Crops Analysis | March 22, 2022
Price action: May corn futures fell 3 1/4 cents to $7.53. December corn gained 6 cents to $6.70 and posted a contract high for the second day in a row, hitting $6.70 3/4.
Fundamental analysis: Bear spreading weighed on nearby futures today while supporting deferred contracts as choppy and sideways price action continued. The wheat market and the Russia/Ukraine war remained the primary trade focus, with wheat futures' retreat from an overnight rally lending some spillover pressure to corn.
Nearby corn futures were also pressed by expectations favorable growing conditions in Brazil will benefit that country’s safrihna crop. World Weather Inc. today reported most of Brazil and Paraguay will see a good mix of rain and sunshine through the next two weeks that will be supportive of crop development.
The Russia/Ukraine war remains a strongly bullish underlying element for grain markets. Ukrainian crops from last year’s harvest are locked down in warehouses behind Russian battle lines, the Wall Street Journal reported, and farmers face the loss of wheat that is already in the ground and corn crops later this year because they can’t get needed materials. The U.S. could be planning to donate around 400,000 MT of emergency food aid to Ukraine, sources report.
Technical analysis: Corn futures bulls still have a solid near-term technical advantage even amid choppy trading at higher price levels. Corn is still in a six-month uptrend on the daily bar chart. The next downside target for bears is closing May futures below psychological support $7.00. The next upside price objective for bulls is closing May above solid resistance at the contract high of $7.82 3/4. First resistance is seen at this week’s high of $7.65, then at $7.75. First support is at this week’s low of $7.43, then at $7.35.
What to do: Get current with advised 2021- and 2022-crop sales.
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 rose 5 1/2 cents to $16.96 1/2, a lifetime-high settlement for the contract for the second consecutive session. May soymeal fell $4.50 to $476.80 per ton. May soyoil rose 83 points to 74.54 cents per pound.
Fundamental analysis: Nearby soybeans faded from an overnight advance to near two-week highs but sustained modest gains, with support from fresh export business. Early today, USDA reported a daily soybean sale of 240,000 MT for delivery to “unknown destinations” during the 2021-22 marketing year. Before today, USDA hadn’t reported a daily soybean sale from China or unknown destinations since March 11. China and unknown destinations had combined for nearly 7.0 MMT of U.S. soybean purchases starting in late January through early March, indicating that drought-reduced South American crops are prompting global buyers to seek supplies elsewhere.
Overnight gains in Malaysian palm oil contributed to strength in soyoil futures amid ongoing concern over tight global vegetable oil supplies. Also, farmers in Paraguay have completed their soybean harvest, which the Soybean, Oilseed, and Cereal Produces Association of Paraguay deemed the worst in the country’s history. As a result, South American Consultant Dr. Michael Cordonnier lowered his Paraguay soybean crop estimate by 1 MMT, to 4 MMT. Cordonnier left his production estimates unchanged for Brazil and Argentina. For Brazil, Cordonnier estimated production at 123 MT for soybeans. In Argentina, he estimated production at 39 MMT for soybeans.
Technical analysis: Bulls retain an upper hand in soybeans after May futures overnight reached $17.20 3/4, the contract’s highest intraday price since $17.34 on March 9. If the market can generate further buying interest this week, bulls may target the March 9 high as well as the contract high of $17.59 1/4, reached Feb. 24. Initial support in May comes in around last week’s low at $16.38, with further support at the Feb. 10 high of $16.34 1/2 and at the psychological $16.00 level.
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
Fundamental analysis: Nearby HRW and SRW futures faded from overnight gains as reports of much-needed precipitation across a large section of the central U.S. Plains contributed to profit-taking pressure. Rains ranging from 0.25 inch to more than 2 inches fell over most of Oklahoma, the eastern two-thirds of Kansas and the Texas Panhandle over the past day, World Weather said. Rain and snow in HRW production areas “was welcome, even though some of the high Plains region did not get as much as desired,” World Weather said. “This latest storm coupled with the two previous events should have wheat poised to green up and begin development quite favorably. There is an ongoing need for more moisture, though.”
Russia’s nearly month-long war with Ukraine continued to be a major concern amid disruptions to Ukrainian agriculture and grain shipments out of the Black Sea. Russia’s naval blockade has cut off shipping exports, but Ukraine is shipping some goods through Western borders by train. Russia is also struggling to get its crops through the Black Sea. By one estimate, the country’s grain shipments are down 60% from normal levels. Ukraine's spring crop sowing area may be cut in half this year to some 7 million hectares, Agriculture Minister Roman Leshchenko said today, versus 15 million hectares expected before the Russian invasion.
Technical analysis: Lower-range closes for nearby HRW, SRW and spring wheat softened the markets’ technical posture to some degree, suggesting prices reached an exhaustion point and may have established major highs in early March. May SRW ended today over $2.45 under the $13.63 1/2 contract high posted March 8 and still has a small unfilled downside gap created March 2 that bears may target. Initial resistance is seen at today’s high of $11.69 1/4, with further resistance around $12.00. Support is seen at last week’s low of $10.31 3/4.
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 also have 50% of expected 2022-crop forward-sold for harvest delivery.
Cash-only marketers: You should be 90% sold on 2021-crop. You should also have 50% of expected 2022-crop forward-sold for harvest delivery.
Cotton
Price action: Cotton futures added modestly to recent large gains. Nearby May futures edged up 3 points to 130.04 cents per pound, a lifetime-high close for the contract.
Fundamental analysis: Export demand for U.S. cotton remains strong and traders are likely anticipating large sales again in Thursday’s weekly USDA Export Sales report. Bears may believe the comparatively slow shipments pace will eventually force USDA to trim its export forecast for the 2021-22 crop year (which ends July 31), but the ongoing rally implies they’re in the minority.
The latest advance in the equity indexes is likely playing a role in the cotton rally since the implied economic strength promises sustained buying in the apparel sector. Consumer interest in new clothes is one of the first things to wane in a recession. Look for broader views about the global economic and geopolitical outlook to play big roles in forthcoming cotton market direction, with crude oil, gold and soybean futures offering insights into trader thinking about the commodity sector.
Things could shift March 31 when USDA releases its Prospective Plantings report. The following Monday, USDA releases its first weekly Crop Progress reports of the season, meaning trade focus will shifting toward new-crop prospects.
Technical analysis: Bulls still hold a strong technical advantage in the cotton market. Bears tried to take the market down early, as indicated by the May futures dip to 128.12 cents. And while the market closed slightly below the daily open, the settlement price at 130.04 cents represented a high-range close. Psychological support at 130.00 cents seems solid, with backing from today’s low at 128.12 cents and yesterday’s bottom at 127.10 cents offering additional support.
A chart gap between 126.85 cents and 127.10 cents may tempt bears to target that area before the bullish breakout is sustained, but a short-term drop back to the breakout point around 121.50 seems unlikely. Yesterday’s high at 131.71 cents marks initial resistance. History suggests resistance will emerge at 5-cent intervals, with the continuation chart also pointing to a bullish target in the 140.00-cent 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.
