Crops Analysis | May 17, 2022
Price action: July corn futures fell 8 3/4 cents to $8.00 3/4. December corn fell 4 3/4 cents to $7.60 3/4.
Fundamental analysis: Corn futures were pressured by a big jump in U.S. planting progress last week and spreading from a surging wheat market. Bear spreading also weighed on nearby corn and limited declines in old-crop December futures. USDA reported 49% of the U.S. corn crop was planted as of Sunday, up from 22% a week earlier but still well behind the 67% average for the past five years.
Corn futures will remain supported by concern over decreasing yield potential from late-planted crops, with the northern part of the Midwest a particular area of concern. Minnesota farmers had planted only 35% of their corn, compared to the five-year average of 72%. Corn futures may have shifted into a sideways pattern for the near-term, though high wheat prices and prospects for a summer weather scare should keep corn futures underpinned
Technical analysis: Corn bulls have a solid near-term technical advantage. The next upside price objective for bulls is to close July prices above solid resistance at the contract high of $8.24 1/2. The next downside target for bears is closing prices below support at the May low of $7.69. First resistance is seen at this week’s high of $8.10 1/4, then at $8.14. First support is at this week’s low of $7.92 3/4, then at $7.80.
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.
Price action: July soybeans rose 21 1/2 cents to $16.78, the highest closing price since April 29. November soybeans rose 13 1/2 cents to $15.25 1/2. July soymeal fell $1.80 to $411.80 per ton. July soyoil rose 50 points to 83.49 cents per pound.
Fundamental analysis: Nearby soybeans rose for a sixth straight session behind strengthening technicals and a jump in corn planting progress that could reduce the likelihood of U.S. farmers shifting more land to beans. Gains in soyoil and weakness in soymeal reflected a resumption in long soyoil/short meal spreading that had been unwound in recent sessions.
Planting remains behind schedule, particularly in the northern Midwest, and new-crop November soybeans’ close near a four-week high suggests ongoing concern over reduced yield prospects, along with broader long-term concern over tight global supplies. USDA reported the U.S. soybean crop was 30% planted as of Sunday, up from 12% a week earlier but behind the 39% five-year average. Analysts expected plantings to be about 29% completed. The crop was 9% emerged as of May 15, behind the 12% five-year average.
Technical analysis: Bullish momentum in soybeans strengthened further with July futures extending the past week’s a sharp upturn and ending firmly above the 20-, 40- and 50-day moving averages. Continued 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. July soymeal faded from an initial extension of sharp gains the past two sessions but still closed above the 10-day moving average at $408.50, sustaining ideas that the market has forged a near-term bottom that could encourage soybean bulls.
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.
Advice: We advise hedgers and cash-only marketers to sell the remaining 10% of old-crop inventories to get to 100% sold in the cash market. Hedgers should also exit the 10% hedges held in July SRW futures.
Fundamental analysis: SRW futures led a wheat market recovery from overnight declines behind ongoing concern over deteriorating U.S. crop conditions and shrinking global supplies. Prices fell overnight after India eased export restrictions slightly, saying it will allow overseas wheat shipments awaiting customs clearance, also wheat exports to Egypt. Wheat futures rallied Monday after India banned most wheat exports to manage domestic food security and prices. Even if wheat supplies from India won’t be as restricted as previously thought, market concerns remain elevated with the war in Ukraine disrupting the global grain trade and the U.S. HRW crop heading for a 59-year low.
Drought in the U.S. Plains continues to crimp the production outlook for winter wheat, while spring wheat seeding in the Northern Plains still lags due to excess moisture. USDA late yesterday reported 27% of the winter wheat crop in “good” or “excellent” condition as of Sunday, down from 29% a week earlier. 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 dropped 6.5 points to 252.7, the lowest rating of the year and 73.8 points below the five-year average. The SRW crop improved 10.8 points to 357.1, its highest rating this spring, though that’s still 1.2 points below the average for this date.
Technical analysis: Winter wheat bulls retain a strong near-term technical advantage as a six-week uptrend continued and July SRW reached a contract high at $12.84, topping the previous high of $12.78 1/4. Upside targets include $13.00 and $13.11 1/4, the record high for a nearby SRW contract posted in March. July HRW posted a contract high at $13.79 1/4, with upside objectives including the all-time high oof $13.84 3/4, posted in February 2008.
What to do: Get current with advised 2021- and 2022-crop sales.
Hedgers: NEW ADVICE – Sell the final 10% of 2021-crop in the cash market to get to 100% sold. Also, exit the 10% hedge in July SRW futures. You should have 50% of expected 2022-crop forward-sold for harvest delivery.
Cash-only marketers: NEW ADVICE – Sell the final 10% of 2021-crop in the cash market to get to 100% sold. You should have 50% of expected 2022-crop forward-sold for harvest delivery.
Price action: July cotton slumped 219 points to 148.46 cents per pound, while new-crop December slipped 60 points to 132.36.
Fundamental analysis: Cotton futures rallied Monday following reports India was banning wheat exports in order to avoid a domestic shortage, as well as ideas that they might do the same to its sizeable cotton supply. The advance was particularly impressive when viewed in light of the latest U.S. dollar rally, which left the greenback at a fresh 20-year high. As pointed out in the past, dollar strength translates into higher U.S. commodity costs to export customers, which then tends to cause a downward adjustment in those dollar-based costs in response. But the greenback fell rather sharply today, as did cotton futures. The latter drop probably marked a belated reaction to ideas that the higher prices will curb both domestic consumer demand and export buying.
Ultimately, the old-crop situation, especially the latest export news, is probably still exerting the most influence over cotton prices. That’s particularly true since the USDA has yet to issue a reading on the condition of new-crop cotton across the country. Monday’s news that planting in both Texas and Georgia, the two biggest cotton-producing states, is running about 3% behind the five-year norm, may have offered some support for the deferred contracts.
Technical analysis: Bulls still hold the short-term technical advantage in cotton futures. Initial resistance is marked by today’s high at 151.95, then at the May 4 contract high at 155.95. A surge above that level would have bulls targeting the 160.00 level, then five-cent intervals to the upside. Today’s low at 148.25 likely represents initial support, with backing from the contract’s 10-, 20- and 40-day moving averages at 145.74, 144.25 and 139.08, respectively. A drop below those levels would open the door to a test of 135.00, then 130.00.
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 90% priced on 2021-crop. You should also be 50% forward-priced for harvest delivery on expected 2022-crop production.
