Crops Analysis | January 26, 2022

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Corn ­

Price action: March corn futures rose 7 cents to $6.27, near the session high and the contract’s highest close since $6.40 on May 7. December corn rose 3 cents to $5.72 3/4 and hit a contract high.

Fundamental analysis: Corn futures rose behind bullish technicals, strength in the soy complex and crude oil’s rally to the highest prices since late 2014. A continued rebound in U.S. stocks contributed to the bullish backdrop, as did IHS Markit’s downward revision to its 2022 U.S. corn plantings forecast. The consultant pared its projection by about 90,000 acres to 91.489 million acres, down from last year’s plantings of 93.357 million acres.

Weather in South American corn-growing regions remains bullish, though rains this week have provided some relief to dry areas. World Weather Inc. today reported another hot and dry day yesterday in northeastern Argentina, Paraguay and southwestern Brazil, with highs in the range of 100 to 110 degrees Fahrenheit. “Crop conditions have to be deplorable in this region,” the weather forecaster said. Brazil will get rain over the next two weeks, some of it heavy. Northern Parana, Sao Paulo and eastern and northern parts of Mato Grosso do Sul may become excessively wet this weekend into next week with some risk of flooding.

U.S. ethanol production averaged 1.035 million barrels per day (bpd) the week ended Jan. 21, down 18,000 bpd from the previous week but up 10.9% from the same week last year. Ethanol stocks rose 884,000 barrels to 24.476 million barrels, the highest since May 2021, and Midwest supplies hit a record 10.107 million barrels, 28% above year-ago. Thursday morning’s weekly USDA export sales report is expected to show U.S. corn sales of 600,000 MT to 1.2 million MT in the 2021-22 marketing year and zero to 200,000 MT in the 2022-23 marketing year.

Technical analysis: Corn bulls have a solid near-term technical advantage with prices are in a 4 1/2-month uptrend. The next downside target for bears is closing March futures below support at $6.00. The next upside objective for the bulls is closing March above solid resistance at last May’s contract high of $6.40 1/2. First resistance is seen at this week’s high of $6.31 and then at last June’s high of $6.33. First support is at today’s low of $6.15, then at $6.10.

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: Soybean futures led the soy complex higher, with nearby March bean futures surging 32 3/4 cents to $14.40, the highest in the contract’s lifetime. March soyoil climbed 142 points to 63.93 cents per pound, while March soymeal advanced $8.50 to $400.50 per ton.

Fundamental analysis: Smaller soybean crops in South America likely will push export business to the U.S. from June onwards, Reuters reported, citing Oil World. The oilseed analyst estimates the combined 2021-22 soybean harvest in Brazil, Argentina, Paraguay and Uruguay will fall to about 186.3 MMT, down 7.4 MMT from the last season and a four-year low. Oil World forecasts Brazil’s soybean crop will fall to about 135 MT from 138.5 MT last year and Argentina’s crop at around 42 MMT, down 1.8 MMT. News that a U.S. advisory firm had trimmed its U.S. soybean plantings for 2022 by about one million acres, to 87.8 million, probably played a role in the across-the-board surge as well.

Equity market strength also supported commodity markets, which were led by a rally in Brent crude oil, the global benchmark, above $90 a barrel for the first time since 2014. Malaysian palm oil also rose.

Technical analysis: Bulls hold a technical advantage in soybeans, with March futures coming within two cents of the contract high of $14.45 1/2. Resistance is seen at today’s high of $14.43 3/4. The continuation chart implies additional resistance around $14.66 and $14.80. A push above those levels would have bulls targeting $15.00. Look for initial support around $14.00, then at today’s low of $13.93 3/4. A drop below that level would have bears looking to test the 40-day moving average near $13.35.

March soyoil futures posted fresh short-term highs, clearly indicating bulls are in command of the short-term technical situation. Still, they may face significant resistance at 64.00 cents and the tcontract high of 64.68 cents. Look for additional resistance around 65.00, with a move above that level likely having bulls targeting the July continuation chart high at 69.18. Initial support at Monday’s low of 61.22 cents will likely be backed by the 10-day moving average near 61.04 cents, but a drop below those levels would have bears looking to challenge the Jan. 14 low of 57.60 cents, then the 40-day moving average at 57.26 cents.

Today’s rebound in March soymeal carried it back above the psychologically important $400.00 level, opening the door to a test of resistance around $415.00. The contract high marks resistance at $431.80. Support at Monday’s low of $3387.40 coincides roughly with the 40-day moving average near $388.10. Also, the extended trendline drawn across the contract’s fall lows places support near $385.70. Additional support is likely to emerge around $368.40, but a drop below that level would have bears targeting $350.00.

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.

 

Wheat

Price action: March SRW wheat fell 23 cents to $7.95, March HRW futures fell 18 3/4 cents to $8.15 3/4 and March spring wheat fell 31 cents to $9.16 1/4.

Fundamental analysis: Winter wheat futures fell on profit-taking after sharp gains the previous two days sent prices to the highest levels since at least late December. The market backdrop remained bullish as escalating Russia-Ukraine tensions pushed crude oil to seven-year highs. Russia is the world’s top wheat exporter and Ukraine is projected to be the fourth-largest in 2021-22, according to International Grains Council data.

Prospects for improved moisture for dry HRW wheat areas in the U.S. Plains may have put some pressure on futures. An “impressive snow event” in the west-central Plains yesterday brought accumulations of 10 to 27 inches in a relatively narrow band extending from east-central Colorado into west-central Kansas, World Weather reported. The snow, when melted, “will lead to a small region of improved topsoil moisture for a portion of hard red winter wheat country,” World Weather said, though the area impacted by the greatest precipitation “was extremely small” relative to the entire HRW production belt. USDA is expected to report net weekly wheat sales of 200,000 to 600,000 MT when its weekly Export Sales report is released early tomorrow morning.

Technical analysis: Winter wheat retained a bullish posture even with today’s losses, with March SRW futures closing above the 50-day moving average at $7.93 3/4 and March HRW ending above most major moving averages, including the 100-day at $7.84 1/4. Initial resistance in March SRW is seen at yesterday’s high of $8.31 1/2, and a push above that level may have bulls targeting the March contract high of $8.67 1/2, posted Nov. 24. 

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.

 

Cotton

Price action: March cotton futures rose 141 points to 122.33 cents per pound, the highest close since Jan. 20.

Fundamental analysis: Cotton futures rose for second day behind broader commodity and financial market strength, as U.S. stocks extended a rebound and crude oil reached the highest levels since 2014. Higher oil prices make polyester, a substitute for cotton, more expensive. The S&P 500 index was up about 1.0% late today, reflecting longer-term optimism over the pandemic recovery and the economy.

Cotton futures remain underpinned by optimism over global demand, meaning the market may take its next directional cue from tomorrow’s weekly USDA export sales report. Last week, USDA reported net U.S. cotton sales for the week ended Jan. 13 at 273,000 running bales (RB), up 12% from the average for the previous four weeks. USDA also reported weekly sales of 139,200 RB for 2022-23.

Also today, IHS Markit projected U.S. 2022 Upland cotton plantings at 11.702 million acres, down slightly from a December estimate of 11.716 million acres.

Technical analysis: Bulls still hold a short-term technical advantage, with March futures closing above most major moving averages and near the contract high of 124.78 cents reached last week. Initial support is seen at the 10-day moving average at 120.65 cents, with psychological support around 120.00 cents. Today’s intraday high at 122.69 cents marks initial resistance, with further resistance seen at 125.00 cents; a close above the latter price would have bulls targeting 140.00 cents.

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.

 

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