Crops Analysis | February 17, 2022
Price action: March corn futures rose 3 cents to $6.50, while December futures rose 2 3/4 cents to $5.96 1/2.
USDA reported net 2021-22 U.S. corn sales of 820,000 MT during the week ended Feb. 10, up 39% from the previous week but down 23% from the average for the previous four weeks. For 2022-23, net sales totaled 113,500 MT. The sales numbers were within trade expectations ranging from 500,000 to 1 MMT for 2021-22 and zero to 250,000 MT in the 2022-23 marketing year. Exports totaled 1.618 MMT, a marketing year high. Export commitments are still 21% behind year-ago, matching the gap from a week ago. USDA projects U.S. exports in 2021-22 at 2.425 billion bu., 11.9% below 2020-21.
Technical analysis: Bulls retain the near-term technical advantage in corn but appear to have slipped into a sideways consolidation pattern after failing to generate sustained buying interest earlier this week. March futures remain above most key moving averages speculators retain a large net long position and may be setting up for another run at the contract highs, through further gains likely will require strength in soybeans. Upside objectives for bulls include closing March futures above solid resistance at the contract high of $6.62 3/4, posted Feb. 10. First resistance is seen at $6.50, then at this week’s high of $6.56 3/4. Initial support levels include $6.40 and this week’s low of $6.35 1/2. Other support levels include the 10-day moving average at $6.41 1/2.
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: Soybean futures finished midrange with gains of 4 to 5 cents. March beans firmed 4 1/2 cents to $15.92, while new-crop November futures rose 5 1/4 cents to $14.60 3/4.
Fundamental analysis: Money flow remains the overriding factor behind price action in the soybean market. While old-crop soybean futures were unable to sustain trade above $16.00 after pushing above that level overnight, a general lack of seller interest suggests there’s still more money flowing into the long side of the market than is interested in selling. Both managed money accounts and small speculators are still buying, while commercials are building their short positions. The South American weather/crop situation and export demand are fundamental factors traders will continue to monitor, but they will remain secondary factors to money flow.
Weekly soybean export sales totaled 1.362 MMT for 2021-22 and 1.526 MMT for 2022-23. China and “unknown destinations” (China, too?) remained the primary buyers of both old- and new-crop sales. USDA also announced a daily sale of 120,000 MT of U.S. soybeans to unknown destinations for 2021-22, continuing a steady string of soybean export business over the past three weeks, despite elevated prices. That suggests China and “unknown” are covering old- and new-crop needs that South America may not be able to supply given this year’s crop shortfalls due to drought.
Technical analysis: March soybeans reached their second highest level behind the contract high of $16.33 on Feb. 10 and the second highest close behind $15.94 3/4 on Feb. 9. The contract has consolidated over the past week, suggesting a bigger move is coming. Since bulls have strong control, odds are greater for an attempted upside breakout, though a close below of this week’s low at $15.42 1/4 would likely trigger a deeper fund-led selloff. Above the contract high at $16.33, resistance on the continuation chart would be at the 2008 high of $16.63, the 2021 high at $16.77 1/4 and then the all-time high of $17.94 3/4 from 2012.
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 17 1/2 cents to $7.98. March HRW wheat rose 15 cents to $8.23. March spring wheat gained 5 1/4 cents to $9.57 1/4.
Fundamental analysis: Ongoing Russia-Ukraine tensions supported wheat prices, with U.S. officials warning of an imminent Russian invasion of Ukraine. Both Russia and Ukraine are major wheat exporters, and a sustained conflict could disrupt exports out of the Black Sea region. Today’s price gains raise the question of whether a “buy-the-rumor, sell-the-fact” scenario is setting up if Ukraine is indeed invaded. Markets generally factor in worst-case scenarios regarding expected major geopolitical events, and if that doesn’t happen, prices typically correct the other way.
USDA today reported net weekly U.S. wheat sales of 118,100 MT for 2021-22, up 39% from the previous week but down 61% from the prior four-week average. For 2022-23, net sales totaled 10,500 MT. Old-crop sales were at the low end of market expectations. So far in the 2021-22 marketing year, wheat export commitments are running 25% behind a year ago, versus 24% last week. USDA projects exports in 2021-22 at 810 million bu., down 18.3% from the previous marketing year.
Also today, the U.S. Drought Monitor has reported winter wheat considered in drought condition increased one point, to 72%, for the week ended Feb. 15. The International Grains Council left its global wheat production estimate in 2021-22 unchanged at 781 MMT, slightly above 774 MMT in 2020-21.
Technical analysis: Winter wheat bulls hold a near-term technical advantage amid choppy trading. SRW bulls' next upside price objective is closing March futures above solid resistance at the January high of $8.31 1/2. Bears' next downside objective is closing prices below solid support at the January low of $7.35 1/2. First resistance is seen at this week’s high of $8.13 1/2, then at $8.24. First support is seen at $7.85, then at this week’s low of $7.73.
HRW bulls' next upside objective is closing March futures above solid resistance at the January high of $8.49 1/4. The bears' next downside objective is closing prices below solid support at the January low of $7.43 3/4. First resistance is seen at $8.31, then at this week’s high of $8.44 1/4. First support is seen at $8.10. then at this week’s low of $7.97 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: March cotton rose 2 points to 121.93 cents per pound, while May cotton rose 3 points at 119.52 cents.
Fundamental analysis: Another “risk-off” trading day in the marketplace kept the cotton market bulls on the sidelines. Russia-Ukraine tensions contributed to weakness in the U.S. stock market, while the U.S. dollar strengthened. Look for cotton to continue to take its direction from crude oil and U.S. stocks in the near term.
USDA today reported U.S. cotton net sales of 158,500 running bales (RB) for 2021-22, down 14% from the previous week and down 46% from the prior four-week average. Increases were primarily for China (47,800 RB), Pakistan (23,900 RB) and Vietnam (23,800 RB). Net sales of 34,700 RB for 2022-23 were primarily for Pakistan (14,100 RB) and Mexico (5,400 RB). Exports of 270,000 RB were down 10% from the previous week, but up 8% from the prior four-week average. The destinations were primarily to China (117,000 RB) and Pakistan (46,300 RB).
Big U.S. planting and production estimates from the National Cotton Council, at 12.0 million acres and 17.3 million bales, respectively, have given the cotton futures bulls pause this week. Feb. 22 is first notice day for the March contract.
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.
