Crops Analysis | January 31, 2022

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Corn ­

Price action: March corn futures fell 10 cents to $6.26 after reaching a contract high overnight at $6.42 1/2. December corn rose 4 cents to $5.73 1/2.

Fundamental analysis: Old-crop corn futures tumbled on profit-taking and spillover from sharp declines in the wheat market, which dropped in part on easing concerns over a potential Russian invasion of Ukraine. For corn, wheat’s weakness overshadowed an extended rally in soybeans, which reached the highest levels since June on shrinking crop prospects for Southern America. Also today, USDA reported 1.036 MMT (40.8 million bu.) of corn inspected for export during the week ended Jan. 27, down from 1.186 MMT the previous week. Expectations ranged from 950,000 MT to 1.4 MMT.

Large speculators increased their bullish bets in the corn market in late January after scaling back earlier in the month, the Commodity Futures Trading Commission’s weekly Commitments of Traders report showed. The managed money net long rose 39,082 contracts during the week ended Jan. 25 to 365,605 contracts, the first weekly increase since Dec. 28.

Technical analysis: Corn’s price action today suggested the market may be near a near-term peak and a bearish key reversal may be in the works, but further weakness tomorrow is needed to confirm that. Futures remain in a strong uptrend since mid-January and have backed away from oversold readings late last week. Initial resistance is marked at today’s contract high of $6.42 1/2 in March futures, with further resistance seen around $6.50. Initial support is seen at the 10- and 20-day moving averages at $6.19 and $6.09 1/4, respectively.

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: Old-crop soybeans ended 17 to 20 cents higher, with the March contract up 20 1/2 cents to $14.90 1/2. New-crop November futures firmed 15 1/2 cents to $13.67. Soymeal futures strengthened around $7, with the March contract up $7.70 to $418.90. Soyoil futures dropped around 40 points, with the March contract down 45 points to 64.82 cents.

Fundamental analysis: Mounting concerns over the South American soybean crop fueled today’s runup to new contract highs in soybeans and solid gains in soymeal. Private crop forecasters continue to cut crop forecasts amid stress from drought in southern Brazil. While there are some rains in the two-week forecast for both Brazil and Argentina, damage has already been done from recent extreme heat and the building drought stress. Still, traders will monitor weather forecasts closely and any perceived shift in the weather pattern could curb buyer interest.

Weekly soybean export inspections totaled 1.411 MMT (51.7 million bu.). Inspections are running 23.6% behind year-ago, whereas USDA projects exports will decline 9.5% from 2020-21. To hit USDA’s export forecast of 2.05 billion bu., weekly inspections need to average 21.1 million bu. the remainder of the marketing year. Seasonally, soybean shipments are slowing as South American supplies will be available soon, though its production won’t be as large as once thought.

Technical analysis: March soybean futures posted a contract high at $14.96 3/4, the highest price for a front-month contract on the continuation chart since June 2021. Bull’s next hurdle will be the psychological $15.00 mark, followed by 2014 peak at $15.36 3/4. The old contract high at from June 2021 at $14.45 1/2 is key near-term support.

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 fell 25 cents to $7.61 1/4, the contract’s lowest closing price since $7.41 1/2 on Jan. 14. March HRW futures fell 21 cents to $7.81 1/4, the lowest close since Jan. 18. March spring wheat fell 13 3/4 cents to $9.06 1/2.

Fundamental analysis: SRW futures dropped to the lowest levels in over two weeks and HRW and spring wheat also tumbled amid signs of easing Russia-Ukraine tension and expectations for moisture relief for dry cropland in the U.S. Plains. A storm later this week is expected to bring 2 to 6 inches of snow to primary HRW production areas from the Texas Panhandle into western and central Kansas, eastern Colorado and southwestern Nebraska, World Weather Inc. said. The snow, once melted, may boost some HRW ground following months of little to no precipitation, though more moisture is needed for stressed crops. “The moisture will be welcome, but it may not survive all the way into spring unless frequent follow up precipitation takes place,” World Weather said.

USDA earlier today reported 361,375 MT of U.S. wheat inspected for export during the week ended Jan. 27, down from 400,973 MT the previous week. The number was within trade expectations and in-line with seasonal tendencies.

Technical analysis: Winter wheat futures have demonstrated patterns of fits and starts, leading to sideways, choppy trade in recent weeks. Winter wheat bulls still have a slight near-term technical advantage but are fading. SRW bulls' next upside price objective is closing March futures above solid resistance at the January high of $8.31 1/2. Bears' next downside objective is closing March below solid support at the January low of $7.35 1/2. First resistance is seen at $7.75 and then at $7.85. First support is seen at today’s low of $7.56 3/4 and then at $7.50.

In HRW, bulls' next upside price objective is closing March futures above solid resistance at the January high of $8.49 1/4. Bears' next downside objective is closing prices below solid support at the January low of $7.43 3/4. First resistance is seen at $8.00, then at today’s high of $8.17. First support is seen at today’s low of $7.77, then at 7.65.

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 rose 381 points to 127.57 cents per pound, the highest settlement for a nearby contract since mid-2011.

Fundamental analysis: Cotton futures extended last week’s late upturn to reach the highest levels in 10 1/2-years behind strength in crude oil and U.S. stocks, and optimism over demand. The S&P 500 index was up about 1.5% late today as the market continued recovering from sharp declines earlier this month. Weakness in the dollar also supported cotton futures. The U.S. dollar index fell about 0.7% after surging last week to 19-month highs. A weaker dollar makes dollar-denominated commodities cheaper for foreign buyers.

Cotton price strength indicates traders expect to see continued strength in U.S. export demand. Last week, USDA reported net U.S. export sales for the week ended Jan. 20 at 391,300 bales for 2021-22, up 43% from the previous week and up 55% from the average for the previous four weeks. Speculators cut net long positions in cotton futures by 1,720 contracts, to 75,075 contracts, in the week to Jan. 25, CFTC data showed.

Technical analysis: Cotton bulls retain a solid near-term technical advantage as prices extended a steep, six-week uptrend, though March futures ended today at slightly over 73 on the Relative Strength Index, above the 70 reading typically viewed as overbought territory. Upside objectives for bulls include closing March futures above solid resistance at 140.00 cents. For bears, downside objectives include closing prices below solid support at 118.50 cents. Initial resistance is seen at today’s March contract high of 127.71 cents. Initial support is seen at the 10-day moving average of 122.52 cents and Friday’s intraday low at 120.01 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.

 

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