Crops Analysis | April 22, 2022
Price action: July corn futures fell 6 1/4 cents to $7.89, the lowest settlement since April 14 but still up 5 1/4 cents for the week. December corn fell 14 1/4 cents to $7.24 1/2, the new-crop contract’s third decline in the past four sessions.
5-day outlook: Corn futures disregarded fresh export business as traders booked profits in the wake of the market’s run to contract highs earlier this week. Technicals eroded a bit late this week, which may produce some followthrough fund selling early next week. But the nearby futures remain in a firm uptrend since late January and are well-above most moving averages and other key chart support levels.
USDA’s next weekly crop condition report Monday likely will show farmers made little planting progress this week as cool, wet weather persisted. Earlier this week, USDA reported 2% of the U.S. corn crop had been planted as of April 10, unchanged from the previous week but just one percentage point behind the average for the previous five years.
30-day outlook: Slow Midwest planting won’t become a significant market concern unless it continues past the first week of May or so, and warmer, drier conditions expected over the next two weeks should allow for more fieldwork, according to World Weather Inc.
Traders will keep a close eye on the Russia/Ukraine war and the U.S. export pace. Disappointing weekly export sales may signal that $8.00 corn is curbing demand, though China continues to step in with purchases. Earlier today, USDA announced 1.347 MMT in old- and new-crop corn sales to China, bringing the country’s total purchases so far this month to nearly 3.5 MMT.
90-day outlook: If planting delays persist past mid-May, some farmers may opt to shift acres to soybeans from corn, which could further boost December futures. Longer-term, spring and summer weather and early crop development will come into greater focus, along with Brazil’s safrina crop, which appears to be off to a good start.
The Russia/Ukraine war may drag on for months, keeping grain prices elevated and exacerbating concern over inflation and tighter food supplies. Earlier this week, the International Grains Council forecast global corn production would fall by 13 MMT in the 2022-23 season to 1.197 billion MT, reflecting smaller crops in Ukraine and the U.S.
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: July soybeans fell 31 1/2 cents to $16.88, the contract’s lowest close since April 14 but still a gain of 22 3/4 cents for the week. July soymeal fell $11.80 to $452.10. July soyoil rose 87 points to a lifetime-high close at 80.51 cents, while May soyoil ended at 83.26 cents, a record settlement for a nearby contract.
5-day outlook: Soymeal futures led soybeans sharply lower to end the week as traders booked profits following strong gains earlier this week. July soybeans posted an “outside day” lower, a potentially bearish signal if followed by further downside early next week. The market remains in a firm uptrend supported by solid export demand, and additional gains in soyoil could add further support. USDA’s weekly crop condition report Monday likely will show little planting progress. As of April 17, the soybean crop was 1% planted, compared to the 2% average for the previous five years.
30-day outlook: Tight global vegetable oil supplies, combined with high crude oil prices and the Russia-Ukraine war, may keep the soy complex elevated for the near future. Indonesia today announced plans to ban palm oil exports starting April 28 to control soaring domestic prices. Indonesia is the world’s biggest exporter of palm oil. Whether China remains a top purchaser of U.S. soybeans will also be key to price direction. Weather may emerge as a bearish factor if soggy Midwest conditions persist past mid-May, potentially prompting farmers to shift corn acres to soybeans.
90-day outlook: Spring and summer weather and U.S. crop development will be key to long-term price direction, along with export demand. While old-crop soybean export sales have tapered off recently, China remains a lead buyer of U.S. beans in weekly sales data. Only 20% of China’s soybean needs for June-September — expected to be 7 MMT to 8 MMT per month — reportedly have been covered, as crush margins are poor. Buying isn’t likely to actively pick up unless margins improve. However, USDA yesterday reported net weekly soybean sales for 2022-23 at 1.24 MMT, led by demand from China.
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 fell 1 1/4 cents to $10.75 1/4, down 29 1/4 cents for the week. July HRW wheat rose 6 cents to $11.49 1/2, still down 7 3/4 cents for the week. July spring wheat fell 8 1/4 cents to $11.62 3/4.
5-day outlook: Price uptrends on daily bar charts for July SRW and HRW futures this week stalled out, giving bears some momentum heading into next week. Wheat traders will be looking to the corn and soybean markets for direction in the near-term. Price action late this week in both corn and soybeans suggests the bulls in those markets have run out of gas, on a near-term basis. Spring wheat futures gained this week amid an outlook for more snow in the Northern Plains. Weekly HRS wheat exports have trended higher recently, to just below the five-year average, which combined with acreage uncertainty may keep futures prices elevated in the near term.
30-day outlook: Weekly export sales of U.S. wheat were dismal in the latest reporting week. Sales plunged to just 26,300 MT for 2021-22, down 73% from the previous week, down 79% from the four-week average and a marketing-year low. U.S. wheat export commitments are running 24% behind a year-ago, which is a bit more than USDA has projected. If U.S. wheat futures prices are to remain at their still-elevated levels U.S. export sales numbers need to improve and do so quickly.
World Weather today said warm to hot temperatures, limited rainfall and windy conditions next week will also enhance drying rates, keeping drought in place across the region. HRW futures are outperforming SRW recently due to poor crop conditions in the U.S. Plains. Drought persists in the central and southern U.S. Plains. Western HRW region conditions are rated poorly and concern remains high over the potential for notable declines in yield this year because of dryness, said the forecaster.
90-day outlook: The U.S. dollar index hit a two-year high this week, keeping U.S. wheat prices less competitive on the world markets. On the bullish side, the Russia/Ukraine war shows no signs of ending, which will keep a floor under wheat futures due to disruptions caused in the Black Sea region.
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 rose 87 points to 139.46 cents per pound, while new-crop December fell 102 points to 119.16 cents.
USDA’s Crop Progress report Monday afternoon might prove supportive of cotton if it indicates plantings are lagging, but it’s likely too early in the planting/growing season for new-crop conditions to greatly affect the market.
30-day outlook: Export demand may be problematic for the cotton market in coming weeks, especially given the sharp slowdown in export sales. While relatively slow shipments may simply push previous commitments into the new crop year, they may end up undercutting the price outlook as well. This seems even more likely if recent talk of a global recession proves accurate, especially if broad inflation remains a major issue. Sustained U.S. dollar strength would also tend to weigh on the market.
90-day outlook: The domestic industry’s potential inability to get all the cotton bought for the 2021-22 crop year shipped before the end of the crop year on July 31 might not prove as bearish as one might think, since those commitments would most likely be shifted into the 2022-23 crop year. Still, the perception of export problems might reduce buying from customers worried about getting their cotton on time. Continued U.S. dollar gains might also hurt export sales, since the rising greenback tends to exaggerate price gains in individual commodities. In addition, an emerging U.S./global recession also holds the potential to undercut the cotton outlook, since apparel demand is often the first to decline in such circumstances. On the other hand, the new-crop outlook will slowly come to the fore during spring and early summer. If droughty conditions in the Southwest do not improve substantially from current levels, the prospect of a poor U.S. crop could provide strong support for new-crop futures.
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.
