Crops Analysis | January 19, 2022
Price action: March corn futures rose 11 cents to $6.10 1/2, the contract’s highest settlement since $6.14 3/4 on Dec. 27.
Fundamental analysis: Corn futures climbed to the highest levels in over three weeks on general commodity market strength and amid renewed inflation concern. Nymex crude oil surged to a seven-year high near $88 a barrel and may rise further, with Goldman Sachs projecting oil at $105 in 2023. A weaker U.S. dollar index today also boosted grain markets, and there were unconfirmed reports China recently bought U.S. corn and soybeans.
Ongoing concern over dry weather in Brazil and Argentina cutting crop potential continue to underpin corn. World Weather Inc. today said Argentina has seen some improvement for crops in the central and interior south. Additional rain over the next week will be sufficient to restore improved topsoil moisture and some improved subsoil moisture. In Brazil, crop conditions are stressed in much of central and northern Rio Grande do Sul and to some degree in western Parana and western and southern Mato Grosso do Sul. Conditions in these areas will worsen over the next seven days and then possibly get some relief during the latter part of next week through the following weekend.
Technical analysis: Corn futures bulls have a solid near-term technical advantage and gained more power today, with prices in a four-month uptrend. The next downside target for bears is closing March futures below support at the January low of $5.84 3/4. The next upside objective for bulls is to close March above solid resistance at the December high of $6.17 3/4. First resistance is seen at today’s high of $6.14 1/2, then at $6.17 3/4. First support is at $6.05, then at $6.00.
What to do: Get current with advised 2021- and 2022-crop sales.
Hedgers: You should be 70% sold in the cash market on 2021-crop. You should also have 20% of expected 2022-crop forward-priced for harvest delivery.
Cash-only marketers: You should be 70% sold on 2021-crop. You should also have 20% of expected 2022-crop forward-priced for harvest delivery.
Soybeans
Price action: March soybean futures led the soy complex higher, surging 30 cents to $13.91 1/4. March soyoil jumped 168 points to 60.76 cents per pound. March soymeal climbed $8.2 to $398.30 per ton.
Fundamental analysis: After slumping in response to recent rains over parched South American growing areas, the soy complex rebounded in part on forecasts for hot, dry weather to return to key crop areas, such as southern Brazil. Production prospects have already been scaled back by USDA and several private forecasters. USDA’s attache in Brazil lowered its estimate for the country’s soybean production, saying drought in some regions and excessive rain in others has dampened prospects for a record crop. The attache’s estimate at 136 MMT is lower than USDA’s 139 MMT projection in last week’s Supply and Demand Report. Soybean prices may have also drawn support from unconfirmed rumors of Chinese purchases of U.S. corn and soybeans, possibly totaling over 1.0 MMT each.
Traders will be watching for daily USDA announcements of any large export sales in coming days and for the agency’s weekly export sales report, delayed till Friday this week due to the Monday holiday.
Technical analysis: Today’s price action seemed to give bulls the upper hand on a short-term technical basis. Bears couldn’t force downside followthrough after closing March futures below the 20-day moving average near $13.69 yesterday, which favors bulls, as did today’s rebound above the 10-day moving average at $13.86 1/4. A reversal that carried the contract back below those levels would have bears targeting the 40-day moving average near $13.18, then the $13.00 level. Conversely, bulls will likely be looking to test the $14.00 level and recent highs in that area, then the Jan. 7 high at $14.15.
March soyoil posted a breakout above resistance around 59.60, with a push above the 60.00-cent level opening the door to a test of the Nov. 24 high of 61.44, then the Oct. 20 top at 63.29. A drop back below support at the 10-day moving average near 59.01 would have bears targeting the 40-day moving average at 56.80.
March soymeal managed a rebound but recovered only a small portion of the losses posted the past three sessions. Yesterday’s low at $389.40 represents initial support and a dive below that level would have bears looking to challenge support at the 40-day moving average near $382.40. Bulls face psychological resistance at the $400.00 level, then at yesterday’s high of $403.60. That’s backed by the 20- and 10-day moving averages at $407.10 and $409.80, respectively.
What to do: Get current with advised 2021- and 2022-crop sales.
Hedgers: You should be 85% priced in the cash market on 2021-crop. You should also have 20% of expected 2022-crop forward-priced for harvest delivery.
