Crops Analysis | March 1, 2022
Price action: May corn futures rose the 35-cent daily limit to $7.25 3/4, while March corn rallied 42 1/4 cents to $7.39 3/4, the highest close for a nearby contract since $7.57 1/2 on May 12.
Fundamental analysis: Market attention remained squarely on the Russia/Ukraine war, which fueling growing concern over global grain supplies and disruptions to trade. Russia and Ukraine provide almost 20% of world corn exports. Corn futures were also supported by unconfirmed rumors China booked up to 10 cargoes of U.S. corn. If China did buy U.S. corn, the purchases should be confirmed through daily USDA sales announcements later this week. A drought-harmed South American corn crop this year may push more demand toward the U.S.
Grain traders should keep a close eye on crude oil and gold prices. A continued oil rally above $100 will likely support speculative buying in grains, while a crude sell-oil could spark a sharp reversal in corn and wheat. As for gold, it’s the fear gauge for the marketplace. Further big gains in gold mean markets would be even more tense, which in turn would keep oil prices elevated.
USDA’s Grain Crushings Report after the close today showed U.S. corn-for-ethanol use during January totaled 474 million bu., down 3.9 million bu. from December but up 57 million bu. from the same month in 2021. Traders expected corn use to drop about 13.8 million bu.
Technical analysis: Corn futures bulls have a strong near-term technical advantage, with prices in a six-month uptrend. The next downside target for bears is closing May futures below support at $6.55 1/4. The next upside objective for bulls is closing May prices above solid resistance at $7.50. First resistance is seen at $7.30, then $7.40. First support is at $7.00, then today’s low of $6.92 3/4.
What to do: Get current with advised 2021- and 2022-crop sales.
Hedgers: You should be 90% sold in the cash market on 2021-crop. You should also have 40% of expected 2022-crop production forward-sold for harvest delivery.
Cash-only marketers: You should be 90% sold on 2021-crop. You should also have 40% of expected 2022-crop production forward-sold for harvest delivery.
Soybeans
Price action: May soybeans rallied 53 1/4 cents to $16.90 while November futures rose 41 1/4 cents to $14.77. May soymeal gained $8.00 to $454.30 per ton. May soyoil soared 369 points to 76.21 cents per pound, a lifetime high for the contract.
Fundamental analysis: The soy complex joined rallying wheat and corn futures amid concerns over disruption to global vegetable oil supplies. Nearby soyoil futures posted a record high close, while nearby soybeans settled at a 9 1/2-year high. Ukraine is the world’s largest producer and exporter of sunflower seeds and sunflower oil, a competitor to soybean oil. Palm oil has become the costliest among four major edible oils for the first time as buyers rush to secure replacements for sunflower oil shipments from the top exporting Black Sea region that were disrupted by Russia’s invasion of Ukraine, Reuters reported. The Black Sea accounts for 60% of world sunflower oil output and 76% of exports. Ports in Ukraine will likely remain closed until the invasion ends.
Fresh export business also supported soybean prices. Early today, USDA reported a daily soybean sale of 264,000 MT for delivery to China during the 2022-23 marketing year, the latest in a month-long flurry of purchases. Since Jan. 28, USDA has reported a combined 4.934 MMT of soybean sales to China or unknown destinations, a more than seven-fold increase compared to the sales the previous month. Pro Farmer consultant Michael Cordonnier left his Argentina and Brazil soybean crop estimates unchanged at 124 MMT and 39 MMT, respectively. “The weather over the last several weeks has improved, and the improvement is most important for the later-plated soybeans, especially in northern Argentina,” Cordonnier said.
USDA’s Oilseed Crushings Report is expected to show U.S. soybean crushing during January totaled 193.7 million bu., which would be down 4.5 million bu. (2.3%) from December’s record and 2.8 million bu. (1.4%) below last year.
