Crops Analysis | March 8, 2022

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Corn ­

Price action: May corn futures rose 2 1/4 cents to $7.53, nearer the session high. December corn rose 1 cent to $6.43 3/4 after posting a contract high at $6.54 3/4.

Fundamental analysis: Corn futures saw some early profit taking today but gained support from solid gains in soybeans and soybean meal, as well as a rebound in SRW wheat futures from steep early losses. Ongoing worries regarding grain trade disruptions from Russia’s invasion of Ukraine continued to underpin corn prices. Rising global corn and wheat prices have encouraged Brazilian exporters to recently book corn and wheat shipments, despite tight supplies and strong domestic prices. Reuters reported about 500,000 MT of Brazilian corn was booked for export out of Parana, while 100,000 MT of wheat was sold from Rio Grande do Sul.

USDA’s Supply and Demand update tomorrow likely will be overshadowed by geopolitics. USDA is expected to lower its Brazilian corn crop estimate for the second month in a row, to about 112.98 MMT, down from its February estimate of 114 MMT, based on a Reuters survey of analysts. Argentina’s crop estimate is expected to be reduced nearly 2 MMT, to 52.09 MMT.

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 psychological support at $7.00. The next upside price objective for bulls is closing May futures above solid resistance at the contract high of $7.82 3/4. First resistance is seen at today’s high of $7.57, then at $7.70. First support comes in at today’s low of $7.28 3/4, then at $7.22.

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 rose 30 1/4 cents to $16.89 3/4, the highest closing price since March 1. May soybean meal rose $14.60 to $473.30 per ton, a lifetime high settlement for the contract. May soybean oil rose 153 points to 75.75 cents per pound.

Fundamental analysis: Nearby soybeans, along with soymeal, led the soy complex higher as crude oil rallied and drought in South America continued to push export demand to the U.S. China extended a string of U.S. soybean purchases that began in late January. Early today, USDA reported daily soybean sales of 132,000 MT for delivery to China during the 2022-23 marketing year and 126,000 MT to “unknown destinations” for 2021-22. Since Jan. 28, USDA has reported a combined 6.22 MMT of soybean sales to China or unknown destinations, a more than nine-fold increase from the previous month.

USDA’s Supply and Demand Report tomorrow is widely expected to include further reductions in crop estimates for Argentina and Brazil. USDA is expected to lower its Brazilian soybean crop estimate for the third month in a row. Brazil’s 2021-22 soybean crop is pegged at 129.01 MMT, down from 134 MMT in USDA’s February report and a three-year low, based on a Reuters survey of analysts. Argentina’s crop estimate is expected to be cut to 43.39 MMT from 45 MMT. Global soybean ending stocks for 2021-22 are expected to be lowered about 3.37 MMT, to 89.46 MMT, the lowest since 78.6 MMT in 2015-16.

Pro Farmer crop consultant Michael Cordonnier maintained his projection for Brazil’s soybean crop at 124 MMT. He also kept production estimates for Argentina and Paraguay unchanged, at 39 MMT and 5 MMT, respectively.

Technical analysis: Soybean futures gained fresh bullish momentum today after a week of sideways trade, as the May briefly pushed above stiff resistance around $17.00 and hit $17.06 1/2, the highest intraday price since the contract high of $17.59 1/4, posted Feb. 24. Today’s strong close may provide market bulls with renewed impetus to test the contract high. Beyond $17.00, upside targets include the 2012 high at $17.94 3/4. Support at the Feb. 24 low of $16.34 1/4 and at the 20-day moving average of $16.27 1/4 is backed by strong support at the psychological $16.00 level. A close below $16.00 would have bears targeting the Feb. 15 low at $15.46 1/4.

Soymeal futures also posted a strong close and showed signs of assuming upside leadership in the soy complex. March soymeal ended at $489.90, the highest close for a nearby contract in almost eight years.

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.

 

Wheat

Price action: May SRW wheat fell 7 1/2 cents to $12.86 1/2 after hitting a contract high at $13.63 1/2. May HRW wheat fell 52 cents to $11.99 1/2. May spring wheat fell 53 1/2 cents to $11.44.

Fundamental analysis: Wheat futures fell sharply but still recovered much of an overnight tumble following exceptionally volatile action and wide trading ranges. May SRW had a range of $1.99 1/2. The Russia-Ukraine war continues to fuel uncertainty over grain production in Ukraine and exports from the Black Sea. Extreme price volatility suggests a climatic phase is in the works for a major bull run in wheat futures. Both markets saw profit taking from speculators today, especially in HRW futures. Winter wheat futures today fell for the first time in seven trading sessions, which is also a warning signal to the bulls.

USDA today reported a daily U.S. wheat sale of 193,000 MT of hard red spring for delivery to the Philippines in 2022-23. That was the first daily sale of U.S. wheat since Feb. 22. However, rapidly rising wheat prices are deterring some global buyers. Tunisia rejected all offers in a tender to buy 125,000 MT of milling wheat and 100,000 MT of feed barley because prices were too high. Traders will scrutinize tomorrow’s monthly USDA Supply and Demand report for changes to the U.S. and global balance sheets, though outside markets and geopolitics will have greater influence.

Technical analysis: May SRW futures prices closed near mid-range but did produce a bearish “outside day” down on the daily bar chart, which, if there is followthrough selling pressure and a lower close tomorrow, would confirm a more significantly bearish key reversal down on the daily chart. That would be one clue implying a market top is in place. Winter wheat bulls still have a near-term technical advantage. However, the recent price surges and extreme volatility are also warning signals of a topping process under way. SRW bulls' next upside price objective is closing May futures above solid resistance at today’s high of $13.63 1/2. Bears' next downside objective is closing prices below solid support at today’s low of $11.64. First resistance is seen at $13.00, then at $13.25. First support is seen at $12.50, then at $12.09.

HRW bulls' next upside price objective is closing May prices above solid technical resistance at $13.00. The bears' next downside objective is closing prices below solid technical support at $11.00. First resistance is seen at $12.50 and then at today’s high of $12.72 1/4. First support is seen at $11.50 and then at today’s low of $11.21 1/2.

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.

 

Cotton

Price action: May cotton futures rose 103 points to 117.97 cents per pound.

Fundamental analysis: Firming U.S. equity indexes and slight U.S. dollar weakness helped boost cotton prices, which continue to be influenced by broad global economic developments and the Russia/Ukraine war. The equity markets and the U.S. dollar had been diverging lately, equities stabilized today while the greenback eased from a 21-month high yesterday.

Traders were also evening up positions ahead of tomorrow’s monthly USDA Supply and Demand Report. Of particular interest will be any shift in USDA’s 2021-22 U.S. cotton export forecast and in the projected carry-out for the current crop year. Given current conditions, it may take a substantial change in those figures to power a significant cotton futures reaction, especially with weekly USDA export sales numbers coming March 10.

Technical analysis: Bears hold a short-term technical advantage, with the short-to-intermediate term moving averages resting just above today’s price range in the May contract. The 10-, 40- and 20-day moving averages come in around 119.06 cents, 119.83 cents and 120.32 cents, respectively. A break-out above that range would open the door to a test of last week’s high at 123.31, then the contract high at 125.83. Solid support emerged around today’s low of 116.19 cents, with backing from yesterday’s low at 115.37 cents. A drop below the latter level would have bears targeting support at the contract’s October 8 high of 111.61 cents and eventually the 100.00-cent 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.

 

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