Crops Analysis | February 9, 2022

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Corn ­

Price action: March corn futures rose 14 1/2 cents to $6.46 3/4, the highest closing price for a nearby contract since July. December futures rose 6 1/2 cents to $5.88 1/2 after posting a contract high.

Fundamental analysis: The bull market in corn gained momentum as rallying soybeans and broad commodity strength offset larger than expected projections for U.S. and South American supplies. USDA, in its monthly Supply & Demand Report, held its 2021-22 U.S. corn ending stocks forecast unchanged at 1.54 billion bu., contrasting with expectations for a 28-million-bu. reduction. Argentina’s projected corn crop was unchanged at 54 MMT, compared to expectations for a drop of nearly 2 MMT. USDA trimmed Brazil’s expected crop by 1 MMT to 114 MTT, while traders were expecting a decline of about 1.37 MMT.

Also today, the Energy Information Administration estimated U.S. ethanol production at an average of 994,000 barrels per day (bpd) during the week ended Feb. 4, the lowest since the week ended Oct. 1 but up 6.1% from the comparable week last year. Ethanol stocks dropped 1.056 million barrels to 24.799 million barrels, the first decline in six weeks.

Tomorrow’s weekly USDA export sales report is expected to show U.S. corn sales of 500,000 to 900,000 MT in the 2021-22 marketing year and sales of zero to 100,000 MT in the 2022-23 marketing year.

Technical analysis: Corn futures bulls have a solid near-term technical advantage and gained more power today. Prices are in a five-month uptrend. The next downside target for bears is closing March futures below support at the February low of $6.10 1/4. The next upside objective for bulls is closing March above solid resistance at $6.50. First resistance is seen at today’s contract high of $6.44 1/2, then at $6.50. First support is at today’s low of $6.30 1/2, then at this week’s low of $6.24 3/4.

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 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 led the soy complex higher, surging 25 3/4 cents to $15.94 3/4 per bushel, the highest closing price since $16.03 3/4 on May 14. March soyoil rose 75 points to 64.10 cents per pound, while March soymeal jumped $7.80 to $461.90 per ton, the highest since January 2021.

Fundamental analysis: Ongoing concern over drought-reduced South American production pushed soybean futures to nine-month highs, even as USDA’s cuts to its Argentine and Brazilian estimates weren’t as large as anticipated. USDA projected the Brazilian and Argentine soybean crops at 134.00 metric tons (MT) and 45 MT, respectively, both of which were about 500,000 MT above pre-report estimates. Global 2021-22 ending stocks were cut from 95.20 MMT in January to 92.83 MMT today, but the reduction fell well short of the average industry forecast at 91.51 MMT.

On the demand side, USDA raised projected U.S. crush by 25 million bu. from last month to a record 2.215 billion bushels but made no other changes to domestic soybean use. USDA lowered its soybean ending stocks forecast by 25 million bu. from last month to 325 million bushels, smaller than the 40 million bu.-reduction traders expected.

Early today, USDA reported a daily sale of 240,000 MT of soybeans for delivery to China during the 2022-23 marketing year. Since Jan. 28, USDA has reported a combined 2.66 MMT of soybean sales to China or “unknown destinations,” suggesting that growing concern over South America’s crops is prompting global buyers to step up purchases from the U.S.

Technical analysis: Bulls still hold a technical advantage in soybean futures, especially after the market turned higher after filling of the Feb. 7 gap on the March futures chart. Yesterday’s low of $15.59 likely marks solid support at this juncture, along with considerable backing from its 10-day moving average near $15.42, then at the Feb. 2 low of $15.26. A drop below that level would have bears targeting the $15.00 level and below. Today’s action indicated the market ran into stiff resistance as it neared $16.00, as shown by the daily high at $15.99 1/2. Look for additional resistance around $16.08, then $16.25.

March soyoil futures bounced from 20-day moving average support at 63.03 cents but couldn’t mount a serious test of the 10-day moving average, where it failed yesterday, near 65.09 cents. Additional resistance is likely at last week’s high of 66.92, whereas a breakdown below the 20-day moving average would have bears targeting the 40-day moving average near 59.60 cents.

In March soymeal, today’s high at $464.10 is pegged as initial resistance and corresponds to resistance that emerged at that level in January 2021, but further gains would face additional resistance at last year’s high of $474.10. Today’s low at $454.00 marks initial support, with backing from the Feb. 2 high of $447.60. The 10-day moving average puts further support at $439.00.

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 6 1/4 cents to $7.85, the highest closing price since Jan. 28. March HRW wheat rose 13 3/4 cents to $8.15, the highest close since Jan. 26. March spring wheat rose 13 1/4 cents to $9.53 3/4, the highest close since Jan. 4.

Fundamental analysis: HRW wheat jumped to a two-week high and SRW and spring wheat also gained after USDA’s larger than expected cut to projected global supplies overshadowed bearish domestic exports and stocks updates. In its monthly Supply and Demand Report today, USDA estimated global wheat stocks at the end of the 2021-22 marketing year at 278.21 MMT, down 1.74 MMT, or 0.6%, from 279.95 MMT in January. Projected stocks were expected to be reduced by only about 60,000 MT. Global supplies are now seen dropping 4.0% from 2020-21, underscoring tight supplies of milling-quality wheat.

Bullish momentum was tempered by USDA’s larger than expected increase to estimated 2021-22 U.S. ending stocks, which were raised 20 million bu. to 648 million bushels. Traders expected an increase of only about 1 million bushels. Also, USDA cut projected 2021-22 exports by 15 million bu. and lowered food use by 3 million bushels. Tomorrow’s weekly USDA export sales report is expected to show net U.S. wheat sales at 100,000 to 400,000 MT for 2021-22 and 25,000 to 300,000 MT for 2022-23.

Technical analysis: Wheat bulls gained strength today, with March SRW futures closing above its 50- and 100-day moving averages and March HRW closing above its 50-day moving average for the first time in two weeks. Upside objectives in March SRW includes closing above solid resistance at $8.00, followed by the January high at $8.31 1/2. Downside objectives include closing prices below 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.

In March HRW, upside objectives include closing above solid resistance at the January high of $8.49 1/4. Downside objectives include closing March below solid support at the January low of $7.43 3/4.

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.

 

Cotton

Price action: March cotton fell 72 points to 126.43 cents per pound, while May cotton fell 24 points to 123.80 cents.

Fundamental analysis: Cotton futures fell after USDA boosted its forecast for U.S. supplies at the end of the 2021-22 marketing year and lowered expected exports, a reflection of logistical and supply-chain snags that have led to lagging shipments. In its monthly Supply & Demand report, USDA raised its cotton ending stocks forecast by 300,000 bales from last month to 3.5 million bales. On the demand side of the balance sheet, USDA cut exports by 250,000 bales, to 14.75 million bales and lowered unaccounted use by 50,000 bales, to -20,000 bales. USDA also lowered its global production estimate by 810,000 bales, to 120.15 million bales, dropping its ending stocks forecast to 84.31 million bales from 85.01 million bales last month.

Traders await USDA’s weekly export sales report tomorrow. Last week, USDA reported net U.S. sales of 332,100 running bales.

Technical analysis: Bulls retain the short-term technical advantage, though momentum slowed over the past week as futures settled into a sideways consolidation pattern. Initial support in March futures is seen at yesterday’s low at 125.05 cents and at the 20-day moving average of 123.33 cents. Initial resistance is seen at last week’s contract high of 129.37 cents, with a close above psychological resistance at 130.00 cents portending a push toward 140.00 cents.

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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