Crops Analysis | April 4, 2022

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Corn

Price action: May corn firmed 15 1/2 cents to $7.50 1/2, while December corn gained 11 cents to $6.99, after posting a contract high for the third straight session. Corn ended near session highs. 

Fundamental analysis: Corn futures rode a wave of strong gains across the grain and soy complex and corrective buying to open the week. Strong export demand also boosted prices. USDA reported daily corn sales of 1.084 MMT to China, with 676,000 MT for 2021-22 and 408,000 MT for 2022-23. Also, weekly corn export inspections totaled 1.528 MMT (60.2 million bu.), which lowered the weekly pace needed to hit USDA’s 2021-22 forecast to 43.4 million bu. over the remainder of the marketing year. Given Chinese buying in the absence of Ukrainian shipments and the current strong shipments pace, we now expect 2021-22 corn exports to reach 2.550 billion bu., 50 million above USDA’s March forecast, though it may not make that much of a change in the Supply & Demand Report on Friday.

December corn futures poked above $7.00 today, though November soybeans gained 33 cents. The new-crop soybean/corn ratio is under 2.1, which strongly favors corn. But the corn market may need to make a more aggressive push to buy acres based on last week’s March intentions, which showed expected plantings down 3.9 million acres from last year and nearly 1.5 million acres below soybeans.

Technical analysis: After the failed downside breakout from the month-long sideways range early last week, May corn futures returned to the middle of the range – and the comfort zone around $7.50. Near-term support extends from $7.26 3/4 to last week’s low at $7.13 1/2. Near-term resistance extends from last week’s high of $7.70 to the contract high at $7.82 3/4.

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 rose 19 1/2 cents to $16.02 1/4 after dropping overnight to a 2 1/2-month intraday low. May soymeal rose $5.10 to $455.10 per ton and May soyoil gained 114 points to 72.34 cents per pound.

Fundamental analysis: Soybeans rebounded from overnight weakness behind strength in corn and wheat markets and concerns over tight global vegetable supplies stemming from the Russia/Ukraine war. A rally of over $4 in Nymex crude oil futures also supported the soy complex. Ukrainian vegetable oil production and exports have come to a virtual halt that may continue until June, Strategie Grains said. Strategie Grains previously expected a one-month halt to Ukrainian oilseed exports, but now sees a prolonged disruption. “Damage to industrial, logistics and port facilities is very significant in much of the east of the country,” the consultant said, according to Reuters.

Also today, USDA reported 737,372 MT (27.1 million bu.) of soybeans inspected for export during the week ended March 31, up from 631,604 MT the previous week. Expectations ranged from 450,000 MT to 1.0 MMT. Inspections are running 19.2% behind year-ago, compared to 20.0% last week. USDA’s 2021-22 export forecast of 2.090 billion bu. is 7.6% below 2020-21. We expect USDA to raise its soybean export forecast, though that might not happen in Friday’s updated Supply & Demand table.

Technical analysis: Bears retain a slight short-term upper hand in soybean futures even with today’s gains, with prices still in a two-week downtrend. May soybeans fell as low as $15.76 3/4 overnight, the contract’s lowest intraday price since $15.51 1/2 Feb. 16. Initial support is seen at today’s low, along with the Feb. 15 low at $15.46 1/4. The $16.00 level marks psychological resistance, as well as the 50-day and 40-day moving averages at $16.11 1/2 and $16.42, respectively.

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 25 3/4 cents to $10.10. May HRW wheat rose 24 3/4 cents to $10.37 3/4. May spring wheat rose 19 3/4 cents to $10.85.

Fundamental analysis: Wheat futures were boosted by short covering and corrective buying following last week’s losses, and some support from strength in corn and crude oil markets. Disruptions from the Russia-Ukraine war and expectations for strong global demand continued to underpin prices. Saudi Arabia purchased 625,000 MT of optional origin wheat. Iraq purchased 100,000 MT of wheat expected to be sourced from Germany. Jordan tendered to buy 120,000 MT of optional origin milling wheat.

USDA reported 297,341 MT (10.9 million bu.) of U.S. wheat inspected for export during the week ended March 31, down from 343,087 MT the previous week but near the pace needed to meet USDA’s U.S. wheat export projections. Shipments are running 18.1% behind year-ago, compared to 17.0% behind last week.

Later today USDA releases its first winter wheat crop condition ratings. Based on individual state ratings, especially in the U.S. Plains, the combined “good” to “excellent” rating is expected to be in the mid-30%. Given moisture deficits in HRW wheat areas, timely spring rains are needed to rescue the crop.

Technical analysis: Winter wheat bulls and bears are on a level near-term technical playing field. Prices are in four-week-old downtrends on the daily charts. SRW bulls' next upside objective is closing May futures above solid resistance at $11.00. Bears' next downside objective is closing prices below solid support at $9.00. First resistance is seen at $10.50, then at $10.75. First support is seen at last week’s low of $9.72, then $9.50.

HRW bulls' next upside objective is closing May futures above solid resistance at $11.64 1/2. Bears’ next downside objective is closing prices below solid support at this week’s low of $9.93. First resistance is seen at $10.50, then $10.75. First support is seen at Friday’s low of $10.12, then $10.00.

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 soared 339 points to 137.94 cents per pound, while deferred contracts also jumped over 300 points.

Fundamental analysis: Cotton futures rose sharply behind strong demand fundamentals and concern over worsening drought in key growing areas, with a rally in crude oil also encouraging buyers. Nymex crude futures surged over $4 as civilian deaths in Ukraine fueled expectations European countries may impose sanctions on Russia’s energy industry. Higher oil prices make polyester, a substitute for cotton, more expensive.

In the U.S., most primary cotton areas remained dry over the weekend, with some light rain from eastern parts of West Texas into southwestern Oklahoma, World Weather Inc. said. Temperatures are expected to become unseasonably warm in many areas. “A restricted rainfall pattern will occur during most of the next two weeks and many cotton areas will need greater rain to improve conditions for planting,” the forecaster said.

Technical analysis: Bulls hold the solid short-term technical advantage in cotton futures. The March 31 high at 140.67 cents marks initial resistance, backed by the contract high at 141.80 cents. A breakout above that level would likely have bulls targeting five-cent price levels, such as 145.00 and 150.00. Support is seen at the 10-day moving average near 135.08 cents. A drop below that level would have bears targeting 130.00 cents, then the 20-day moving average at 128.00.

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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