Crops Analysis | February 23, 2022
Price action: May corn futures rose 8 3/4 cents to $6.81 1/4 after posting a contract high at $6.82 1/4. December futures rose 5 1/2 cents to $6.11 1/4.
Fundamental analysis: Soaring wheat and soybean futures prices pulled the corn market higher with top global grain suppliers Russia and Ukraine on the verge of war. Escalating uncertainty has grain end-users scrambling to secure supplies and speculators ramping up bullish bets on futures. Corn futures likely will follow the lead of wheat and soybean markets over the near-term.
A serious drought in South American corn-growing regions is the other bullish fundamental driving corn futures prices higher. World Weather Inc. expects Brazil to experience warm to hot temperatures over the coming days and that may deplete soil moisture. “Some summer crops were damaged too seriously by hot and dry weather this season to benefit from the rain,” World Weather said.
Nymxe crude oil prices neared 7 1/2-year highs and pushed toward $100 a barrel, a key bullish outside market influence for grains that bears close watching in coming weeks. If oil starts to lose upside momentum, grain markets are likely to follow suit. However, if crude prices keep climbing, sellers in grain futures will remain scarce.
Technical analysis: Corn bulls have a strong near-term technical advantage with prices in a 5 1/2-month uptrend. The next downside target for bears is closing May futures below support at last week’s low of $6.35 1/4. The next upside objective for bulls is closing May prices above solid resistance at $7.00. First resistance is seen at today’s contract high of $6.81 3/4, then at $6.90. First support is at today’s low of $6.67 1/2, then at $6.60 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: May soybean futures soared 36 cents to $16.71 after posting a contract high at $16.75. May soyoil rose 52 points to 70.58 cents per pound, while May soymeal jumped $15.20 to $466.00.
Fundamental analysis: Escalating Russia/Ukraine tension and ongoing crop stress in South American lifted the soy complex, along with fresh export business. Early today, USDA reported a daily sale of 132,000 MT of soybeans for delivery to China during the 2022-23 marketing year, the latest in a four-week string of purchases. Since Jan. 28, USDA has reported a combined 3.78 MMT of soybean sales to China or unknown destinations.
Neither Russia nor Ukraine is a major player in the soybean and product markets, but the potential for major disruptions to their ongoing grain export sales and shipments could affect the soy complex as well. Short-term South American crop prospects seem likely to improve slightly in the short run, but that didn’t persuade bulls to back away from fresh purchases. Spring planting in the U.S. will increasingly come into focus, since some areas of the western Corn Belt are joining much of the Plains in terms of increasing dryness. Given diminished prospects for the South American harvest, traders are likely anticipating continued buying from China. Sustained energy and livestock sector strength also seems to bode well for the soyoil and soymeal markets, respectively.
Technical analysis: Bulls own the technical advantage across the soy complex at this point. Today’s high at $16.75 represents tentative initial resistance, particularly with last year’s continuation high looming at $16.77 1/2. Look for psychological resistance around $17.00, with backing from summer 2012 highs around $17.15, $17.25 and $17.35. Bulls probably can’t rely upon strong support above the Feb. 10 high of $16.34 1/2, then at Monday’s high of $16.11. The 10-day moving average places additional support near $15.98 1/2. A drop below that level would have bears targeting the Feb. 15 low at $15.46 1/4, then the $15.00 level.
The May soyoil contract backed off significantly from its daily high at 71.37 before posting a mid-range close at 70.58. The continuation chart implies additional resistance around 71.59, 72.32 and 73.74. A breakout above those levels would then have bulls targeting 75.00, then 80.00. Look for support at Tuesday’s low of 67.90, then at the 10-day moving average near 66.80. A drop below that level would open the door to a test of the Feb. 9 low at 62.81, then the 40-day moving average near 62.52.
Today’s May soymeal high of $469.40 now represents initial resistance, with considerable backing from the contract high at $474.90 reached Feb. 10. A breakout above that level would have bulls targeting the psychologically important $500 level. Initial support is likely to emerge around today’s low of $453.80 and the 10-day moving average at $453.10. Another layer of support is likely layered between the contract’s 20-day moving average near $441.26 and last week’s low of $437.90. A close below that range would have bears targeting the 40-day moving average at $428.35, then the $400 level.
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: May SRW wheat futures rose 32 1/4 cents to $8.84 3/4, while May HRW wheat rose 31 cents to $9.18, both lifetime-high settlements. May spring wheat rose 15 cents to $10.02 3/4, a two-month closing high. Nearby HRW and SRW futures ended at the highest levels since late 2012.
Fundamental analysis: Nearby winter wheat futures soared to the highest levels in over nine years on concern Russia’s escalating aggression toward Ukraine will disrupt the global grain trade. Russia and Ukraine combined account for nearly 30% of global wheat exports and almost one-fifth of world corn exports. Deteriorating conditions for the U.S. HRW wheat crop, based on individual state ratings, exacerbated supply concerns. In Kansas, the “good” to “excellent” ratings for HRW wheat dropped to 26% (down four points from the end of January), while Oklahoma fell to 9% (down seven points) and South Dakota fell to 24% (down seven points).
When the individual state crop ratings are plugged into the weighted Pro Farmer Crop Condition Index (CCI; 0 to 500 point scale, with 500 being perfect), the HRW crop plunged to a rating of 259.0, down 11.4 points from the end of January and 65.4 points below the end of November. At the current level, the CCI rating would be 71.3 points below the five-year average for the beginning of April when USDA starts releasing weekly national crop condition ratings.
Technical analysis: Bullish momentum accelerated as HRW and SRW markets broke decisively above the trading ranges of the past two months and posted contract highs. Based on continuation charts, upside targets for SRW futures include $9.00 and $9.47 1/4, the 2012 high. Upside targets for HRW futures include $9.48, the 2012 high, and $9.90 1/4, the 2011 high. May HRW and SRW contracts both pushed into overbought territory, ending above 70 on the Relative Strength Index.
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 101 points to 121.30 cents per pound, the contract’s highest close since Feb. 11.
Fundamental analysis: Cotton futures ended near two-week highs as escalating Russia-Ukraine tensions sent wheat futures to the highest levels in over nine years and provided spillover strength to other raw commodities. Cotton’s upside was held in check by weaker crude oil and slumping U.S. stocks, which fell into correction territory, based on a drop of over 10% in the S&P 500 index since the benchmark’s early-January record peak. The shaky stock market suggests growing concern inflation combined with war in Europe could slow economic growth. Traders await USDA’s next weekly export sales report, delayed a day to Friday, for a read on foreign demand.
Technical analysis: Cotton futures extended the market’s sideways consolidation trade of the past month, which increasingly suggests upside momentum has been exhausted following the climb to contract highs in early February. May futures face resistance at the 20-day moving average at 121.95 cents and last week’s high at 123.17 cents, and further resistance at the contract high of 125.83 cents. Support is seen at last week’s low of 118.76 cents and the 40-day moving average at 118.18 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.
