Crops Analysis | January 13, 2022
Price action: Corn futures finished low-range with losses of 10 to 11 cents in old-crop contracts. March corn dropped 11 1/2 cents to $5.87 1/2.
Fundamental analysis: Corn futures faced increased selling pressure and long liquidation today amid a broad-based selloff across the grain and soy markets. A potential change in weather patterns in South America provided fundamental pressure. Forecasts indicate rains will move into dry areas of southern Brazil this weekend, with better chances next week. Argentina is also line for some rains and cooler temps from the weekend through next week. While the coming rains will provide temporary relief from moisture and heat stress for crops, more will be needed.
Corn export sales were below expectations at 457,700 MT for the week ended Jan. 6. Weekly exports totaled 1.012 MMT. Total export commitments (outstanding sales plus exports) are running 8.6% under year-ago. After yesterday downward adjustment, USDA forecasts 2021-22 corn exports down 12% from last year.
Technical analysis: March corn closed below the 40- and 50-day moving averages for the first time since Oct. 15, and Oct. 21, respectively. Still, today’s price action didn’t hurt the technical posture, though bulls must defend support at the Jan. 3 low at $5.84 3/4 or short-term momentum will swing to bears. Violation of the Jan. 3 low would open the downside to the 100-day moving average near $5.65 and the Nov. 30 low at $5.62 1/2. Bulls must push prices above the 10-day average around $5.99 and the psychological $6.00 mark to suggest a short-term low.
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 soybean futures fell 22 cents to $13.77 1/4, the contract’s lowest closing price since $13.55 1/2 on Jan. 3. March soybean meal fell $7.30 to $408.90. March soybean oil fell 93 points at 58.44 cents per pound.
Fundamental analysis: Profit-taking pressure and forecasts for much-needed rain in South America sent soy complex prices lower, with March soybean settling at the lowest price in over a week, following yesterday’s USDA-driven gains. Lackluster exports also weighed on soybeans
Dry conditions stressing crops in South America continue to drive a weather market. Southern Brazil is expected to see a shift in its weather pattern this weekend as Parana and nearby areas benefit from rain before showers and thunderstorms become better organized Jan. 16-23 from Rio Grande do Sul to Parana, World Weather Inc. said today. “Rain 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.” In Argentina, temperatures yesterday reached 100 to 110 degrees Fahrenheit and little rain fell.
Early today, USDA reported net U.S. soybean sales of 735,600 MT for the week ended Jan. 6, up 92% from the previous week but down 1% from the four-week average and at the lower end of expectations. China was a lead buyer. The Rosario Grain Exchange lowered its outlook for Argentina’s soybean crop, cutting its estimate 5 MMT, to 40 MMT.
Technical analysis: Bulls could argue this week’s choppy and consolidative price action is actually a healthy development to sustain priced uptrends. Soybean bulls have a solid near-term technical advantage, with prices in a two-month uptrend. The next near-term upside objective for bulls is closing March futures above solid resistance at the June high of $14.45 1/2. The next downside objective for bears is closing futures below solid support at $13.34 1/2. First resistance is seen at $14.00, then at the January high of $14.15. First support is seen at this week’s low of $13.66 1/2, then at $13.50.
Soymeal bulls have a solid near-term advantage with prices in a nearly three-month uptrend. The next upside objective for bulls is closing March futures above solid resistance at $440.00. The next downside objective for bears is closing prices below solid support at $398.20. First resistance comes in at today’s high of $415.90, then at $420.40. First support is seen at today’s low of $403.80, then at $400.00.
Soyoil bulls have a near-term technical advantage. The next upside objective for bulls is closing March prices above solid resistance at 61.44 cents. Bears' next downside price objective is closing prices below solid support at 55.00 cents. First resistance is seen at the January high of 59.68 cents, then at 60.00 cents. First support is seen at this week’s low of 57.52 cents, then at 57.00 cents.
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 11 cents to $7.46 3/4, the lowest close in a week. March HRW futures fell 18 1/4 cents to $7.59 1/4, the lowest closing price since $7.54 on Oct. 21. March spring wheat fell 25 cents to $8.95 1/2, the lowest settlement since Sept. 29.
Fundamental analysis: Wheat futures fell sharply a second straight day in the wake of USDA’s higher-than-expected U.S. winter crop seedings estimates. USDA estimated all U.S. winter wheat seedings for the 2022 harvest at a six-year high of 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.
Sluggish exports continued to burden wheat futures. USDA reported net U.S. wheat sales of 264,400 MT for the week ended Jan. 6 were up “noticeably” from the previous week, but down 20% from the prior four-week average, USDA said. Expectations ranged from 150,000 to 400,000 MT. Accumulated wheat export sales so far this marketing year, at 4.32 MMT, are 25% below the same period last year.
Also today, the International Grains Council (IGC) raised its forecast for 2021-22 global wheat production, partly driven by an improved outlook for the crop in Australia. In its monthly update, IGC increased its 2021-22 world wheat crop outlook by 4 MMT to 781 MMT. Strategie Grains cut its forecast for European Union soft wheat exports in 2021-22 citing strong competition from the Black Sea region and Argentina.
Technical analysis: Chart patterns have eroded substantially for winter wheat futures, with March SRW sustaining a downtrend since late November. March SRW futures have support at this week’s low of $7.35 1/2 and at the 200-day moving average at $7.34 1/4. A push below those levels may have bears targeting the October low at $7.25 3/4. First resistance is seen at this week’s high of $7.70 1/2, then at $7.80.
HRW bears' downside objectives include closing March futures below last week’s low at $7.54 1/2 and support at $7.50. First resistance is seen at yesterday’s high of $7.93 1/2, then at $8.00.
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 fell 80 points to 116.84 cents per pound today.
Fundamental analysis: After March futures posted a contract yesterday, cotton futures pulled back on profit taking from shorter-term futures traders. Prices yesterday rallied after USDA lowered the 2021 U.S. cotton crop by a larger-than-expected 660,000 bales. USDA also reduced its U.S. export forecast by 500,000 bales.
Losses in cotton futures today were limited by an upbeat weekly USDA export sales report. Net sales of 401,000 running bales (RB) for 2021-22 were up noticeably from the previous week and up 85% from the average for the previous four weeks. Increases were primarily for China (139,500 RB) and India (74,700 RB). Exports of 167,600 RB were up 60% from the previous week and up 27% from the prior four-week average.
Cotton futures traders will continue to keep a close eye on the key outside markets. Recently, higher crude oil prices and a weakening U.S. dollar index have been friendly influences on the cotton market, as has a resilient U.S. stock market.
Technical analysis: The cotton futures bulls still have a solid near-term technical advantage. Prices are in a five-week uptrend. The next upside price objective for bulls is closing in March futures above solid resistance at 125.00 cents. The next downside objective for bears is closing prices below solid support at 112.50 cents. First resistance is seen at the contract high of 118.99 cents and then at 120.00 cents. First support is seen at 115.70 cents, then at 115.00 cents.
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.
