Crops Analysis | January 27, 2022
Price action: March corn futures fell 1 3/4 cents to $6.25 1/4 but are still up from $6.16 1/4 at the end of last week. December corn fell 6 cents to $5.66 3/4.
Fundamental analysis: Corn futures fell under corrective selling following yesterday’s close near a nine-month high, along with pressure from the U.S. dollar’s rally to 19-month highs, which also helped send wheat futures down sharply. Strengthening exports and shrinking crop prospects in South American kept prices underpinned. UDSA reported net 2021-22 U.S. corn sales of 1.402 MMT for the week ended Jan. 20, up 29% from the previous week and up 84% from the average for the previous four weeks. Sales topped trade expectations ranging 600,000 MT to 1.2 MMT. Weekly exports totaling 1.437 MMT, a marketing-year high, were up 36% from the prior four-week average.
Crop stress in South America remains concerning even with rains providing some relief this week. Parts of Paraguay and Brazil’s Rio Grande do Sul state received another round of rain yesterday, “but coverage of significant rain was poor leaving many areas in need of greater rain,” World Weather Inc. said. Recent rain in Rio Grande do Sul “has not been enough to significantly improve soil moisture in the drier areas in the west and stress to crops and declines in yields will increase until rain returns Feb. 3,” World Weather said.
Technical analysis: Corn bulls retain a near-term technical advantage with prices in a 4 1/2-month uptrend. Initial resistance is seen at yesterday’s high of $6.27 3/4, matched today, and at the seven-month intraday high of $6.31 reached Tuesday. A push above those levels would have bulls targeting the June high at $6.33 and the contract high at $6.40 1/2. Initial support is seen at the 10-day moving average of $6.11 1/4 and this week’s low of $6.09 1/2. March corn moved slightly away from overbought readings, ending today at 65 on the Relative Strength Index. A reading of 70 or higher is typically considered overbought.
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 8 1/4 cents to $14.48 1/4 after hitting a contract high at $14.56 1/2. March soybean meal rose $4.20 to $404.70, near a two-week high. March soybean oil rose 41 points to 64.34 cents after posting a contract high.
Fundamental analysis: A South America weather market and strong global demand continue to propel soybean bulls, sending March futures to a life-of-contract high for the second straight day. Crude oil rose to a seven-year high and Malaysian palm oil hit a record high, fueling the global “inflation trade” boosting many commodities and overshadowing a potentially bearish resurgent U.S. dollar. USDA reported solid net weekly U.S. soybean sales for 2021-22 totaling 1.026 MMT, up 53% from the previous week and up 77% from the prior four-week average. Lead buyers included China and Mexico.
World Weather said Paraguay, northern Argentina and southern Brazil have experienced excessive heat frequently, with extreme afternoon temperatures in the upper 90s and to over 100 degrees Fahrenheit. “The stretches of hot weather were accompanied by notable dryness, resulting in an extremely stressful environment for crops and widespread production cuts,” the forecaster said. “Some crops have completely failed.”
Technical analysis: Soybean futures bulls have a solid near-term technical advantage, with prices in a 10-week uptrend. The next near-term upside objective for bulls is closing March futures above solid resistance at $14.80. The next downside price objective for bears is closing prices below solid support at this week’s low of $13.82 1/2. First resistance is seen at today’s contract high of $14.56 1/2, then at $14.65. First support is seen at today’s low of $14.28 1/2, then at $14.15.
Soymeal bulls also have a near-term technical advantage. The next upside price objective for meal bulls is to close March futures above solid resistance at the contract high of $431.80. The next downside price objective for bears is closing prices below solid support at the January low of $387.40. First resistance comes in at today’s high of $409.70, then at $415.00. First support is seen at $400.00, then at today’s low of $396.30.
Soyoil bulls have a solid near-term advantage, with prices in a six-week-old uptrend. The next upside price objective for bulls is closing March prices above solid resistance at 67.50 cents. Bears' next downside objective is closing prices below solid support at this week’s low of 61.22 cents. First resistance is seen at today’s contract high of 64.86 cents, then at 65.00 cents. First support is seen at today’s low of 63.44 cents, then at 62.50 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: Winter wheat futures fell mostly 17 to 22 cents. March SRW wheat dropped 18 cents to $7.77, while the March HRW contract fell 22 1/4 cents to $7.93 1/2. Spring wheat futures declined mostly 13 to 14 cents with the March contract down 13 3/4 cents to $9.02 1/2.
Fundamental analysis: Wheat futures were pressured by strong gains in the U.S. dollar index, which surged to the highest levels since July 2020. That prompted concerns about impacts to already struggling export demand and caused traders to dump long positions. Additional pressure came from ideas of reduced risks of an imminent attack on Ukraine by Russia. While tensions in the region are still high, traders’ worries have eased.
Weekly wheat export sales were a pleasant surprise at 676,700 MT for 2021-22, which was a marketing-year high. USDA also reported sales of 60,000 MMT for 2022-23. But total export commitments (exports plus outstanding sales) are still 21% behind year-ago and 16% behind the five-year average. It’s going to take a lot of bullish surprises in weekly export data to shift in attitudes on the demand side of the market for wheat. If the dollar continues to strengthen and if Russia doesn’t invade Ukraine and cause disruptions to Black Sea exports, hopes for bullish surprises for U.S. wheat export demand seem slim.
Technical analysis: Price action in March SRW wheat futures the last three days suggests Monday’s high was a short-term top. Near-term support is the 100-day moving average at $7.73 1/4 and the 20-day average at $7.72 1/2. The violated downtrend drawn off the November and December highs intersects around $7.69 on Friday and falls about 2 1/2 cents each day thereafter. Violation of aforementioned moving averages and falling back into the downtrend would point the contract toward a near-term test of this month’s low at $7.35 1/2. Near-term resistance is layered from the $7.95 area to Monday’s high at $8.31 1/2.
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 70 points to 121.63 cents per pound, closing near the middle of today’s range.
Fundamental analysis: Cotton futures fell under modest profit-taking from recent gains but are still not far below last week’s 10-year high. Dollar strength, which makes dollar-denominated commodities more expensive for foreign buyers, contributed to price weakness, as did renewed declines in U.S. stocks.
Strong global demand is likely to continue to keep cotton prices at elevated levels for the near-term. USDA reported net weekly U.S. cotton sales of 391,300 running bales (RB) for 2021-22 were up 43% from the previous week and up 55% from the prior four-week average. Increases were primarily for Vietnam, India and China. Net sales of 106,800 RB were reported for 2022-23. Exports of 197,900 RB were unchanged from the previous week, but up 25% from the prior four-week average. The destinations were primarily to China, Vietnam and Turkey.
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.
