Crops Analysis | March 9, 2022

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Corn ­

Price action: May corn futures fell 20 cents to $7.33. December corn lost 7 cents at $6.36 3/4.

Fundamental analysis: Corn futures were pressured by outside markets, as wheat dropped sharply for a second day and crude oil plunged over $14 after United Arab Emirates said it would support boosting supplies, weighing on other commodity markets. Grain traders appear to sense the establishment of major tops in corn and wheat

Today’s monthly USDA Supply and Demand Report held few big surprises for corn. USDA cut its 2021-22 U.S. corn ending stocks forecast by 100 million bu. from last month to 1.440 billion bu. and made no changes to the supply side of the balance sheet. On the demand side, USDA increased food, seed and industrial use by 25 million bu., with all of that increase in corn-for-ethanol use. USDA raised projected exports by 75 million bu., “reflecting expectations of sharply lower exports from Ukraine.” USDA raised its national average on-farm cash corn price for 2021-22 by 20 cents from last month to $5.65. The agency forecast Argentina’s corn crop at 53.0 MMT for 2021-22, down 1 MMT from February. Brazil corn output is forecast at 114.0 MMT, unchanged from February.

Weekly U.S. ethanol production increased 31,000 barrels per day in the week ended March 4, to 1.028 million bpd. Ethanol stocks increased 338,000 barrels, to 25.271 million barrels. Production increased 9.6% from year ago. Traders await tomorrow’s USDA weekly export sales report, which is expected to show U.S. corn sales of 500,000 to 1.2 million MT in the 2021-22 marketing year and sales of 50,000 to 700,000 MT in the 2022-23 marketing year.

Technical analysis: Corn futures bulls still hold a solid near-term technical advantage. Prices are in a six-month uptrend on the daily bar chart. The next downside target for bears is closing May futures below psychological support at $7.00. The next upside objective for bulls is to close May prices above solid resistance at the contract high of $7.82 3/4. First resistance is seen at $7.50, then at today’s high of $7.59 1/2. First support is at this week’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 fell 18 cents to $16.71 3/4. May soyoil fell 160 points to 74.15 cents per pound, while May soymeal edged up $1.40 to $474.70 per ton.

Fundamental analysis: Despite big early losses in crude oil and the energy sector, soybean futures were still trading firmly this morning. Soyoil was supported by USDA’s report of a 20,000 MT sale to “unknown destinations” for the current marketing year, as well as reports that Indonesia is ordering domestic palm oil exporters to sell 30% of their planned exports domestically, up from 20% mandated previously. China announced it is cutting its forecast of the country’s edible oils imports from 9.3 MMT to 8.5 MMT.

Some pressure also stemmed from USDA Supply and Demand report, which included a smaller than expected decrease in projected 2021-22 ending U.S. soybean stocks. USDA pegged ending stocks at 285 million bu., down 40 million bu. from February but under trade expectations for a cut of about 47 million bu. Estimated U.S. soybean exports for 2021-22 were boosted 40 million bu. to 2.09 billion bu. Projected ending global stocks were lowered 2.87 MMT to 89.96 MMT, also not a large a reduction as expected.

Traders expect strong numbers in USDA’s weekly export sales tomorrow. Net U.S. soybean sales are expected between 900,000 MT to 1.7 MMT for 2021-22 and 900,000 MT to 1.5 MMT for 2022-23. Those compare to week-prior figures at 857,029 MT and 1.386 MMT, respectively.

Technical analysis: After fluctuating widely in today’s session, soybean futures posted a low-range close. Bulls seemingly hold the short-term technical advantage, but once again failed to sustain intraday gains above $17.00. The weak close kept initial resistance around the $17.00 level, while today’s high at $17.34 likely marking additional resistance. A close above that level would have bulls targeting the Feb. 24 high at $17.59 1/4, then the $18.00 level. Today’s low at $16.69 1/2 represents initial support, with strong backing from the 10-day moving average at $16.57 ¾. Additional support is marked by the 20-day MA near $16.28. A close below that level would likely have bears targeting $16.00, then the 40-day moving average at $15.45.

