Crops Analysis | February 4, 2022

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Corn ­

Price action: March corn futures rose 3 3/4 cents to $6.20 1/2, down 15 1/2 cents for the week. New-crop December futures rose 5 1/2 cents to $5.73 3/4.

5-day outlook: Corn futures posted the first weekly decline in the past three weeks in part on concern over demand from China, which canceled a corn purchase of 380,000 MT, USDA reported yesterday. Prices may consolidate early next week as traders wait for USDA’s monthly Supply and Demand Report Feb. 9. USDA is expected to cut its Brazil corn crop estimate to 113.63 MMT from 115 MMT and its Argentina corn estimate to 52.16 MMT from 54 MMT, based on a Reuters survey of analysts.

30-day outlook: Corn futures remain in a five-month uptrend but bullish momentum stalled and technical eroded this week, which may lead to further liquidation of a large net long position held by speculators. The corn market requires continued strength in soybeans and/or wheat and sustained export demand to remain at elevated levels over the longer-term. UDSA yesterday reported net 2021-22 U.S. corn sales of 1.175 MMT for the week ended Jan. 27, down 16% from the previous week but up 47% from the average for the previous four weeks. Export commitments still lag last year’s levels.

90-day outlook: South American weather will become less of a market factor as the U.S. spring planting season approaches, though development of Brazil’s (second crop) safrina corn will be followed. High prices for fertilizer and other inputs are widely expected to prompt U.S. farmers to plant fewer acres to corn and shift some ground to soybeans. We expect U.S. corn plantings to decline 3 million acres this year to an estimated 90.4 million acres.

What to do: Get current with advised 2021- and 2022-crop sales.

Hedgers: You should be 80% priced in the cash market on 2021-crop. You should also have 30% of expected 2022-crop production forward priced for harvest delivery.

Cash-only marketers: You should be 80% priced on 2021-crop. You should also have 30% of expected 2022-crop production forward priced for harvest delivery.

 

Soybeans

Price action: March soybeans rose 9 1/4 cents to $15.53 1/2, up 83 1/2 cents for the week and the highest settlement for a nearby contract since prices topped $16.00 last June. March soymeal rose $6.80 to $443.90 per ton, up $32.70 for the week, and March soyoil fell 39 points to 65.36 cents per pound, up 9 points for the week.

5-day outlook: Soybean futures rose for the third consecutive week on a flurry of export business and a series of private forecaster reductions to South America’s crop outlook. Market attention next week will revolve around USDA’s Feb. 9 Supply and Demand report. USDA is expected to lower its projection for Brazilian soybean production to 133.65 MMT from 139 MMT, based on the Reuters survey. Argentina’s crop estimate is expected to be cut to 44.51 MMT from 46.5 MMT.

30-day outlook: Early-harvest results from Argentina and Brazil may carry some price impact, and continued gains in crude oil and palm oil markets could pull soy complex prices higher, or at least provide underlying support. But South American crop losses are likely factored into current prices, meaning the soybean market requires sustained export demand to hold at elevated levels. From Jan. 28-Feb. 4, USDA reported daily soybean sales to China and “unknown” totaling 949,500 metric tons (MT) for 2021-22 and 502,000 MT for 2022-23.

90-day outlook: Market focus will shift to the U.S. spring planting season and an expected increase in soybean acres, making USDA’s annual Prospective Plantings report March 31 a key event. We expect soybean plantings to increase 1.2 million acres from 87.2 million acres in 2021. Competition between crushers and exporters for reduced global supplies may keep a floor under the market.

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 30% of expected 2022-crop production forward priced for harvest delivery.

Cash-only marketers: You should be 85% sold on 2021-crop. You should also have 30% of expected 2022-crop production forward sold for harvest delivery.

 

Wheat

Price action: March SRW wheat rose 11 1/2 cents to $7.63 1/4, down 23 cents from $7.86 1/4 at the end of last week. March HRW rose gained 16 3/4 cents to $7.85 3/4, down 16 1/2 cents for the week. March spring wheat rose 12 1/4 cents to $9.13, down 7 1/4 cents for the week.

5-day outlook: SRW wheat futures fell for the first week in the past three and charts strongly suggest prices may have established a near-term peak, but the market has demonstrated a capacity to generate renewed buying interest following slumps. USDA’s Supply and Demand report Feb. 9 may carry some price impact. USDA is expected to lower its 2021-22 global ending wheat stocks estimate by about 60,000 MT, to 279.89 MMT, underscoring tight supplies for milling-quality wheat.

30-day outlook: Russia-Ukraine tensions will be closely followed. Concern Russia may invade Ukraine seemed to dissipate this week, contributing to selling pressure in wheat prices, but a flare-up could quickly spark another rally. Upside will be limited as long as U.S. wheat continues a soft export pace. USDA yesterday reported net weekly wheat sales of just 57,500 MT for 2021-22 and 103,500 MT for 2022-23. The old-crop sales were down sharply from a marketing-year high of 676,700 MT the previous week and the second lowest for 2021-22.

90-day outlook: Expanding drought and lack of snow cover in the U.S. Plains HRW belt may lead to greater than usual acreage abandonment. Little precipitation is expected in the Plains the next two weeks, which will lead to a continuation of drought conditions, World Weather Inc. said today. “Completely dry weather is unlikely,” World Weather said. “There will be some occasional shower activity; however, the general pattern of unusual dryness will continue. The need for greater moisture will be increasing later in February as spring gets closer.”

What to do: Get current with advised 2021- and 2022-crop sales.

Hedgers: You should be 80% priced in the cash market on 2021-crop. You have hedges covering 20% of 2021-crop in short March SRW wheat futures at $7.57. You should also have 30% of expected 2022-crop production forward priced for harvest delivery.

Cash-only marketers: You should be 80% priced on 2021-crop. You should also have 30% of expected 2022-crop production forward priced for harvest delivery.

 

Cotton

Price action: After surging to fresh highs early this week, cotton futures couldn’t break out above 130.00 cents per pound through the balance of the week. March futures fell 88 points today to 126.74 cents, up 298 points for the week.

5-day outlook: The cotton industry will likely begin next week again concentrating on strong exports. USDA’s weekly export sales report yesterday reinforced a bullish outlook, as both old- and new-crop sales, as well as the weekly shipments figure, all topped 300,000 bales. Focus will shift to USDA’s Supply and Demand report Feb. 9, with traders looking at any change to the U.S. export and/or carry-out forecasts for 2021-22, then any significant shifts in the global situation.

30-day outlook: The National Cotton Council holds its annual meeting in Houston next weekend and will release the results a planting survey of its members, along with a preliminary estimate of 2022 U.S. cotton plantings. Futures action on Feb. 14 could prove interesting. Weekly USDA export sales, as well as the USDA’s annual long-term outlook forum scheduled for Feb. 24-25, could also affect the market.

90-day outlook: The export situation, particularly the question of whether weekly shipments are living up to the strong export sales pace of recent months, will remain a major focus of those tracking the old-crop situation. However, planting prospects and the pace of activity during the spring months will at least partially shift the industry’s focus to the new-crop situation as summer nears.

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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