Crops Analysis | February 8, 2022
Price action: March corn futures fell 3 cents to $6.32 1/4 and near mid-range, while December futures rose 1 cent to $5.82.
Fundamental analysis: Routine profit-taking weighed on corn futures in consolidation trade ahead of USDA’s Supply and Demand update tomorrow. Losses in soybeans, soybean oil and crude oil futures contributed to pressure. The U.S. dollar index stabilized from last week’s steep losses, a mild negative for the grain markets today.
USDA’s monthly supply and demand data tomorrow will is expected to reflect crop losses in South America due to drought and other adverse conditions. USDA is expected to lower its Brazil corn crop estimate to 113.63 MMT from 115 MMT and its Argentina corn production forecast to 52.16 MMT from 54 MMT, according to a Reuters survey of analysts.
Technical analysis: Corn futures bulls still have a near-term technical advantage with prices in a five-month uptrend. The next downside target for bears is closing March futures below support at $6.00. The next upside price objective for bulls is closing March above solid resistance at the January contract high of $6.42 1/2. First resistance is seen at today’s high of $6.36 3/4, then at $6.42 1/2. First support is at this week’s low of $6.24 3/4, then at $6.20.
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 soybean futures fell 12 3/4 cents to $15.69. March soybean meal rose $1.30 to $454.10, the highest close for a nearby contract since January 2021. March soybean oil fell 119 points to 63.35 cents per pound, a two-week low.
Fundamental analysis: Soybean futures fell in a corrective pullback following yesterday’s rally to eight-month highs as traders positioned for USDA’s Supply and Demand Report on Wednesday, which is expected to include further reductions to crop estimates for South America. 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. USDA is also expected to report a tighter outlook for U.S. supplies. Ending U.S. soybean stocks for 2021-22 are expected to be lowered 40 million bu. to 310 million bu., based on the survey.
Weekend rains across areas of Paraguay came too late to help the drought-damaged soybean crop, prompting Pro Farmer consultant Michael Cordonnier to lower his Paraguay soybean crop estimate by 1 MMT, to 5 MMT, less than half of what the country was originally expected to produce. Cordonnier kept his Argentine and Brazilian soybean production estimates unchanged at 42 MMT and 130 MMT, respectively.
A recent upturn in export business continued as exporters seek to lock in supplies that won’t be as plentiful as once thought. USDA announced daily soybean sales of 132,000 MT for delivery to China and 332,000 MT for delivery to “unknown destinations,” both during the 2022-23 marketing year. Since Jan. 28, USDA has reported a combined 2.42 MMT of soybean sales to China or unknown destinations.
Technical analysis: March soybean futures fell as low as $15.59, filling a downside gap created by a strong overnight open Sunday. Bulls continue to hold the near-term advantage, though the recent rally has taken soybeans well-into overbought territory, raising prospects for a fund-driven sell-off. March futures ended today at nearly 78 on the Relative Strength Index. Initial support in March soybeans is seen at the 10-day moving average around $15.17 and the psychologically important $15.00 mark. Bulls’ are targeting the March contract high of $15.89 1/2 set yesterday, with further upside targets including $16.00 mark, followed by the June 2021 high of $16.23 1/2, based on the continuation chart.
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.
Price action: March SRW wheat rose 10 cents to $7.78 3/4 and near the session high. March HRW wheat rose 9 1/2 cents to $8.01 1/4, also near the session high. Spring wheat futures rose 19 1/4 cents to $9.40 1/2.
Fundamental analysis: Wheat futures rose after Stats Canada reported a big drop in the country’s inventories at the end of 2021, fueling concern over tight supplies of milling-quality wheat. Canada’s wheat stocks at the end of December totaled 15.6 MMT, down 38% from the same period in 2020 and nearly 2 MMT smaller than market expectations. The drop in stockpiles is mainly due to poor growing conditions in western Canada.
Wheat futures also gained on short covering from recent declines, as well as position-evening heading into Wednesday’s monthly USDA Supply and Demand report. USDA is expected to reduce its 2021-22 global ending wheat stocks forecast by around 60,000 MT, to 279.89 MMT. Signs of possible easing in Russia/Ukraine tensions may limit the upside in wheat futures in the in near term. However, that situation is still very fluid and could change in a hurry.
Technical analysis: SRW futures today and scored a bullish “outside day” higher on the daily bar chart. SRW winter wheat bulls and bears are on a level overall near-term technical playing field. 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 January low of $7.35 1/2. First resistance is seen at today’s high of $7.82, then at $7.90. First support is seen at $7.60, then at today’s low of $7.54.
HRW bulls have a slight near-term technical advantage. Bulls' next upside objective is closing March futures above solid resistance at the January high of $8.49 1/4. Bears' next downside objective is closing March below solid support at the January low of $7.43 3/4. First resistance is seen at $8.10, then at $8.17. First support is seen at today’s low of $7.77 1/4, then at 7.69 1/4.
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.
Price action: Cotton futures rebounded from losses the two previous sessions, with nearby March jumping 158 points to 127.15 cents per pound. May futures rose 104 points to 124.04.
Fundamental analysis: Cotton futures posted gains for the first day in the past three as traders evened positions ahead of tomorrow’s USDA Supply and Demand Report, which is expected to show a modest rise in 2021 U.S. cotton production and a small drop in U.S. exports, as well as in U.S. and global ending stocks. A Bloomberg survey shows traders expect USDA to boost its estimate of last fall’s U.S. production to 17.65 million bales from the current estimate of 17.62 million bales. U.S. ending stocks for 2021-22 are seen rising to 3.29 million bales from 3.2 million bales and global ending stocks are expected to be trimmed to 84.95 million bales from 85.01 million bales.
Export optimism continued encouraging market bulls. Following tomorrow’s USDA numbers, market focus will quickly shift to Thursday’s Export Sales report. U.S. cotton shipments continue running well behind normal, due largely to the lingering effects of Hurricane Ida and the shortage of shipping containers, but the recent surge of cotton “hitting the waves” has bulls optimistic about the fiber market outlook. A Goldman-Sachs report highlighting the bullishness built into the commodity markets probably encouraged bulls again today, although the gains may have been limited by a big drop in crude oil futures, as well as renewed firmness in the U.S. dollar.
Technical analysis: Bulls continue to enjoy the short-term technical advantage, especially after the March contract rebounded from 10-day moving average support near 125.97 cents. The bears’ inability to force a downside follow-through after the contract dipped below that MA emphasized the market’s underlying strength. Look for initial resistance at last week’s contract high at 129.37 cents, with a decisive close above psychological resistance at 130.00 cents likely opening the door for a push toward 140.00 cents. Mid-January highs at 124.78 cents likely represent secondary support, with additional buying represented by the contract’s 20- and 40-day moving averages s at 123.17 cents and 116.89 cents. A drop below the latter level would have bears targeting the 100.00-cent level.
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.