May soyoil futures made a fresh high at 78.58 today, but closed poorly. Look for resistance at today’s opening quote of 76.19, then at last week’s 77.33 high, then at the new peak. Initial support is likely at the 10-day moving average near 73.72, then at last week’s low of 71.87. Further losses would have bears targeting 70.00, then the Feb. 25 low at 68.22.

May soymeal futures made a run at the Feb. 24 high of $487.00, but stalled at $485.00 before reversing and posting a low range close. However, that marked a new contract high close at $474.70. The recent highs represent resistance, with backing from the psychological $500 level. Initial support is likely around the $470 level, with backing at the 10-day moving average around $456.70, then the 20-day moving average at $453.70. A drop below those levels would have bears targeting the Feb. 16 low at $435.80.

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 futures dropped the 85-cent daily trading limit to $12.01 1/2. May HRW futures also fell the 85-cent limit, settling at $11.14 1/2. May spring wheat fell 60 cents to $10.84.

Fundamental analysis: Wheat futures fell sharply for a second consecutive day, sustaining losses from overnight trade after USDA unexpectedly increased its forecasts for U.S. and global ending stockpiles. U.S. wheat supplies at the end of the 2021-22 marketing year will total 653 million bu., up 5 million bu. from a February estimate, according to USDA’s Supply and Demand report today. Analysts expected a decline of about 20 million bu. Projected global ending stocks were raised 3.3 MMT to 281.51 MMT, contrary to expectations for a drop of about 620,000 MT.

On the demand side of the balance sheet, USDA cut projected U.S. exports for 2021-22 by 10 million bu. to 800 million bushels, a six-year low. While the export pace has been lagging, we expect the U.S. to pick up some lost business out of the Black Sea region due to the war, and anticipate USDA will eventually raise its export forecast. USDA raised its national average on-farm cash wheat price for 2021-22 by 20 cents from last month to $7.50, which would be up $2.45 from 2020-21.

Disruptions from Russia’s war with Ukraine remained in market focus. Ukraine’s government has banned exports of rye, barley, buckwheat, millet, sugar, salt and meat until the end of this year, according to a cabinet resolution. Notably missing from the export ban are corn, wheat and sunflower oil.

Technical analysis: Steep losses the past two sessions suggest nearby wheat futures are undergoing a violent blowoff top and could push even lower, though the Russia/Ukraine war will keep prices elevated. May SRW futures yesterday posted a bearish “outside day” lower on the daily bar chart and followthrough weakness the rest of this week would confirm a bearish key reversal down. Solid resistance is seen at yesterday’s contract high of $13.63 1/2. Downside objectives include filling a chart gap between the March 3 high at $11.34 and yesterday’s low at $11.64. In May HRW futures, key resistance is seen at the contract high of $12.99 1/2, posted March 7.

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 fell 42 points to 117.55 cents per pound.

Fundamental analysis: Cotton futures finished lower after USDA’s Supply and Demand data came out largely price-neutral. USDA made no changes to the old-crop balance sheet, keeping its U.S. cotton ending stocks projection for 2021-22 unchanged from last month at 3.5 million bales. Estimated exports remained at 14.75 million bales, contrary to expectations for an increase to about 14.89 million bales. USDA continues to project the 2021-22 national average on-farm cash cotton price at 90 cents, which would be up 23.7 cents from last year.

Estimated global production in 2021-22 was lowered to 119.85 million bales from 120.15 million bales and ending stocks were lowered to 82.57 million bales from 84.31 million bales, while expectations were for no change. USDA estimated world 2021-22 consumption will be marginally higher but said the “consumption growth rate” will be lower this month. Traders await USDA’s weekly export sales report tomorrow. Last week, the report showed net sales of 348,600 running bales of cotton.

Technical analysis: Bears hold the short-term technical advantage with nearby futures continuing the grind lower. Initial support is seen at this week’s low of 115.37 cents and the 100-day moving average at 113.42 cents. Key resistance is seen at the 20- and 40-day moving averages, both around 119.94 to 119.99 cents. A break above those levels could set up a test of last week’s high at 123.31, then the contract high at 125.83. A drop below this week’s low would have bears targeting support at the October 8 high of 111.61 cents and 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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