Crops Analysis | January 12, 2022
Price action: March corn futures fell 2 cents to $5.99 while December futures rose 3/4 cent to $5.58 1/4.
Fundamental analysis: USDA’s monthly Supply and Demand update and Crop Production report had limited impact on futures. The agency’s final 2021 corn production estimate increased 53 million bu. from November to 15.115 billion bu., 46 million bu. more than traders anticipated. Estimated corn carryover for 2021-22 was raised 47 million bu. from December, about 68 million bu. above the average pre-report trade estimate.
Corn traders are paying closer attention to the key outside markets, such as U.S. stocks and crude oil, which strengthened today. The U.S. dollar index fell to a two-month low. Nymex crude oil futures pushed above $83 earlier today, the highest in two months and near last fall’s seven-year highs.
USDA reported a daily sale of 100,000 MT of corn to “unknown destinations” for 2021-22. Tomorrow’s weekly USDA export sales report is expected to show U.S. corn sales in the 2021-22 marketing year of 500,000 MT to 1.5 MMT.
U.S. ethanol production declined 42,000 barrels per day (bpd) to 1.006 million bpd for the week ended Jan. 7, the lowest production since the week ended Oct. 1, according to the Energy Information Administration. Ethanol stocks rose 1.552 million barrels, the second largest weekly build ever, to 22.91 million barrels, the highest since the week ended Feb. 12, 2021. The Biden administration is considering lowering the 2022 ethanol blending mandate below the proposed 15 billion gallons, Reuters reported.
Technical analysis: The corn futures bulls have the firm overall near-term technical advantage. Prices are in a four-month-old uptrend on the daily bar chart. The next downside target for the bears is closing March prices below chart support at the December low of $5.84 3/4. The next upside price objective for the bulls is to close March prices above solid chart resistance at the December high of $6.17 3/4. First resistance is seen at today’s high of $6.04 and then at this week’s high of $6.08. First support is at $5.96 and then at today’s low of $5.91.
What to do: Get current with advised 2021- and 2022-crop sales.
Hedgers: You should be 70% sold in the cash market on 2021-crop. You should also have 20% of expected 2022-crop forward-priced for harvest delivery.
Cash-only marketers: You should be 70% sold on 2021-crop. You should also have 20% of expected 2022-crop forward-priced for harvest delivery.
Soybeans
Price action: March soybeans rose 12 3/4 cents to $13.99 1/4, the contract’s second-highest close over the past seven months. March soybean meal rose $3.10 to $416.20 per ton and March soybean oil rose 50 points to 59.37 cents per pound, the highest close in a week.
Fundamental analysis: Soybean futures erased early declines after USDA reported larger-than-expected cuts to its South American soybean crop projections, underscoring the impact of persistent dryness much of the growing season. USDA cut its forecast for production in Brazil by 5 MMT to 139.00 MMT, compared to expectations for a reduction closer to 2.4 MMT. Argentina's estimated soybean crop was lowered 3 MMT to 46.50 MMT, more than double expectations for a drop of about 1.4 MMT, based on a Reuters survey of analysts.
USDA also boosted its estimate of the U.S. soybean crop to a record 4.435 billion bu. from a November estimate of 4.425 billion bu., though the final production figure for 2021 was slightly lower than trade expectations. The average U.S. yield was raised to an estimated 51.4 bu. per acre from 51.2 bu. per acre.
South American weather remains in focus. Rain expected Jan. 16-23 in Brazil’s Rio Grande do Sul and Parana states “is not likely to be heavy in many areas, but at least some relief from dryness should occur and crops that have not been too badly harmed by dryness will respond to the moisture and yield potentials should increase,” World Weather Inc. said today.
Early today, USDA reported a daily sale of 132,000 MT of soybeans to China for 2022-23. USDA hadn’t reported a daily soybean sale to China since Dec. 17, though it has reported two soybean sales to unknown destinations since then. Tomorrow’s weekly export sales report is expected to show net U.S. soybean sales between 400,000 MT and 1.2 MMT.
Technical analysis: Bulls retain an upper hand in soybean futures, though upward momentum has slowed this week with prices still down from last Friday’s close of $14.10 1/4, the March contract’s highest settlement since June 11. March futures ended today slightly above 66 on the Relative Strength Index, just under levels typically considered overbought. March futures fell earlier today to $13.66 1/2, the lowest intraday price since Jan. 4. A push above resistance is last week’s high at $14.15 may have bulls targeting the contract high of $14.45 1/2, reached June 7. Support is seen at the 20-day moving average of $13.50 1/4 and last week’s low of $13.42.
