Crops Analysis | March 15, 2022
Price action: May corn futures rose 9 3/4 cents to $7.58 and nearer the session high.
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.
Price action: May soybean futures fell 11 3/4 cents to $16.58 3/4, the contract’s lowest settlement since $16.36 3/4 on Feb. 28. May soymeal fell 30 cents to $484.00 per ton and May soyoil fell 27 points to 73.68 cents per pound, after earlier dropping to the lowest price since March 4.
Fundamental analysis: Nearby soybean futures closed at the lowest level in over two weeks, burdened by steep declines in crude oil and concern over recent Covid lockdowns in China, which had been actively buying U.S. soybeans the past six weeks. Nymex crude oil sank over 6.0% and dropped under $94 a barrel amid easing concern over supply disruptions.
The Russia/Ukraine war has consumed much of the market’s attention recently, but soybean traders are also tracking crop development and harvest progress in South America. Pro Farmer consultant Michael Cordonnier lowered his Brazilian soybean crop estimate by 1 MMT, to 123 MMT and held his forecast for Argentine production unchanged at 39 MMT. He also left his Paraguay soybean crop estimate at 5 MMT.
“There is truly a stark difference in soybean yields across Brazil,” Cordonnier said in a weekly report. “The soybean yields in southern Brazil are some of the worst anybody has ever seen, while at the same time, soybean yields in central and northern Brazil are quite good.” Brazilian soybeans were 64% harvested as of late last week compared to 46% last year, according to AgRural.
The February U.S. soybean crush declined to the lowest in five months but was in line with trade expectations, while the end-of-month soyoil supply rose to a 22-month high, according to National Oilseed Processors Association (NOPA) data today. NOPA members crushed 165.057 million bu. of soybeans last month, down 9.4% from January but up 6.4% from February 2021. It was the second-largest NOPA February crush on record, behind only 2020. NOPA said soyoil supplies among its members as of Feb. 28 rose to 2.059 billion lbs, the largest end-of-month stocks since April 2020.
Technical analysis: Soybean futures’ extended sideways consolidation from the past two weeks took a slightly bearish turn today with a soft close posted in the May contract, which pushed below the 20-day moving average for the first time since January 18. The market continues to show signs of exhaustion and prices will need to make a decisive push above resistance at $17.00 soon to generate fresh buying interest. The contract high of $17.59 1/4, posted Feb. 24, may mark the peak. Key downside support includes this month’s low at $16.34 1/2, with further support around $16.00 and the late February low of $15.79.
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 rose 58 cents to $11.54 1/4. May HRW wheat rose 57 1/2 cents to $11.57 1/2. May spring wheat futures jumped 40 cents to $11.10 1/4.
Fundamental analysis: Short-covering was featured in wheat futures markets after recent strong selling pressure. The grains, and especially wheat, were also supported by reports Russian President Vladimir Putin said Ukraine’s demands in its talks with Russia are unrealistic. That reinforced notions the Russia/Ukraine war will continue to force global wheat buyers to seek other suppliers. Russia on Monday suspended grain exports to ex-Soviet countries.
Wheat traders are wondering if the bulls will be able to muster important follow-through buying strength tomorrow, which would be one clue that last week’s price bottoms mark near-term lows.
Serious drought in the U.S. Plains remains an underlying bullish fundamental for wheat. More than half of Kansas was classified in severe drought or worse as of March 8, according to the National Drought Mitigation Center. Major drought is also covering three-quarters of Oklahoma and more than two-thirds of Texas.
Technical analysis: Recent price action still strongly suggests major market tops are in place in wheat futures. Recent price action on the daily charts suggests a bear flag or bearish pennant pattern may be forming in SRW and HRW. SRW bulls' next upside price objective is closing May futures above solid resistance at $12.00. Bears' next downside objective is closing prices below solid support at last week’s low of $10.43 1/4. First resistance is seen at today’s high of $11.56 1/2,then $11.75. First support is seen at $11.00, then at this week’s low of $10.64.
HRW bulls' next upside objective is closing May futures above solid resistance at $12.00. Bears' next downside objective is closing prices below solid support at last week’s low of $10.35 1/2. First resistance is seen at today’s high of $11.56 1/2, then at $11.75. First support is seen at $11.00 , then at this week’s low of $10.51 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: Cotton futures sagged late, with nearby May sliding 17 points to 118.60 cents per pound.
Fundamental analysis: A sizeable rebound in the equity indexes today probably encouraged bullish cotton traders relying upon sustained consumer demand for apparel and strong cotton prices. However, another dive in crude oil futures, along with big losses in the metals and the other softs, probably spurred selling. Not only do the futures losses suggest inflation fears are diminishing, they may also reflect growing fears of an economic recession. One could counter such arguments with the sustained strength being exhibited by the lumber market, but “Doctor Copper” settled right at $4.50, down over 10% from its March 7 high.
Still, exports remain the bread and butter of the cotton market, so traders continue watching developments on that front. The U.S. dollar index traded firmly today and looks set to end the day just slightly below last week’s high at 99.418. Look for traders to turn their attention to Thursday’s USDA’s weekly Export Sales report. Bulls will be hoping for strong sales plus a shipments figure over 400,000 bales since such a pace is needed to justify USDA’s 2021-22 U.S. cotton export forecast at 14.25 million bales.
Technical analysis: Bears seemingly hold a slight short-term technical advantage at this juncture, since bulls couldn’t sustain last Friday’s push above the May contract’s 40-day moving average at 120.33. A breakout above that level, as well as Friday’s high at 121.73, would have bulls targeting the March 1 high of 123.31, then the contract high at 125.83. Initial support is marked by the 10-day moving average near 118.21, then at today’s low of 117.05. A drop below that level would open the door to a test of the March 7 low of 115.37, then the 110.00 area.
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.
