Crops Analysis | January 25, 2022
Price action: March corn futures fell 1 cent to $6.20, near the session low after hitting a seven-month high earlier. New-crop December corn futures hit a contract high and closed up 2 1/4 cents at $5.69 3/4.
Fundamental analysis: Today’s low-range close in March corn suggests market bulls are exhausted and prices may consolidate for a few sessions. Early strength in corn early stemmed from big gains in the wheat market and a solid rebound in crude oil futures prices following yesterday’s losses. Improved rain chances for South American growing regions pressured prices. World Weather Inc. expects Paraguay and far southern Brazil to receive significant rain the next few days, with additional chances for rain through the first week of February. “Crops that have not been too badly harmed by hot and dry weather should see an increase in yield potentials,” the forecaster said.
The U.S. stock market has become wobbly and volatile the past few sessions, with the S&P 500 index dropping to a seven-month low earlier today before rebounding sharply. If high volatility and price weakness continues, further corn futures upside will likely be limited. The U.S. dollar index also rebounded solidly from its January low, another outside element that could work to squelch buyer interest in corn futures.
Technical analysis: The corn futures bulls have the solid overall near-term technical advantage. Prices are in a 4.5-month-old uptrend on the daily bar chart. The next downside target for the bears is closing March prices below chart support at $6.00. The next upside price objective for the bulls is to close March prices above solid chart resistance at last May’s contract high of $6.40 1/2. First resistance is seen at today’s high of $6.31 and then at $6.33. First support is at today’s low of $6.18 1/2 and then at $6.10.
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 4 1/4 cents to $14.07 1/4 after dropping as low as $13.93 1/4 during morning trading. March soymeal fell $1.90 to $392.00 per ton and March soyoil rose 54 points to 62.51 cents per pound.
Fundamental analysis: Soybean futures fell overnight on expectations rain this week will provide some relief to dry areas of South America but bounced back as the wheat market extended a rally. Strong domestic crushing demand also supported soybean prices. Forecasts call for improved rain chances and more seasonal temperatures in southern Brazil as a cold front moves through the region this week, after two weeks of temperatures exceeding 100 degrees Fahrenheit, Pro Farmer consultant Michael Cordonnier noted. Cooler temperatures “might start to stabilize the crops,” Cordonnier said in a report. He maintained his estimates for Brazilian and Argentine soybean production at 134 MMT and 43 MMT, respectively, while lowering his soybean estimate for Paraguay by 1 MMT, to 6 MMT. Cordonnier had cut his Brazil soybean forecast five times since late December.
Much of Argentina will receive additional rain through Thursday, inducing further improvements in crop and soil conditions, World Weather said today. “Late corn and soybean planting should increase as a result of the rain and some replanting may occur where newly planted withered and died,” World Weather said.
Technical analysis: Soybean futures remain in an uptrend since early November but appeared to have lost some momentum with lower closes two of the past three sessions. Bulls likely need to push March futures above the seven-month high of $14.29 1/2, posted Jan. 20, to extend the rally, with further resistance seen at the contract high of $14.45 1/2. March soybeans traded within yesterday’s range bounded by $13.82 1/2 and $14.23 1/4. Initial support is seen at the 10- and 20-day moving averages at $13.93 1/2 and $13.83 1/2, respectively.
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 rose 17 1/2 cents to $8.18, around the middle of the day’s range and the contract’s highest close since Nov. 29. March HRW wheat rose 16 1/2 cents to $8.34 1/2, the highest close since Dec. 27. March spring wheat fell 1 1/4 cents to $9.47 1/4, after rising earlier to $9.65.
Fundamental analysis: SRW wheat futures closed near a two-month high and HRW futures settled at the highest price in a month behind ongoing concerns a potential Russia invasion of Ukraine may disrupt the global wheat trade. Russia is the world’s top wheat exporter and Ukraine is also a major grain supplier. Prices were also supported by state crop condition reports that reflected further drought-driven deterioration in the U.S. Plains HRW crop.
In Kansas, the HRW acres rated “good” to “excellent” dropped to 30%, down three points from the end of December, reports showed. Oklahoma’s good-to-excellent rating fell four points to 16%, Colorado fell five points to 20% and Nebraska fell three points to 36%. When the individual state HRW crop ratings are plugged into the weighted Pro Farmer Crop Condition Index (CCI; 0 to 500 point scale, with 500 being perfect), the HRW crop fell to 270.4, down 54.1 points from the end of November when USDA released its final national ratings until spring.
Technical analysis: Winter wheat bulls gained further momentum as SRW pushed above December highs, though the market gave back part of today’s advances during the last hour of trade. Initial resistance is seen at today’s high of $8.31 1/2, and bulls may now be targeting the March contract high of $8.67 1/2, posted Nov. 24. Initial support is seen around the psychologically important $8.00 mark and the 50-day moving average around $7.94 1/2.
In HRW futures, upside objectives include closing above resistance at $8.50 and at the December high of $8.71, along with the contract high of $8.92 1/4, posted Nov. 24. Support includes today’s low at $8.18 1/4 and the 50-day moving average at $8.16 1/4.
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 rose 54 points to 120.92 cents per pound after trading within yesterday’s range.
Fundamental analysis: Cotton futures rose for the first time in four sessions behind a sharp bounce in U.S. stocks. The direction of cotton prices still depends heavily upon export demand, particularly on forthcoming sales, as well as the domestic industry’s ability to get previously sold fiber shipped to overseas customers. Future cotton sales to the export markets will likely be affected by the equity markets and their implications for U.S. and global economic growth. The U.S. dollar will also affect the sales pace. Today the U.S. dollar index climbed near a three-week high, and continued strength may mute buying interest.
The cotton shipments pace depends on domestic availability of shipping containers and ports’ ability to get goods loaded and moved out. While the shipments pace has improved significantly in recent weeks, it still lags behind the rate needed to get all the previously-sold cotton shipped. Nevertheless, continued futures strength implies considerable industry confidence that those bales will get moved.
Technical analysis: While cotton futures have set back since making new highs last week, bulls still own a short-term technical advantage. Bears weren’t able to force the March futures below the 10-day moving average at 120.01 cents. Psychological support lies at around the 120.00 level, with secondary support at the previous high of 118.50 cents. A drop below that level would probably have bears targeting 115.00 cents, then 112.00. Look for initial resistance at yesterday’s high of 122.50, then last week’s contract high at 124.78 cents, with considerable backing from psychological resistance at 125.00. A close above the latter point would have bulls targeting the 140.00 level.
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.
