Crops Analysis | March 4, 2022
Price action: May corn futures rose 6 1/2 cents to $7.54 1/4, a gain of 98 1/2 cents for the week, and posted a contract high at $7.82 1/2. March futures reached $7.87 1/4, the highest for a nearby contract since prices hit $8.00 in July 2013. December futures hit a contract high at $6.47.
5-day outlook: Corn futures extended a rally to near nine-year highs on spillover from soaring wheat prices and indications that global grain trade disruptions from the Russia/Ukraine war are boosting demand from China and other foreign buyers. Russia/Ukraine will continue to dominate market focus, along with prospects for further U.S. export business. USDA is expected to again reduce its South American crop forecasts in its Supply and Demand report March 9. Argentina’s corn crop will be lowered to about 52.09 MMT from USDA’s current estimate of 54 MMT, while Brazil’s crop will be cut to 112.98 MMT from 114 MMT, based on a Reuters survey of analysts.
30-day outlook: Grain prices are likely to remain elevated for at least the near-term unless the Russia/Ukraine conflict eases, and speculative money flow will also be a key influencer. Large speculators bought heavily in corn futures this week, likely expanding a sizable net long position, though signs of a market top could trigger a fund-driven sell-off. USDA’s Prospective Plantings report March 31 may not carry the usual impact with the global grain trade in turmoil. Before the outbreak of war, we expected U.S. corn plantings to decline 3 million acres this year to 90.4 million acres, though results from our spring acreage survey will give us a better idea of planting intentions.
90-day outlook: Corn futures will require sustained demand from both domestic ethanol producers and export markets to maintain elevated levels through spring. USDA yesterday reported net weekly U.S. corn export sales totaling 485,100 MT for 2021-22 (down 47% from the average for the previous four weeks) and 222,800 MT for 2022-23. However, those sales were as of Feb. 24, the day Russia invaded Ukraine. Next week’s Export Sales report will be more telling, as those numbers should reflect any panic buying from global importers after. Ukraine, a major exporter of corn, had 13 MMT to 14 MMT (512 million bu. to 552 million bu.) of supplies left to ship in 2021-22, export sources said this week. Global end-users must find replacements for those bushels.
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 7 1/4 cents to $16.60 1/2 after tumbling from a morning high at $16.88 1/2. The most-active contract still gained 76 cents this week. November soybeans fell 3 3/4 cents to $14.50 1/4. May soymeal rose $7.0 to $460.40. May soyoil fell 201 points to 72.80 cents per pound.
5-day outlook: Nearby soybeans initially followed corn and wheat markets higher and gained further support from fresh export business but faded late on profit-taking and indications the market may have established a near-term top. Russia/Ukraine concern likely will keep prices elevated next week, and traders will also watch to see whether China’s five-week buying binge is sustained. USDA’s March 9 Supply and Demand Report is expected to show further reductions in South America’s crop prospects. Argentina’s soybean crop will be lowered to about 43.4 MMT from USDA’s current estimate of 45 MMT, while Brazil’s crop will be slashed to 129 MMT from 134 MMT, based on the Reuters survey.
30-day outlook: The Russia/Ukraine war is not as large a factor in the soy complex relative to corn and wheat, but Ukraine is the world’s top producer of sunflower seed oil, which competes with soybean oil on global markets. The accelerating South America harvest should provide at least some alternatives for global buyers in the weeks ahead, so the pace of daily USDA sales announcements will be watched closely. Early today, USDA reported daily soybean sales of 106,000 MT for delivery to China during the 2021-22 marketing year, along with daily soybean sales of 108,860 MT to Mexico and 125,000 MT to “unknown destinations,” both for 2021-22. Since Jan. 28, USDA has reported a combined 5.827 MMT of soybean sales to China or unknown destinations, a more than eight-fold increase from the pace over the previous month. USDA’s March 31 Prospective Plantings is expected to show an increase in soybean acres.
90-day outlook: U.S. farmers were widely expected to increase soybean acres over corn this year, through the Russia/Ukraine war casts uncertainty over the planting outlook. Corn’s rally this week shifted price relationships in favor of more corn acres. The corn-soybean ratio ended the week at 2.3, the lowest since late January and suggesting the market is trying to “buy” more corn ground. We previously expected soybean plantings to increase 1.2 million acres from last year to 88.4 million acres, though our acreage survey will give us a better indication of planting intentions.
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 and reached a contract high at $12.09. The most-active contract gained nearly $3.50 this week. May HRW futures rose 62 1/4 cents to $12.14 1/2, up over $3.14 on the week. Nearby HRW futures hit a 14-year high today. Nearby SRW futures scored a record high at $13.40, while nearby HRW posted a 14-year high. May spring wheat gained 28 3/4 cents to $11.47, up $1.86 3/4 for the week.
5-day outlook: Wheat futures went parabolic this week on intensifying Russia/Ukraine concerns, and the opening of overnight trading Sunday will offer one indication whether upside momentum will be sustained. A short-term pullback and/or market top is possible, though prices likely will remain elevated as long as war rages and sellers reluctant to step in. Ukrainian ports remain closed, contributing to surging export demand for European Union wheat that’s expected to continue. USDA monthly Supply and Demand report March will likely take a back seat to geopolitics. However, ending global wheat stockpiles were already heading for a five-year low in 2021- 22 before the Russian invasion of Ukraine, making USDA data of keener interest.
30-day outlook: Russia/Ukraine should continue to dominate trade attention, though weather in the U.S. Plains will come into increasing focus. Colder conditions in U.S. winter wheat areas next week should impede any stimulation of new-crop development in the wake of this week’s unseasonably warm weather, and there appears to be no threatening cold ahead, according to World Weather Inc. Nearly three-fourths of U.S. winter wheat ground remains in drought condition.
90-day outlook: Weekly U.S. export sales this week rose 54% over the four-week average, suggesting global demand is shifting to U.S. wheat. A prolonged Russia-Ukraine war would very likely move more global wheat business to the U.S. and argue for keeping futures price elevated, albeit probably not at the extreme, emotion-driven price levels achieved at the beginning of the war.
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 338 points to 116.42 cents a pound, down 221 points for the week and the lowest closing price since Jan. 14.
5-day outlook: Concerns over the global economy and surging U.S. dollar dragged cotton lower. A slowing U.S. economy tends to hurt consumer demand for apparel, whereas a rising dollar boosts the cost of U.S. cotton to export customers. Short-term developments and the eventual outcome of the Russia/Ukraine war will exert great influence over the cotton outlook, especially if widespread embargoes on Russia lead to a recession. USDA’s March 9 Supply and Demand report, as well as its weekly Export Sales report March 10, could affect prices as well.
30-day outlook: The Russia/Ukraine war likely will continue influencing the cotton market over the next month. A Russian embargo of fertilizer exports, for example, would raise uncertainty over spring U.S. plantings. USDA is now taking its surveys for its March 31 Prospective Plantings report, so the war could diminish the accuracy of the result. How strongly China continues to back Russia in the current situation could also have significant implications for the commodity markets. The effects on the global economy and the value of the U.S. dollar could also prove very important to the cotton price outlook.
90-day outlook: The spring-summer outlook depends heavily upon the course of geopolitical and economic events and developments. Traders will remain partially focused upon exports, particularly regarding old-crop. Spring plantings, weather and progress of the 2022 crop will come increasingly into focus as summer looms. Sustained dryness in the southern Plains could affect the Texas crop. The state of the global economy and especially the value of the U.S. dollar will also be key to the outlook.
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.