What to do: Get current with advised 2021- and 2022-crop sales.
Hedgers: You should be 85% priced in the cash market on 2021-crop. You should also have 20% of expected 2022-crop forward-priced for harvest delivery.
Cash-only marketers: You should be 75% priced on 2021-crop. You should also have 20% of expected 2022-crop forward-priced for harvest delivery.
Price action: March SRW wheat futures fell 12 1/2 cents to $7.57 3/4. March HRW wheat fell 13 3/4 cents to $7.78. March spring wheat fell 7 3/4 cents to $9.20 1/2.
Fundamental analysis: Wheat futures declined following USDA’s higher than expected U.S. plantings estimates in its Winter Wheat seedings report. All U.S. winter wheat seedings for the 2022 harvest totaled an estimated 34.397 million acres, up 749,000 acres from last year and 142,000 acres above the average pre-report estimate. The increase was driven largely by higher than anticipated SRW plantings at 7.07 million acres, up 6.648 million acres in 2021. Estimated HRW plantings, at 23.8 million acres, were below trade expectations.
U.S. wheat stocks in all positions as of Dec. 1 fell 18.4% from the same time last year and were 31 million bu. below the average trade estimate. Estimated wheat carryover for 2021-22 was raised 30 million bu. from last month and was 20 million bu. above the average pre-report trade estimate. Tomorrow’s weekly USDA export sales report is expected to show net U.S. wheat sales at 150,000 to 400,000 MT.
In SRW, bulls' next upside objective is closing March futures above solid resistance at $8.00. Bears' next downside objective is closing prices below solid support at the October low of $7.25 3/4. First resistance is seen at this week’s high of $7.70 1/2, then at $7.80. First support is seen at this week’s low of $7.48, then at the January low of $7.35 1/2.
HRW bulls' next upside objective is closing March futures above solid resistance at $8.25. Bears' next downside objective is closing prices below solid support at $7.50. First resistance is seen at today’s high of $7.93 1/2, then at $8.00. First support is seen at $7.75, then at $7.65.
What to do: Get current with advised hedges. Wait on a price rebound to extend wheat sales.
Hedgers: You have hedges covering 20% of 2021-crop in short March SRW wheat futures at $7.57. You should also be 70% priced in the cash market on 2021-crop. You should have 20% of expected 2022-crop production forward-priced for harvest delivery.
Cash-only marketers: You should be 70% priced on 2021-crop. You should also have 20% of expected 2022-crop production forward-priced for harvest delivery.
Price action: March cotton futures surged 162 points, or 1.3%, to 117.64 cents per pound, the highest close in the contract’s lifetime. March futures also posted a contract high at 118.99 cents.
Fundamental analysis: Cotton futures soared after USDA made larger-than-expected cuts to its U.S. production and ending stocks estimates for the 2021-22 crop year. In its monthly Supply and Demand update, USDA reduced its projection for U.S. production by 660,000 bales, to 17.62 million bales, below expectations for a drop to about 18.24 million. Projected ending stocks were lowered 200,000 bales, to 3.20 million bales.
USDA also cut its global production forecast by about 610,000 bales, to 120.96 million bales, lowering expected ending stocks to 85.01 million bales from 85.73 million bales last month. But USDA also cut U.S. exports by 500,000 bales, to 15.0 million bales, citing lower U.S. crop and continuing logistical issues. Weakness in the U.S. dollar also supported cotton futures, as the U.S. dollar index fell to a two-month low.
Technical analysis: Cotton bulls had a solid near-term technical advantage before USDA’s reports and likely gained further upside fuel with a strong close today, as March futures closed above a key upside objective, the previous contact high at 118.50 cents. Bulls may now be targeting the psychologically important level at 120.00 cents, as well as 121.67 cents, a 10-year high reached in November, based on nearby futures. March futures ended today at slightly above 65 on the RSI, close to the 70 mark that’s typically considered overbought territory.
What to do: Get current with advised 2021- and 2022-crop sales.
Hedgers: You should be 100% priced 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% priced on 2021-crop. You should also have 40% of expected 2022-crop production forward-sold for harvest delivery.