Cash-only marketers: You should be 75% priced on 2021-crop. You should also have 20% of expected 2022-crop forward-priced for harvest delivery.
Price action: March SRW wheat soared 27 1/2 cents to $7.96 1/2, the contract’s highest closing price since $8.04 on Dec. 27. March HRW wheat rose 27 1/4 cents to $8.00, the highest close since $8.04 on Jan. 4. March spring wheat futures rose 32 3/4 cents to $9.39 3/4, the highest close since Jan. 5.
Fundamental analysis: Wheat futures rose sharply for the second day as concerns over a cold snap in the U.S. Plains and Russia potentially invading Ukraine triggered short covering and corrective buying. Both of the latter countries are major wheat exporters. Signs of improved export demand and general commodity market strength also supported wheat prices.
In the U.S., temperatures are expected to drop near or slightly below 0 degrees Fahrenheit overnight in minor winter wheat production areas of central Nebraska and near the Kansas-Nebraska border, World Weather Inc. said today. “There is no snow on the ground in these areas, so, some damage might occur if temperatures get cold enough,” World Weather said. The Plains weather outlook “will be closely monitored because the temperatures will be low enough to threaten some negative impact on crops without snow cover.”
Also today, the Buenos Aires Grains Exchange reported Argentina produced a record wheat crop of 21.8 MMT in the 2021-22 marketing year, topping the country’s previous high of 19 MMT in 2018-19. The harvest, which ended this month, came in 2.8 MMT higher than the exchange’s initial estimate. Japan received no offers from a tender to buy 80,000 MT of feed wheat and 100,000 MT of feed barley. Jordan tendered to purchase 120,000 MT of optional origin milling wheat. Iran tendered to buy 60,000 MT of milling wheat.
Technical analysis: Winter wheat bulls gained strength as SRW futures surged above major moving averages the past two days. March SRW futures closed above the 50-day moving average, currently at $7.94 3/4, for the first time since late December, and are close to pushing above a downtrend line drawn from the contract high of $8.74 3/4 posted Nov. 24. SRW bulls' next upside objective is closing March futures above solid resistance at $8.00. Bears' next downside objective is closing prices below solid support at the October low of $7.25 3/4.
What to do: Get current with advised hedges. Wait on a price rebound to extend wheat sales.
Hedgers: You have hedges covering 20% of 2021-crop in short March SRW wheat futures at $7.57. You should also be 70% priced in the cash market on 2021-crop. You should have 20% of expected 2022-crop production forward-priced for harvest delivery.
Cash-only marketers: You should be 70% priced on 2021-crop. You should also have 20% of expected 2022-crop production forward-priced for harvest delivery.
Price action: March cotton futures surged 287 points to 123.95 cents per pound, the highest close for a nearby contract since July 2011, when prices topped 164.00 cents.
Fundamental analysis: Cotton futures extended a steep rally to decade-plus highs behind general commodity market strength and optimism over global demand. Nymex crude oil futures jumped over $1.00 to a seven-year high near $88 a barrel, while winter wheat futures climbed over 25 cents. Higher oil prices make polyester, a substitute for cotton, more expensive.
The cotton market also continued to draw support from bullish USDA figures released last week. In its monthly Supply and Demand update, USDA reduced its projection for U.S. production by 660,000 bales, to 17.62 million bales, below expectations for a drop to about 18.24 million. USDA also cut projected ending stocks by 200,000 bales, to 3.20 million bales, and lowered estimated global production by about 610,000 bales, to 120.96 million bales.
Traders await USDA’s next weekly export sales report, which will be released Friday, a day later than usual, due to Monday’s holiday.
Technical analysis: Cotton bulls strengthened their near-term technical advantage as prices extended a steep six-week uptrend. The next upside objective for cotton bulls is closing March futures above solid resistance at 125.00 cents, with additional upside targets including 140.00 cents. The next downside price objective for cotton bears is closing March below solid support at 115.00 cents. First resistance is seen at today’s contract high of 124.78 cents. Cotton futures’ sharp gains have pushed the market into overbought territory, which may leave the market vulnerable to a short-term sell-off. For March futures, the Relative Strength Index is now near 74, up from about 57 at the end of last year.
What to do: Get current with advised 2021- and 2022-crop sales.
Hedgers: You should be 100% priced 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% priced on 2021-crop. You should also have 40% of expected 2022-crop production forward-sold for harvest delivery.