Technical analysis: Bulls remain in command in soybean futures but the market is nearing overbought conditions and could be vulnerable to a short-term sell-off if the wheat market pulls back. May soybeans rose as high as $16.97 1/2, surpassing the intraday highs of the previous two sessions but short of the contract high of $17.59 1/4 reached Feb. 24. March soybeans reached $17.09, after posting a 9 1/2-year high at $17.65 Feb. 25. Upside targets for the bulls include the Feb. 24 contract high and 9 1/2-year highs. Initial support is seen at the 10-day moving average of $16.24 1/4 and yesterday’s low at $16.13. Soybeans could trade inside that wide price band for the next few days as the market watches Russia/Ukraine developments.
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 40% of expected 2022-crop production forward-sold for harvest delivery.
Cash-only marketers: You should be 85% sold on 2021-crop. You should also have 40% of expected 2022-crop production forw/ard-sold for harvest delivery.
Price action: May SRW wheat rose the 50-cent daily limit to $9.84 and May HRW wheat also rose the 50-cent limit, ending at $10.03. Prices hit contract and 14-year highs today. March spring wheat leapt 59.75 cents to $10.53 3/4. HRW and SRW futures price limits expand to 75 cents tomorrow.
Fundamental analysis: Major global grain producers and exporters Russia and Ukraine remain in a full-scale war with no end in sight and that’s keeping the grain futures markets unnerved. Ukraine’s exports have stopped and there are ideas Russian shipments out of the Black Sea will be disrupted. Global end-users may need to soon find alternative wheat supplies. The war will remain on the front-burner for the grain markets for the near-term.
U.S. winter and spring wheat crop conditions still favor bulls. World Weather Inc. today reported well above average temperatures through Friday will reduce U.S. winter wheat hardiness. Multiple weather disturbances late Friday through the second week of the outlook will promote some beneficial and needed moisture. However, southwestern areas from Texas Panhandle into southwestern Kansas and southeastern Colorado may not receive enough precipitation to increase topsoil moisture, said World Weather.
HRW bulls' next upside objective is closing May futures above solid resistance at $10.50. Bears' next objective is closing prices below solid support at $9.00. First resistance is seen at $10.25, then $10.50. First support is seen at $9.81, then $9.50.
What to do: Get current with advised 2021- and 2022-crop sales.
Hedgers: You should be 90% sold on 2021-crop in the cash market. You have 10% of 2021-crop hedged in July SRW futures at $8.75 1/4. You should be 40% forward-priced for harvest delivery on expected 2022-crop production.
Cash-only marketers: You should be 90% sold on 2021-crop. You should be 40% forward-priced for harvest delivery on expected 2022-crop production.
Price action: May cotton futures jumped 363 points to 122.75 cents per pound, the contract’s highest closing price since $122.91 on Feb. 11.
Fundamental analysis: Cotton futures joined rallies in grains and crude oil amid broad market concern the intensifying Russia/Ukraine war will disrupt global commodity trade. Cotton gains were limited as U.S. stocks came under pressure, stirring concern over demand for apparel and other consumer goods.
A report out of India may have added support for cotton, indicating the country is facing a domestic shortage after commercial companies had exported cotton aggressively due to strong global demand. The Southern India Mills Association said the country is facing a shortage of 3.0 to 4.0 million bales. The indicated shortage may not be as large as it seems, since Indian cotton bales weigh 375 pounds rather than the 480 pounds weighed by the international standard. If India were to emerge as a big cotton importer, that would likely occur over the next three to four months.
Technical analysis: The short-term technical advantage has shifted to bulls. Bears ended last week testing stout support at the contract’s 40-day moving average around 118.46. Prices dipped well below that level yesterday, but bulls were able to force a slightly higher close. That set the stage for today’s surge, which also smashed through resistance at the contract’s 10- and 20-day moving averages at 120.22 and 121.77 cents per pound, respectively.
Bulls will now be targeting the Feb. 24 high at 125.13, then the contract high at 125.83. A push above that level would open the door to a test of 130.00. A drop back below the short-to-intermediate-term moving averages would then have bears targeting last Friday’s low of 115.86, then the 110.00 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.
