Crops Analysis | February 18, 2022
Price action: March corn futures rose 4 1/4 cents to $6.54 1/4, up 3 1/4 cents for the week. New-crop December futures rose 1 1/4 cent to $5.97 3/4 after posting a contract high at $5.99 1/2.
5-day outlook: Corn futures ended the week near seven-month highs behind spillover support from gains in soybeans and ongoing concerns that a potential Russian invasion of Ukraine my disrupt global grain trade. Russia/Ukraine tensions will likely be the key price influencer for corn futures following the three-day weekend, along with South American weather and speculative money flow. Drought-stressed crops in South America may receive moisture relief in coming weeks, but it will likely come too late to prevent substantial yield losses in some areas. If corn market strength carries over into next week, bulls may aim for a test of the March contract’s high at $6.62 3/4, posted Feb. 10.
30-day outlook: Corn futures will require strong domestic and foreign demand, as well as strength in soybeans, to sustain or build on current lofty prices. Signs of further demand slippage emerged in recent weeks, with ethanol production down sharply from late-2021 levels and exports running well behind last year’s pace. U.S. export commitments (accumulated exports plus outstanding sales) lag last year’s levels by 21%. USDA’s March 9 Supply & Demand Report will be watched for any changes to the domestic and global balance sheets.
90-day outlook: The U.S. spring planting outlook will increasingly come into focus, along with development of Brazil’s second-crop corn. U.S. farmers are widely expected to plant fewer acres to corn due to high prices for fertilizer and other inputs. We currently expect U.S. corn plantings to decline 3 million acres this year to 90.4 million acres, though results from our spring acreage survey that will be emailed next week will give us a better idea of planting intentions.
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 rose 9 1/2 cents to $16.01 1/2, up 18 1/2 cents for the week and the first close above $16.00 for nearby soybeans since mid-May last year. March soybean meal fell $1.30 to $447.90 per ton, down $8.70 for the week. March soybean oil rose 76 points to 67.57 cents per pound, up 185 points for the week and the highest close for a nearby contract since mid-July.
5-day outlook: Soybean futures rose for the third consecutive week and closed at nine-month highs on fresh export business and expectations crop shortfalls in South America will drive more overseas demand to the United States. South America’s shrinking production outlook has ignited a flurry of purchases from China and others over the past three weeks, and a continuation of foreign buying next week could compel market bulls to test the March contract’s high at $16.33, posted Feb. 10. Traders will also watch for private forecaster updates to South American crop production and continue to monitor Russia/Ukraine tensions.
30-day outlook: Soybean futures will require sustained demand to remain at elevated levels, and so far, high prices do not appear to be deterring buyers. Since Jan. 28, USDA has reported a combined 3.52 MMT of soybean sales to China or unknown destinations. By comparison, over the month prior to Jan. 28, sales to China and unknown destinations totaled just 648,000 MT. USDA’s March 9 Supply & Demand Report should produce a sharp drop in USDA’s Brazilian soybean crop estimate and we anticipate a big jump in the U.S. export forecast.
90-day outlook: Market focus will shift away from South America as the U.S. spring planting season approaches, with farmers widely expected to increase soybean acres. The soybean-to-corn ratio reached 2.45 this week, the highest in over four months and an indication the market is trying to “buy” more bean acres. USDA’s Prospective Plantings Report March 31 will set the market tone in early spring. We currently expect soybean plantings to increase 1.2 million acres from last year to 88.4 million acres, though our acreage survey that will be emailed next week will give us a better indication of planting intentions. Strong global demand for vegetable oil may provide longer-term support for the soy complex. Indian traders have contracted to import a record 100,000 MT of soyoil from the U.S. because of limited supplies from drought-hit South America, Reuters reported, and more purchases are possible.
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 dropped 1 cent to $7.97, down 3/4 cent on the week. March HRW wheat firmed 12 1/4 cents to $8.35 1/4, up 11 cents for the week. March spring wheat futures rose 3 1/2 cents to $9.60 3/4, down 3/4 cent for the week.
5-day outlook: Attention next week will remain squarely on the Russia/Ukraine standoff. Some believe if Russia is going to invade, it would happen after the Feb. 20 end to the Winter Olympics. If there is an invasion, it would likely be price-supportive for wheat on concern over disruptions to Black Sea shipments. If Russia doesn’t invade, more back-and-forth price action is likely as trader attitudes will continue to shift with each new headline. A blast of Arctic air will move into the central U.S. next week, which could cause some winterkill.
30-day outlook: Even if Russia invades Ukraine and Black Sea exports are disrupted, it’s unlikely U.S. wheat would garner enough demand to push prices higher for an extended period. Any geopolitical price premium should be viewed as a selling opportunity. Seasonal factors strongly favor bears from late winter through spring.
90-day outlook: The long-term U.S. weather outlook indicates little moisture relief for parched HRW wheat acres in the Plains. Drought expanded the past week. With forecasts calling for elevated chances for above-normal temperatures and below-normal precipitation for virtually all HRW areas through May, timing of any spring rainfall will be critical to the development of the crop.
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: May cotton futures rose 164 points to 121.16 cents per pound, up 175 points for the week.
5-day outlook: The cotton outlook will remain closely focused upon the pace of export sales and shipments. The numbers posted the past two weeks have proved disappointing, especially since the shipment figures have fallen back from the strong weekly totals posted in mid-to-late January. Feb. 22 marks first notice day for the March cotton contract. The size of notices and deliveries against the contract could affect trader attitudes. Weekly USDA export sales numbers, delayed a day to Feb. 25, will be closely monitored. The export pace still needs to accelerate to attain projected 2021-22 U.S. export commitments. USDA’s Agricultural Outlook Forum Feb. 24-25 may offer some insight into planting and supplies.
30-day outlook: USDA’s March 9 Supply and Demand and Crop Production report will be of interest, though few significant changes are expected. The March 31 Grain Stocks and Prospective Plantings reports however, are likely to move markets. Export data will continue to be a key influencer, along with the U.S. spring planting outlook.
90-day outlook: Spring planting will become increasingly important to the cotton market outlook. Traders will start seeing evidence of this in early April when USDA resumes publications of its weekly Crop Progress reports on Mondays. Weather and crop conditions in the southern Plains and Southeast will obviously exert the greatest influence over cotton prices. Outside markets, such as U.S. stocks, the U.S. dollar and crude oil will affect the outlook as well, with the domestic economy and geopolitical events also holding potential to act as wildcards.
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.
