Crops Analysis | April 12, 2022
Price action: May corn futures rose 11 3/4 cents to $7.76 1/4, a lifetime-high settlement for the contract. December corn rose 13 cents to $7.31 and posted a contract high for the third day in a row.
Fundamental analysis: Speculative money flowing to the long side propelled a rally in grains and other commodity markets, with Nymex crude oil soaring over $6.00 a barrel and back above $100.00. Commodity bulls were energized by fresh fuel for the global “inflation trade” as the U.S. consumer price index in March posted its largest rise in over 40-years.
Fundamentally, U.S. corn exports have been solid lately and are on pace to meet or exceed USDA projections for the current marketing year. Expected continued grain-shipping disruption from the Black Sea region remain bullish for U.S. grains. Strength in wheat futures is also encouraging buyers in corn, as well as growing concern over slow U.S. corn plantings due to cool, wet weather forecast for the Midwest over the next week. USDA Monday reported 2% of the corn crop had been planted as of April 10, unchanged from the previous week.
Technical analysis: Corn futures bulls have a strong near-term technical advantage. The next upside price objective for bulls is closing May futures above solid longer-term resistance at $8.00. The next downside target for the bears is closing May below support at $7.40. First resistance is seen at the contract high of $7.82 3/4, then at $7.90. First support is at this week’s low of $7.62, then at $7.50.
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 soybeans rose 15 cents to $16.70 1/4 while November soybeans gained 21 1/4 cents to $15.07, near a three-week high. May soymeal rose $1.80 to $460.90 and May soyoil rose 113 points to 75.43 cents per pound.
Fundamental analysis: The soy complex posted broad gains amid concern over tightening global vegetable oil supplies and general strength in commodity markets, propelled after the Labor Department reported U.S. consumer inflation surging 8.5% during March compared with a year ago--the highest annual increase since December 1981. The report appeared to throw fresh fuel onto the global inflation trade, as Nymex crude oil rallied over $6 per barrel and Malaysian palm oil hit a three-week high. Wheat futures also rallied. Commodity strength overshadowed near-term focus on U.S. Midwest weather, which may be turning slightly bearish for soybeans. Continued cool, wet conditions are slowing corn planting, raising prospects for higher soybean acres.
Technical analysis: Nearby soybeans’ technical performance today was relatively tepid compared to grain markets, as May futures failed to trade outside yesterday’s range. The lead soybean contract did close over the 20-day moving average, but prices likely need to take out yesterday’s high at $16.97 1/2 to draw in sustained buying interest. Near-term support in May soybeans is seen at the 10-day and 50-day moving averages around $16.37 3/4 and $16.35 3/4, respectively. Further support comes in at the April low of $15.76 3/4. Further resistance includes the psychologically important $17.00 area and the late-March high of $17.36 1/2.
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.
Price action: July SRW wheat rose 23 1/2 cents to $11.12 1/2, the contract’s highest closing price since $11.27 1/2 on March 15. July HRW wheat rose 21 1/4 cents to $11.66 3/4, the highest close since March 8. July spring wheat rose 15 1/2 cents to $11.56, also the highest settlement since March 8.
Fundamental analysis: Wheat futures rallied to the highest levels in four weeks or longer on continuing concerns over supply disruptions from the Russia/Ukraine war and poor conditions in the U.S. Plains. Wheat contributed to a broad fund-driven commodity market rally that included gains of over $6 per barrel in Nymex crude oil. U.S. winter wheat conditions improved slightly, with USDA rating 32% of the crop good-to-excellent as of April 10, up from 30% a week earlier.
But prolonged drought has likely already caused substantial damage to the crop. When USDA’s weekly crop condition ratings are plugged into the weighted Pro Farmer Crop Condition Index (0 to 500-point scale, with 500 being perfect), the HRW crop improved 5.2 points to 277.8 and the SRW crop rose 3.2 points to 345.3. At those levels, the CCI ratings are still 52.1 points below the five-year average for HRW and 11.2 points below for the SRW crop. Also today, France’s ag ministry said it expects the country’s all-wheat planted area to fall 3.9% from year-ago to 4.79 million hectares. Winter wheat acreage at 4.77 million hectares would be down 4.0% from last year.
Technical analysis: Winter wheat bulls strengthened their near-term technical advantage as the market appeared to break a downtrend that began in late March. SRW bulls' objectives including closing July futures above resistance around the late-March high of $11.02, though the contract high of $12.78 1/4 is a sizable ways away. Initial support is seen at the 20-day and 10-day moving averages at $10.53 1/4 and $10.39, respectively. Further support is seen at last week’s low of $9.85.
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.
Price action: May cotton futures jumped 322 points to 138.51 cents per pound, while new-crop December posted a third consecutive contract high before closing up 241 points at 120.03 cents.
Fundamental analysis: Strong bullish money flow boosted commodity markets, with cotton following crude oil, gold and wheat higher. Sustained gains despite the U.S. dollar index soaring above par (100.00) to the highest level in over two years underscores recent commodity strength. Today’s strength partly reflected the Labor Department reporting an 8.5% year-over-year jump in CPI last month.
Persistently large export sales totals are likely required to support cotton prices at current levels. The next result Thursday could prove influential, since last week’s net old-crop figure at just 62,900 running bales easily represented a marketing-year low. Another poor result could truncate this latest price advance, but a return to recent norms well over 200,000 bales could amplify the market’s underlying strength.
There is little new on the new-crop front, with dryness in Texas still seeming to bode ill for the forthcoming crop. Monday’s afternoon Crop Progress report from the USDA again showed early plantings in just three states (Arizona, California and Texas), with the national average at 7% complete matching the five-year norm.
Technical analysis: Bulls clearly hold the short-term technical advantage in cotton futures, with today’s low and the 10-day moving average marking stout initial support near 135.50. The 20-day moving average implies additional support near 133.10, with backing from Monday’s low at 131.58. The 40-day moving average places pivotal support at 126.16. A drop below that level would have bears targeting the 120.00 level. Today’s high marks initial resistance at 139.25, with a move above that level likely preceding a test of resistance at the April 5 high at 140.45, then the contract high at 141.80. A breakout to fresh highs would likely have bulls targeting the psychological 145.00 level, then 150.00.
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.
