Crops Analysis | March 23, 2022
Price action: May corn futures rose 4 3/4 cents to $7.57 3/4, the contract’s highest closing price since March 15. December corn gained 2 1/4 cents to $6.72 1/4 and posted a contract high for the third day in a row, touching $6.80 1/2.
Fundamental analysis: Bull spreaders were back in action in corn, as nearby contracts outpaced gains in new-crop December amid strong demand and global supply concerns. Strong gains in crude oil futures limited selling interest across the commodity sector. The Russia/Ukraine war continues to be an underlying bullish element for the grain markets, keeping corn prices elevated amid choppy and sideways conditions.
Demand fundamentals remained firm. U.S. ethanol production during the week ended March 18 averaged 1.042 million barrels per day (bpd), up 16,000 bpd from the previous week and up 13% from the same week in 2021, according to the Energy Information Administration. Ethanol stocks rose 203,000 barrels, to 26.148 million, the highest since April of 2020.
Tomorrow's weekly USDA export sales report is expected to show U.S. corn sales of 800,000 to 1.8 million MT for the 2021-22 marketing year and 100,00 to 400,000 MT for 2022-23.
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 soybeans rose 22 1/4 cents to $17.18 3/4, the highest settlement for a nearby contract since September 2012. May soyoil jumped 143 points to 75.97 cents per pound, while May soymeal climbed $8.30 to $485.10.
Fundamental analysis: Broad commodity strength led by the energy and metals markets spurred buying in the soy complex. Global vegetable oil values surged a third straight day, possibly reflecting the continued absence of Ukrainian sunflower oil from the export sector, which very likely contributed to soyoil gains. News that Egypt’s state grain buyer purchased 80,000 MT of soyoil fueled bullishness as well.
The soy complex is likely deriving new-crop support from spring U.S. planting estimates. Recent talk of sharply higher input costs for corn has many observers anticipating a substantial shift of acreage out of corn and into soybeans, with some suggesting the latter would top the former. That likely weighed on beans somewhat. But others are reportedly agreeing with Pro Farmer in expecting corn acres (91.9 million ac., based on our farmer survey) to once again top soybean plantings (we estimate 87.8 million ac.). USDA’s March 31 Prospective Plantings report will be a major key to spring price direction.
Tomorrow’s USDA Export Sales report is expected to show net U.S. soybean sales between 500,000 MT to 1.3 MMT. New crop sales are expected to range between 300,000 MT and 800,000 MT. Old-crop soybean meal sales are seen within the range of 100,000 MT and 300,000 MT.
Technical analysis: Bulls enjoy a technical advantage across the soy complex. Although May soybeans fell short of the February 24 contract high at $17.59 1/4, the settlement at $17.18 3/4 represented a new high close. The 25-cent intervals (for example, $17.25 and $17.50) may mark initial resistance levels, which are then backed by the contract high. The September 2012 peak at $17.94 3/4 implies additional resistance at that level. Look for solid support around psychologically important $17.00, then around today’s low of $16.91. The short-term moving averages place additional support at $16.78 1/2 (10-day) and $16.68 1/4 (20-day). Bears are likely targeting the 40-day moving average near $16.14.
What to do: Get current with advised 2021- and 2022-crop sales.
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 erased overnight gains on profit-taking as the market continued to monitor the Russia/Ukraine war. Disruptions from the Russia/Ukraine war continue to support prices. Ukrainian ports remain closed, slashing grain export prospect for the foreseeable futures. Ukraine’s spring crop-sowing area may be cut more than half from 2021 levels to 7 million hectares, the country’s ag minister said earlier this week. Prior to the invasion, seedings were expected to reach 15 million hectares. But barring the conflict taking a severe turn for the worse, it appears Russia/Ukraine disruptions have already been factored into prices, meaning HRW and SRW futures likely established major tops earlier this month.
In the U.S., rain and snow earlier this week brough some relief to parched HRW ground in the central and southern Plains, and more precipitation is expected into early April. Two potential weather disturbances from March 29 to April 2 “will likely bring more precipitation to parts of the region, leading to additional short-term improvement in the condition of the winter wheat crop,” World Weather Inc. said today. “Eastern and far northern crop areas will be most favored in these precipitation events leaving the high Plains region with limited precipitation.”
USDA’s weekly export sales report tomorrow is expected to show net U.S. wheat sales ranging between 100,000 and 600,000 MT for 2021-22 and 100,000 and 300,000 MT for 2022-23. Last week, USDA reported net U.S. weekly sales totaling 145,900 MT for 2021-22 and 325,600 MT for 2022-23.
Technical analysis: Bullish momentum in winter wheat futures has waned as the markets shifted into a choppy, sideways pattern the past two weeks, with May SRW ending today around the middle of the recent range, between the March 22 high at $11.69 14 and the March 17 low of $10.31 3/4. A push toward or below the March lows could prompt large speculators to shed a sizable net long position they’ve built in recent weeks. A renewed push above the March highs may have bulls targeting resistance around $12.00.
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: May cotton futures fell 1 point to 130.03 cents per pound, after rising earlier to 132.96 cents, a contract high and the highest intraday price for a nearby contract since mid-2011. Deferred futures such as December ended higher.
Fundamental analysis: Cotton futures rallied initially to the highest levels in nearly 11 years, supported by strong demand and concern drought could curb production in key growing regions. Much of Texas, Oklahoma and Kansas remain in drought as the spring growing season approaches, with little relief in sight. “West and South Texas rainfall potentials remain poor for the next 10 days to two weeks,” World Weather said today. “Some areas in the Texas Coastal Bend area will also receive limited rainfall. The Texas Blacklands, Delta and Tennessee River Basin areas will experience an abundance of rain in this coming week to maintain some flood conditions while limiting fieldwork.”
Surging crude oil prices also supported cotton futures, with nearby Nymex contracts surpassing $5 daily gains and topping $115 a barrel in nearby May. But late weakness in U.S. stocks and strength in the U.S. dollar appeared to dampen buying interest in cotton. Tomorrow’s USDA weekly export sales report will be studied closely to see if the strong demand trend has persisted. Last week, USDA reported net weekly sales of 371,400 running bales (RB) for 2021-22, up 5% from the previous week and up 34% from the prior four-week average. Prominent buyers included China (144,700 RB) and Turkey (59,300 RB).
Technical analysis: Cotton bulls retain a strong near-term technical advantage even with today’s late fade. Further strength after tomorrow’s open would indicate bulls will continue to push the upside, but disappointing export sales could undercut prices. Based on continuation charts, upside targets include 140.00 cents and 150.00 cents, levels last traded in June and July 2011. Downside targets include the gap created today by the May contract’s low at 127.10 cents and Friday’s high at 126.86 cents.
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.
