After Getting Off To A Slow Start, Corn And Soybean Plantings Picked Up The End Of May
DAVID REINBOTT
BENTON, MISSOURI
The markets were down hard last Tuesday and Wednesday coming off the Memorial Day Holiday. The rest of the week and going into today, Tuesday, prices are trying to hold some price support and make at least a modest rebound.
Some of the key factors driving prices are built around weather and its impact on planting progress, total acres planted, prevent plant acres, the crop mix of acres planted, and crop conditions. After getting off to a slow start, corn and soybean plantings picked up the end of May and based on Monday’s USDA’s planting progress and conditions report, planting progress is at or above the five-year average. It is behind in some key states like North Dakota, but overall, no major problems. Rainfall overall has been good so no major issues there except the need to replant in some areas. For right now the outlook is for a good corn and soybean crop. However, the 6 to 10 and 8 to 14 weather forecasts are projecting above normal temperatures and below normal precipitation for the mid-west with more of the heat and lack of precipitation being concentrated on the western regions.
Initially this will be positive for crop development. However, if this weather pattern persists into the end of June and into July, it could result in less production and higher prices.
The war in Ukraine and its impact on world crop production and exports will continued need to be watched. Russia two weeks ago wanted to allow wheat to leave Ukrainian ports for humanitarian reasons.
However, it requires that sanctions to be lifted. However, it does not look like this will happen due to Russia blowing up a grain terminal this past weekend. There is still a lot of knows on how Ukraine is going to handle the crops they still have in storage and the crops that have been planted and will be harvested. My guess some of that grain will leave the country and make it into the export market. There are reports that some of the grain has already been exported. If we do have a drought this year in the U.S. that substantially reduces corn and soybean production, there will be pressure to get their grain into the export markets. Again, we will have to see how this upfold throughout this year.
The size of corn and soybean crops in South America will have a big impact on prices. Southern Brazil and northern Argentina experienced a drought this growing season. Central and northern Brazil had more favorable weather. However, the second crop safrinha corn crop in Brazil had a late season drought that cut their production. There will be a USDA report out on Friday, and the trade is expecting an increase in the Argentina soybean crop and a 1 – 2 mmt cut in Brazil’s corn production. The South American corn and soybean production will compete with the U.S. in the export market especially exports to China.
On Friday June 10, USDA will release their monthly supply and demand report. USDA will probably not make any major changes to U.S. production unless they update the projected yields for the 2022-23 crops. Acres will probably be left unchanged as USDA will have an updated planted acres report on June 30. USDA may increase soybean exports 25 million bushels for the 2021-22 crop year. This will drop ending stocks close to 200 million bushels for the 2021 -22 year and 300 million for the new crop 2022-23 year. Because of the tight stocks, is one reason soybean prices have remained solid.
Pricing opportunities
Unless there is some major news event, prices will remain in a sideways price range as we go into Friday’s USDA report. From there, the trade will focus on the weather and its impact on production. If there is a forecast of heat with and little or no rain for more than a week or two in the Mid-West, prices will move higher. Also continue to monitor the events in Ukraine. As we move into the summer months, look to use price rallies as marketing opportunities. A farmer can use a close below an important moving average or price support level to make old crop and new crop sales.
Technically, I like to use trend lines to determine price support and resistance levels. From there, I use the moving averages for more intermediate to short term price support levels and pricing opportunities. For buys and sell signals, I use candlestick patterns and signals. I have found that closes below the 8 and 17 EMA are good signals to make sales when used in conjunction with the other technical indicators and make buys when prices close above 8 and 17 EMA.
Technical Analysis – June 7, 2022 for Corn, Soybeans, Wheat, Cotton and Rice.
