Bears' next downside objective is closing prices below solid support at this week’s low of $11.56 3/4. First resistance is seen at the record high of $13.84 3/4 hit in February 2008 and then at $14.00. First support is seen at today’s low of $13.25, then $13.00.

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.

 

Cotton

Price action: July cotton rose 545 points to 150.65 cents per pound, the contract’s highest closing price since May 4. Deferred futures rose nearly 500 points.

Fundamental analysis: Cotton futures soared behind spillover from strong gains across other major commodities, with wheat prices soaring to 14-year highs and Nymex crude oil rallying near $114 per barrel to a seven-week high. Weakness in the dollar and concern over persistent dryness in key U.S. cotton areas also supported prices.

Restricted rainfall is expected to continue most of the next two weeks in the Southern Plains, including West Texas, World Weather said today. Most of the region is “in need of rain to improve conditions for planting, germination, and establishment of cotton,” the forecaster said. “A few light showers will occur today in northern parts of West Texas, the Panhandle, and southwestern Oklahoma where most of the rain will be too light to do more than briefly moisten the soil.” Bullish USDA Supply and Demand numbers last week continued to underpin cotton futures. The USDA projected lower global supplies, consumption and ending stocks in 2022-23.

Technical analysis: Bullish momentum gained strength in cotton futures, with today’s strong close, including a push above the 10-day moving average, likely emboldening bulls to target the July contract high at 155.95 cents, posted May 4. Initial support comes in around the 20-day moving average of 143.74 cents and last week’s low at 142.10 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.

 

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