Crops Analysis | March 2, 2022
Price action: May corn futures fell 3/4 cent to $7.25, after rising earlier to a contract high at $7.47 3/4. Nearby futures touched a 10-month high before ending lower.
Fundamental analysis: Corn futures erased overnight gains amid profit-taking, ended lower despite sharp advances in wheat as the Russia/Ukraine war intensified. Many traders appeared to be exiting long corn/short wheat spread positions, Reuters reported said. Large speculators hold a sizable net long position in corn futures, which leaving the market vulnerable to long liquidation. Still, the corn market is likely to remain elevated amid fears of major grain supply disruptions as two of the world’s largest grain producers and exporters are at war.
USDA’s Grain Crushings Report yesterday afternoon 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. January marked the third consecutive month of a higher-than-expected corn grind for ethanol, implying the yield per bushel crushed was lower than levels the past three years.
USDA’s export sales report tomorrow is expected to show U.S. corn sales of 600,000 to 1.2 million MT for the 2021-22 marketing year. Next week’s export sales report may be more telling, as it will reflect U.S. corn sales that occurred after the start of the Russia-Ukraine war.
Technical analysis: Corn futures bulls still 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 this week’s low of $6.73 1/2. The next upside price objective for bulls is closing May prices above solid resistance at today’s contract high of $7.47 3/4. First resistance is seen at $7.30, then $7.40. First support is at today’s low of $7.11 1/2, then $7.00.
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 soybean futures fell 27 cents to $16.63, while May soyoil fell 34 points to 75.87 cents per pound after posting a contract high at 77.02 cents. May soymeal dropped $6.3 to $448.00.
Fundamental analysis: Soybean futures fell sharply as reports of rain relief in dry areas of Brazil and Argentina triggered profit-taking, overshadowing reports of fresh export business. Early today, USDA reported daily soybean sales of 264,000 MT to “unknown destinations,” including 198,000 MT is for delivery during the 2021-22 marketing year and 66,000 MT for 2022-23. USDA also reported daily soybean sales of 266,000 MT to China, including 198,000 MT is for 2021-22 and 68,000 MT for 2022-23. Since Jan. 28, USDA has reported a combined 5.464 MMT of soybean sales to China or unknown destinations, a more than seven-fold increase compared to the sales the previous month. Separately, Reuters reported China booked at least five cargoes of U.S. old-crop soybeans for delivery in April-May, which is likely some of the daily sales. “While prices of U.S. and Brazil beans were almost the same, logistics for U.S. cargoes were faster,” one trader said.
StoneX lowered its forecast for Brazil's 2021-22 soybean crop to 121.17 MMT, down 4.2% from the brokerage's February projection and a reflection of drought cutting yield prospects. Soyoil futures remain supported by soaring crude oil prices and concern the Russia/Ukraine war will disrupt the global vegetable oil trade. Ukraine is the global leader in sunflower and sunflower oil production.
Technical analysis: Bulls still hold the short-term technical advantage in soybeans despite today’s setbacks. Look for initial support in May soybeans at today’s low of $16.50 1/4, with backing from the 10-day moving average around $16.32 3/4. Support at the 20-day moving average near $16.01 1/2 is likely backed by strong psychological support at $16.00. A close below that level would have bears targeting the Feb. 15 low at $15.46 1/4. Today’s high places initial resistance at $16.97, which likely marked the start of resistance around the psychological $17.00 level. A close above that point would have bulls targeting the contract high at $17.59 1/4.
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 forward-sold for harvest delivery.
Price action: May SRW wheat rose the 75-cent daily limit to $10.59, while May HRW wheat was locked at the 75-limit much of the day before ending up 72 1/4 cents to $10.75 1/4. May spring wheat rose 4 1/2 cents to $10.58 1/4. HRW and SRW futures price limits will remain expanded at 75 cents tomorrow.
Fundamental analysis: Winter wheat futures posted contract highs for the second consecutive day and neared 14-year highs as the escalating Russia/Ukraine conflict stoked concern about the availability of supplies from the Black Sea region. Russia and Ukraine combined account for about 29% of global wheat exports. Some traders appeared to be exiting long corn/short wheat and long soy/short wheat spread positions, Reuters reported, noting that large speculators have held a net short position in SRW wheat for several months.
Turmoil in the Black Sea region, a key source point for Russian and Ukrainian wheat, may push export business elsewhere. “Global buyers of grains have been increasingly turning to the U.S., Europe or South America to secure supplies in the immediate term,” ING said in a note. “The demand for stockpiling has also increased due to the current uncertainty, as prolonged military action in the region could create long-term supply imbalances.”
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 fell 421 points to 118.54 cents per pound, the contract’s lowest closing price since $118.44 cents on Jan. 25.
Fundamental analysis: Cotton futures fell sharply to five-week lows as dollar strength and economic uncertainty sparked long liquidation ahead of USDA’s weekly export sales report tomorrow. Russia’s week-long war against Ukraine continued to keep global markets on edge, coming amid already-soaring U.S. inflation burdening consumers. The U.S. dollar index reached a 21-month high, stirring concern that dollar-denominated commodities will increasingly price out foreign buyers.
Traders await tomorrow’s USDA exports sales update for a read on overseas demand. Last week, USDA reported net weekly sales for 2021-22 at 247,000 bales, up 56% from the previous week but down 7% from the average for the previous four weeks. For 2022-23, net sales totaled 218,200 bales. The numbers seemed to fall short of the pace needed to reach USDA targets for the current crop year.
Technical analysis: Cotton futures remain in a longer-term uptrend stretching back to early 2021 but have shifted into a sideways consolidation pattern capped by the May contract high of 125.83 cents posted Feb. 4. The bottom of the near-term range and key support is marked by last week’s low of 115.86 cents, with initial support at the 50-day moving average of 117.17 cents. Targets for bulls include the Feb. 24 high at 125.13 cents, then the contract high at 125.83 cents. 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 have bears targeting last Friday’s low of 115.86 cents, then 110.00 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.