Corn –
July 2022 futures are in a down trending channel of lower highs and lower lows. Prices are trying to find support at $7.25 after falling hard last Tuesday and Wednesday. If prices cannot hold this price level, the next support level is at $7.00. On Tuesday, prices were above the 8 day EMA which is positive and the next resistance levels are at the 17 day EMA at $7.61 and the 50 day MA at $7.73. $8.44 is the high set in August during the drought of 2012. The slow stochastic is oversold and could provide momentum for price rallies. If you still have old crop corn, scaling in sales would not be a bad idea. Another strategy is to make sales if prices close below a major moving average or support level and especially if prices close below $7.25 or rally back to one of the major moving averages.
December 2022 futures broke the $7.10 support level last week, and now is trying to rebound back over this price level. The next resistance levels are at $7.30, $7.60 and $8.49 from August 2012. Price support is at $6.80. Price direction will be influenced by U.S. production from planted acres, yield, and summer weather. For new crop sales, I would first use rallies into the $7.30 to $7.60 price range to get total new crop sales in the 33 percent to 50 percent range.
Soybeans –
July 2022 futures are challenging the top of the price channel with the high at $17.49. The next price target is $17.95 from September 2012. Price support is at the uptrend line at $17.00 followed by $15.60. With the uncertainty of the supply of soybeans in the world and the U.S., prices should be well supported at least in the near term. USDA will need to increase exports in the next report. For old crop soybeans, scaling in sales or a close below $17.00 would be a good plan.
November 2022 soybean futures are attempting to close above the top of the price channel at $15.50. The high on May 31 was $15.61 and the next price target is $17.89 from September 2012. Price support is at the 50 day MA at $14.97 followed by $14.40 at the bottom of the price channel. Price direction will be influenced by U.S. production from planted acres, yield, and summer weather. For new crop sales, I would advise either scale in sales on rallies due to weather or use a close below a support level in this case a close below the 50 day moving average at $15.50.
Wheat-
July 2022 wheat futures have tumbled from $12.84 on May 17 from the news of a smaller wheat crop in India and a possible export ban to the price support at $10.30. This is an important price level and needs to hold or prices could tumble below $10.00. Prices are now trying to rebound on the lack of available exportable wheat in the world. Slow Stochastic are over sold and could provide momentum for price rallies.
Price resistance is at the down trend line at $11.00 followed by $11.33 and the high at $12.84. Seasonally, winter wheat prices put in a high in early May and trend lower into harvest. Therefore, making some sales in the $11.33 to $11.00 price range may be a good idea.
Cotton-
July Cotton futures put in a bearish key reversal on May 5 and have been trending lower with lower highs and lower lows. Prices closed below the price support level at $1.44 and the 50 day MA at $1.39.
The next support levels would be at the support line at $1.35. The slow stochastics price momentum indicator is over sold which could signal a bounce in prices. Price resistance is at the contract high at $1.56 and the life time high is at $2.27 from March 2011. In the near term, if old crop sales need to be made, I would use rallies back to $1.44.
December Cotton futures put in a new high on May 17 at $1.34 and have trended lower and have found support at $1.18. The uncertain demand and exports maybe a reason for the pull back in prices. There are still questions about acres planted and abandonment of cotton acres in Texas and the Southwest due to drought. It is important for prices to hold the $1.18 price level with the next price support at $1.12. The slow stochastics price momentum indicator is over sold which could signal a bounce in prices. For new crop sales, I would recommend making some sales on a close below $1.18 or a rebound back to the $1.23 to $1.30 price range.
Rice-
July rice futures continue to trend higher for 2022. However, prices have reached a critical price point at $16.70 and must hold this price support or the next support level is at $16.00. Price resistance is at $17.66 and $18.16. From the weekly charts the next resistance level is at $20.57 from June 2020. If you need to make old crop sales, I would use a close below $16.70 or rallies above $17.50.
September rice futures have trended higher for 2022, but prices have gone into a more sideways trend the past two months. The price level at $16.83 is very critical and it needs to hold or the next price level is at $16.00. Price resistance is at $17.88 and $18.20. If you need to make new crop sales, I would use a close below the support line and up trend line at $16.83 or rallies back above $17.50. ∆
DAVID REINBOTT: Agriculture Business Specialist, University of Missouri Extension