Crops Analysis | March 24, 2022

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Corn ­

Price action: Corn futures closed low-range with losses of 4 to 9 cents. May corn dropped 9 1/2 cents to $7.48 1/4. December corn fell 4 3/4 cents to $6.67 1/2.

Fundamental analysis: Corn futures faced spillover pressure from selling in soybean and wheat markets, along with a downturn in crude oil futures as back-and-forth trade continued. Fundamental pressure came from weekly corn export sales that failed to inspire traders.

USDA reported old-crop corn export sales at 979,500 MT for the week ended March 17, down sharply from recent weeks and at the lower portion of trader expectations. Total corn export commitments are running 18.3% behind year-ago, whereas USDA forecasts exports will fall 9.2%. However, there’s still a lot of Ukrainian corn exports that must be replaced, so we remain hopeful export pace will be strong over the second half of the marketing year.

The back-and-forth price action the past three weeks suggests traders feel they have the Russia/Ukraine situation adequately factored into prices for now. The ongoing fighting is no longer news. It will take some fresh bullish news to reinvigorate bulls.

Technical analysis: May corn futures continue to pivot around $7.50, with neither bulls nor bears being able to move the contract too far from that level. Bulls still have the overall technical advantage, but the longer the contract drifts sideways, the more momentum they will lose. Resistance is at the contract high of $7.82 3/4, followed by the 2013 high of $8.00 on the continuation chart. The 20-day moving average at $7.40 is initial support, followed by the March 16 low at $7.26 3/4 and then the psychological $7.00 mark.

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 $17.00 3/4, near the session low. May soymeal rose 80 cents to $485.90 per ton and May soyoil fell 168 points to 74.29 cents per pound.

Fundamental analysis: Nearby soybeans fell for the first day in the past four in the wake of disappointing weekly export sales. USDA reported net weekly soybean sales totaling 412,200 MT for 2021-22, down 67% from the previous week and down 70% from the prior four-week average. Sales were under the low end of expectations, which ranged from 500,000 MT to 1.3 MMT for 2021-22. For 2022-23, USDA reported net sales reductions of 13,000 MT for China. Weekly exports totaled 549,200 MT, down 23% from the previous week and down 38% from the prior four-week average.

Export demand has cooled off the past two weeks after a six-week buying spree led by China, but foreign demand continues to underpin prices in light of drought-driven crop shortfalls in South America. Early today, USDA also reported a daily sale of 318,200 MT of soybeans for delivery to “unknown destinations” during the 2021-22 marketing year. That marked the second daily sales announcement to unknown destinations this week, following a 240,000-MT sale Tuesday.

Technical analysis: Bulls retain a technical advantage in the soy complex, with soybeans sustaining a three-month uptrend, though the market may require a strong close to this week to generate sufficient buying for a test of the contract highs. May soybeans face resistance at yesterday’s high of $17.36 1/2, the highest intraday price since the contract high of $17.59 1/4 posted Feb. 24. Further resistance is seen at the September 2012 peak at $17.94 3/4, based on continuation chart. Initial support comes in at yesterday’s low of $16.91 and the 10- and 20-day moving averages of $16.79 3/4 and $16.70 1/4, respectively.

One potentially bearish signal arose in May soyoil, which earlier rose to 76.63 cents, the highest intraday price since March, before reversing to close sharply lower, but still above yesterday’s low at 74.23 cents.

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 20 cents to $10.85 3/4, the lowest settlement in nearly a week. May HRW wheat fell 16 1/2 cents to $10.95, near the session low. May spring wheat fell 6 1/2 cents to $10.82 3/4.

Fundamental analysis: Nearby SRW futures fell for a third day in a row and HRW contracts also tumbled as the markets extended a fund-driven, profit-taking pullback amid beliefs the markets have priced in disruptions from the Russia/Ukraine war. Additional pressure stemmed from lackluster weekly export sales. Net weekly wheat sales totaled 155,700 MT for 2021-22, up 7% from the previous week but down 51% from the prior four-week average. Net sales for 2022-23 totaled 367,300 MT. Sales were expected to range from 100,000 to 600,000 MT for 2021-22 and 100,000 and 300,000 MT for 2022-23. U.S. wheat export commitments so far in 2021-22 are running 24% behind a year-ago, versus 23% behind last week. USDA projects 2021-22 exports at 800 million bu., down 19.4% from the previous marketing year.

Also today, Egypt’s supply minister said the country is in talks with Argentina, India, France and the U.S. for wheat imports but is in no rush to buy at the moment. Egypt is looking for alternatives to Black Sea grain exports, which have been disrupted by Russia's invasion of Ukraine. Russia and Ukraine accounted for 80% of Egypt’s wheat imports last year.

In the U.S., the HRW belt is expected to receive additional rain and snow March 29-30, which should provide further relief for parched crops, though more moisture is needed, World Weather Inc. said today.

Technical analysis: Bullish momentum in winter wheat futures continued to fade as the markets extended the choppy, sideways pattern of the past two weeks. May SRW ended 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. Also, May SRW closed below its 10- and 20-day moving averages but is still up from $10.63 3/4 at the end of last week. 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 rose 87 points to 130.90 cents per pound, the highest settlement for a nearby contract in nearly 11 years. December rose 70 points to 109.25 cents and set a contract high.

Fundamental analysis: Cotton futures continues to draw support from recent strong gains in crude oil, which ended the day above $111 a barrel, and from strength in U.S. equities. USDA reported net weekly U.S. cotton net sales of 307,500 running bales (RB) for 2021-22, down 17% from the previous week and down 7% from the prior four-week average. Increases were primarily for China (130,200 RB) and Turkey (71,700 RB). Net sales of 67,400 RB for 2022-23 were primarily for China (21,800 RB) and Thailand (13,600 RB). Exports of 442,700 RB, a marketing-year high, were up 36% from the previous week and up 29% from the prior four-week average. The destinations were primarily to China (173,500 RB).

Persistent dryness in west and south Texas cotton regions is also keeping sellers at bay. Rainfall potential in those regions remains poor for the next 10 days to two weeks, World Weather said today. Some areas in the Texas Coastal Bend area will receive limited rainfall.

Technical analysis: Cotton bulls have the strong technical advantage. The next upside objective for bulls is to close May futures above longer-term resistance at 140.00 cents. The next downside objective for bears is to close prices below solid support at 125.00 cents. First resistance is seen at the contract high of 132.96 cents, then 134.00 cents. First support is seen at 128.50 cents, then at this week’s low of 127.10 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.

 

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