Crops Analysis | January 21, 2022
Price action: March corn futures rose 5 1/4 cents to $6.16 1/4, a gain of 20 cents for the week and the contract’s highest closing price since $6.22 on June 10.
5-day outlook: Corn futures rose for the fifth straight day and settled at the highest levels in over seven months on strengthening export demand. Earlier today, USDA reported net U.S. corn sales for 2021-22 of 1.091 MMT for the week ended Jan. 13, more than double the previous week and up 48% from the average for the previous four weeks. Sales topped expectations ranging from 500,000 MT to 1 MMT. Weekly exports of 1.298 MMT, a marketing-year high, rose 28% from the previous week and 29% from the four-week average. The market’s strong performance this week sets it up for further gains next week, especially if March futures can break above the late-December high at $6.17 3/4.
30-day outlook: South America weather will be closely followed in coming weeks after extreme heat and dryness prompted many forecasters, including USDA, to cut production estimates. Some rain relief may reach dry areas later this month, but dryness remains concerning. Paraguay and far southern Brazil will see little to no rain of significance and hot temperatures through tomorrow, and crop stress and yield reductions will increase as moisture from recent rain is lost to evaporation, World Weather Inc. said today. Rain will increase in Rio Grande do Sul Sunday into Monday before Paraguay and the remainder of far southern Brazil see an increase in rain Jan. 25-28. USDA will update its Supply and Demand figures on Feb. 9.
90-day outlook: Sustained strength in exports will be required for corn futures to hold above $6.00. Crude oil futures reached a seven-year high this week, and continued gains could encourage speculators to boost bullish bets in grain markets as the “inflation trade” gains momentum. Strong demand from domestic ethanol producers could also underpin corn prices over the winter, though record ethanol stocks and weaker margins may slow distiller operations in the weeks ahead. Later this winter, market focus will shift toward the spring planting outlook and prospects for reduced corn acres at the expense of corn. We project a decline of 3 million acres in corn plantings in 2022 from 93.4 million acres planted in 2021.
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 fell 11 1/2 cents to $14.14 1/2, but still rose 44 1/2 cents for the week. March soybean meal fell $8.10 to $392.70 per ton, down $12.90 for the week. March soybean oil fell 12 points to 63.00 cents per pound, up 454 points for the week
5-day outlook: Soybean futures on Friday fell under profit-taking pressure following this week’s rally to seven-month highs. Net weekly soybean sales of 671,000 MT for 2021-22 came in at the low end of expectations and were also down 9% from the previous week, but up 12% from the prior four-week average. USDA’s announcement of a daily sale of 132,000 MT of soybeans to China for 2021-22 encouraged market bulls, and traders will be watching for any additional China purchases next week. If March futures can push above yesterday’s high at $14.29 1/2, bulls may gain fresh impetus to target the contract high of $14.45 1/2, reached June 7.
30-day outlook: South American weather during the late growing season and early harvest results will be closely watched. Several private analysts cut projections for Argentine and Brazilian production this month, though smaller crops are factored into soybean prices at current levels and it would likely take further cuts of substance to push prices even higher, including from USDA. The agency’s estimates for Argentina and Brazil in the Feb. 9 Supply and Demand update will be of keen interest. Dry areas of South America may receive rain relief before the end of the month, but dryness remains a concern.
90-day outlook: South America’s harvest will accelerate in February, with Brazil’s shipments reaching global export channels. Even with a smaller crop, Brazil may still garner the lion’s share of global soybean exports. U.S. soybean exports still lag last year’s levels. Focus will soon shift toward spring U.S. planting and widespread expectations soybean acres will increase in light of soaring fertilizer costs for corn. We expect soybean plantings to increase 1.2 million acres from 87.2 million acres in 2021.
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 10 1/4 cents to $7.80, up 38 1/2 cents for the week. March HRW wheat fell 3 1/4 cents to $7.93 1/4, up 48 1/4 cents for the week. March spring wheat futures fell 8 3/4 cents to $9.36, up 57 3/4 cents for the week.
5-day outlook: Wheat futures fell in a corrective pullback after this week’s solid gains. Don’t be surprised to see some fresh technical buying interest in the winter wheat futures early next week. Wheat futures prices are likely to remain supported by the uncertainty regarding a potential Russia invasion of Ukraine and implications for global wheat trade. Both countries are major wheat producers.
Traders will also watch for weather updates for the Midwest and Plains. World Weather today reported that a second morning of bitter cold conditions occurred in parts of the Midwest and Great Plains. The cold brought subzero-degree low temperatures as far to the south as central Missouri and east-central Kansas as well as west-central Illinois. The lack of snow and temperatures in the negative single digits may have led to some wheat damage, said World Weather, although no accurate assessment of the impact will be possible prior to spring.
30-day outlook: The bulls today got a solid weekly USDA export sales report. Net weekly U.S. wheat sales totaled 380,600 MT for 2021-22, up 44% from the previous week and up 62% from the prior four-week average. Weekly shipments for 2021-22 of 391,400 MT were up 52% from the previous week and up 57% from the prior four-week average. If weekly U.S. wheat sales/export numbers continue to come in at a good pace, bulls can argue the present elevated futures prices are warranted. The U.S. dollar index has seen its price uptrend stall out, which is also beneficial in making U.S. wheat prices a bit more competitive on world markets.
90-day outlook: Plains drought likely will lead to higher-than-normal acreage abandonment this year, but U.S. wheat stocks still look to be ample. We do expect spring wheat and durum seedings to rise, which could help replenish tight spring wheat stocks. Overall, look for wheat futures traders in the coming weeks to look more to the corn and soybean markets for direction, as key drivers of those markets will be more clarity on the South American crops that have been damaged by drought, and upcoming U.S. planted corn and soybean acreage estimates.
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 fell 212 points to 120.75 cents per pound, still up 105 points for the week.
5-day outlook: The cotton outlook depends heavily upon exports over the coming weeks. Today’s USDA weekly export sales report seemed supportive, since the 2021-22 sales figure at 273,000 running bales (RB) was supplemented by sales of 139,200 bales for 2022-23. Moreover, the shipments figure at 198,700 bales was the largest since early last September. The market will watch for developments likely to affect cotton export demand, with moves in soybeans, crude oil, the U.S. dollar and the equity indexes potentially affecting cotton prices. Next week’s Federal Reserve meeting might also influence the market.
30-day outlook: While the latest export figure was impressive when compared to rates seen through fall and early winter, it must grow substantially to meet the target set by the export sales totals posted in recent months. If shipments don’t continue rising, the market might easily set back from greatly elevated levels as the industry starts anticipating cancellations of prior export sales. Traders will also begin turning their attention to 2022 U.S. crop prospects. Of particular importance will be the results of the National Cotton Council’s annual grower survey to be published the weekend of Feb. 12-13.
90-day outlook: Longer-term direction hinges on the pace of U.S. cotton export sales and shipments, with the latter likely to be particularly important in coming weeks due to the port damage done by Hurricane Ida late last summer, as well as the subsequent shortage of shipping containers. The outside markets, particularly the value of the U.S. dollar and the equity markets, will likely affect both old- and new-crop contracts due to their implications for the U.S. and global economic situations. Traders will be watching spring planting developments and acreage estimates in order to get an early handle on fall harvest prospects. The cost of inputs, particularly fuel, fertilizer and farm chemicals, could also prove extraordinarily important this coming spring.
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.
