Crops Analysis | January 28, 2022

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Corn ­

Price action: March corn rose 10 3/4 cents to $6.36, the contract’s highest close since $6.40 on May 7 and a gain of 19 3/4 cents for the week. December corn rose 2 3/4 cents to $5.69 1/2.

5-day outlook: Corn futures carry strong upside momentum into next week, assuming soybeans and/or wheat markets don’t sell off after trade opens again Sunday night. Continued gains in crude oil futures, which reached the highest levels since late 2014 this week, could provide a further boost, and Russia-Ukraine tensions will continue to be closely followed. South American weather remains in market focus. Southern Brazil received some rain relief this week, but the country’s first corn crop has already suffered damage due to drought or extended dryness. Paraguay into Brazil’s Santa Catarina and Rio Grande do Sul will see a drier weather pattern through Feb. 2 and stress to crops will increase as moisture from recent rain is lost to evaporation, while areas that missed out on rain recently will see steady declines in crop yields, World Weather Inc. said today.

30-day outlook: The U.S. dollar’s resurgence over the past two weeks may emerge as a bearish factor for grain markets, potentially curbing export demand as dollar-denominated commodities grow more expensive for foreign buyers. The U.S. dollar index hit a 19-month high this week. Corn futures likely require continued rallies in soybeans and/or wheat, along with sustained export strength, to remain at elevated levels over the longer-term. UDSA yesterday reported net 2021-22 U.S. corn sales of 1.402 MMT for the week ended Jan. 20, up 84% from the average for the previous four weeks. Weekly exports totaling 1.437 MMT, a marketing-year high, were up 36% from the prior four-week average

90-day outlook: South American weather will become less of a factor as trade focus moves to the U.S. planting outlook and the prospect that high fertilizer costs may compel farmers to shift acreage away from corn and toward soybeans. We expect U.S. corn plantings to decline 3 million acres this year to an estimated 90.4 million acres. Assuming a trendline yield, our expected plantings would result in just a fractional decline in total supply. USDA’s Prospective Plantings report March 31 promises to set the market tone for much of spring.

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 surged 21 3/4 cents to $14.70, a contract-high close for the third consecutive day and a gain of 55 3/4 cents for the week. March soybean meal rose $6.50 to $411.20 per ton, a gain of $18.50 for the week, and March soybean oil rose 93 points to 65.27 cents per pound, the highest close for a nearby contract since Aug. 10

5-day outlook: The soy complex should carry strong upward momentum into next week after drought in South America and Malaysian palm oil’s rally to record highs sent nearby soybeans to the highest settlement since June. Any weekend weather shifts in South America, along with early harvest progress and results, have potential to move prices, and traders will watch for any additional export business after USDA reported a flurry of soybean sales today. Exporters sold 141,514 MT of soybeans for delivery to Mexico and 251,500 MT to “unknown destinations,” both during the 2021-22 marketing year. USDA also reported exporters sold 264,000 MT of soybeans for delivery to China during the 2022-23 marketing year.

30-day outlook: Early-harvest results from Argentina and Brazil and more cuts to private analyst crop estimates could provide added upside impetus ahead of USDA’s Supply and Demand update Feb. 9, though South America’s likely harvest shortfall may be largely factored into prices. Further gains in crude oil and palm oil markets could pull soy complex prices even higher. Indonesia, the world's biggest palm oil producer and exporter, announced a 20% mandatory domestic sales obligation for all palm producers to slow soaring cooking oil prices. The move boosted Malaysian palm oil futures to a record high today at 5,639 ringgit ($1,346.47) per MT.

90-day outlook: Harvest in South America will accelerate next month, sending fresh supplies into global export channels, and market focus will shift to the U.S. spring planting outlook and a likely boost in soybean acres. USDA’s annual Prospective Plantings report March 31 will be of keen trade interest (we expect soybean plantings to increase 1.2 million acres from 87.2 million acres in 2021). As South American weather becomes less of a market factor, soybean prices likely require a continuation of recently strong export demand to remain elevated. USDA yesterday reported net weekly U.S. soybean sales for 2021-22 totaling 1.026 MMT, up 77% from the prior four-week average. But total export commitments (exports plus outstanding sales) for 2021-22 still lag about 18% behind year-ago levels.

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.

 

Wheat

Price action: March SRW wheat futures rose 9 1/4 cents to $7.86 1/4, up 6 1/4 cents for the week. March HRW futures rose 8 3/4 cents to $8.02 1/4, up 9 cents for the week. March spring wheat futures surged 19 3/4 cents to $9.20 1/4, up 15 3/4 cents for the week.

5-day outlook: Wheat futures this week kept with the pattern of recent months: big spurts higher followed by sizeable drops lower. Charts still favor the wheat market bulls, suggesting more upside potential next week. A potential Russian invasion of Ukraine remains perhaps the largest near-term market factor and should limit selling interest. Ideas of a reduced risk of an invasion contributed to selling in wheat late this week. Whether wheat can extend a recent uptick in exports will also be watched closely. USDA yesterday reported net weekly U.S. wheat export sales at 676,700 MT for 2021-22, a marketing-year high. Still, total export commitments are 21% behind year-ago and 16% behind the five-year average.

30-day outlook: Continued strength in the U.S. dollar could crimp global demand for U.S. wheat, which was already uncompetitive on the world market. USDA will update its U.S. and global wheat balance sheet figures in its monthly Supply and Demand report Feb. 9.

90-day outlook: There are growing beliefs Plains drought will cause substantial crop damage and acreage abandonment this year. The Northern U.S. Plains are expected to receive a blast of Arctic air in early February and limited snowfall prospects suggest little moisture relief for the dry soils. Weather in U.S. wheat regions heading into springtime will likely garner front-burner market status for futures traders at that time.

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.

 

Cotton

Price action: March cotton futures rallied 213 points to 123.76 cents per pound, after scoring a contract high at 125.60 cents. The contract gained 301 points this week, its eighth consecutive weekly gain.

5-day outlook: The U.S. dollar will be one key to cotton market direction next week. The U.S. dollar index eased today after surging to 19-month high yesterday, encouraging futures buyers. Strong export demand, if sustained, may provide a further price boost. USDA yesterday reported net weekly U.S. export sales at 391,300 bales for 2021-22 and 106,800 bales for 2022-23, both robust figures considering elevated futures prices. Recent shipments numbers raise concern over the industry’s ability to get previously sold cotton shipped overseas, which may also support prices.    

30-day outlook: Traders will likely continue focusing on the export outlook through early February, with increasing attention on the pace of shipments, which must accelerate to attain export targets. USDA’s Supply and Demand update Feb. 9 will include updates on U.S. cotton export estimates. Attention will then shift to the National Cotton Council’s annual meeting Feb. 11-13, which will include an estimate for spring 2022 U.S. cotton plantings.  Crude oil and the dollar will continue to exert influence.

90-day outlook: Look for more of the same into spring, with the export situation exerting the most influence over cotton prices. However, spring plantings, planted acres and how weather affects seedings will take increasing precedence with traders. A continuation of dryness in the Southwest could prove especially important.

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.

 

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