Crops Analysis | February 1, 2022
Price action: March corn futures rose 8 3/4 cents to $6.34 3/4, nearer the session high. December futures rose 4 1/4 cents to $5.77 3/4, after posting a contract high at $5.79 3/4.
Fundamental analysis: Corn futures rose with spillover from strength in soybeans and wheat, as a shrinking crop outlook in South American continued to encourage speculative buying in grains. The U.S. dollar weakened for a second day, providing further support for grains. Pro Farmer Crop Consultant Michael Cordonnier kept his corn production forecasts for Argentina and Brazil unchanged at 51 MMT and 112 MMT, respectively. He holds a neutral-to-lower production bias for both countries.
“Brazil’s 2021-22 total corn production is now going to depend on the safrinha (second) crop,” Cordonnier said in his weekly report. “The first corn crop was severely impacted by the drought in southern Brazil and there is now a strong financial incentive to plant as much safrinha corn as possible.”
After today’s close, USDA reported corn processed for ethanol in December at a higher-than-expected 485.8 million bu., up from 466.9 million bu. in November and up from 431.7 million in December 2020. The numbers illustrated strong domestic ethanol demand that’s contributed to the corn market’s rally in recent months. Also today, USDA reported a daily corn sale of 110,000 MT to Mexico for 2021-22.
Technical analysis: Corn futures saw little follow-through selling today after yesterday’s losses, so a potentially bearish “key reversal” lower on the daily bar chart was not confirmed. Bulls have a solid near-term technical advantage with prices in a 4 1/2-month uptrend. The next downside target for bears is closing March futures below support at $6.00. The next upside objective for bulls is to close March above solid resistance at $6.50. First resistance is seen at the contract high of $6.42 1/2, then at $6.47. First support is at $6.28, then at this week’s low of $6.22 1/2.
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 38 cents to $15.28 1/2, the highest close for a nearby contract since June. March soymeal rose $17.10 to $436.00 per ton, the highest settlement for a nearby contract since prices topped $450.00 in mid-May. March soyoil rose 101 points to 65.83 cents per pound.
Fundamental analysis: Soybean futures soared to contract highs for the fourth straight session on fresh export business and expectations a smaller South American crop will boost demand for U.S. beans. Pro Farmer consultant Michael Cordonnier lowered his Brazil soybean crop projection 4 MMT, to 130 MMT, his sixth cut since late December. By comparison, USDA estimates Brazil’s crop at 139 MMT. Cordonnier also lowered his forecast for Argentina’s soybean crop by 1 MMT, to 42 MMT, citing the impacts of drought.
In Brazil, “there was some hope that the soybeans in Rio Grande do Sul could recoup some of the losses if the weather improved, but those hopes largely faded under the extreme temperatures,” Cordonnier said in a weekly report. “Two to three weeks of record or near-record high temperatures have resulted in stunted soybeans, low plant populations, and in some cases dead plants.”
Also today, USDA reported U.S. soybean sales of 132,000 MT to China for 2022-23. Today’s announcement follows USDA-reported soybean sales to China the previous two business days totaling 393,000 MT for 2021-22 and 2022-23. USDA is expected to report soybean crush at a record 197.5 million bu. in December, based on a Bloomberg survey. The projected crush would be up 7 million bu. from November and 4.4 million bu. more than last year. Soyoil stocks are expected to climb to 2.51 billion pounds.
Technical analysis: Soybean futures’ steep rally has pushed the market well-into what’s typically considered overbought conditions, with the March ending today at over 78 on the Relative Strength Index. Chart patterns suggest a potential “blow-off top” is in the works, but bullish momentum remains strong. March soybeans posted a contract high at $15.39, the highest intraday price for nearby futures since $15.51 1/4 on June 11.
Based on the daily continuation chart, upside targets for March soybeans include psychological resistance around $16.00, last June’s high at $16.23 1/2 and a nine-year high of $16.77 1/4, reached May 12. Initial support is seen at $15.00 and today’s low of $14.85.
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 7 3/4 cents to $7.69. March HRW wheat rose 5 cents to $7.86 1/4. March spring wheat futures rose 8 1/2 cents to $9.15.
Fundamental analysis: Wheat futures posted a corrective bounce following yesterday’s losses, supported by strength in soybeans and weakness in the U.S. dollar. Ongoing worries a possible Russian invasion of Ukraine could disrupt the global wheat trade remains a supportive background factor. On the bearish side, a major winter storm expected to stretch from Colorado to the East Coast may provide much-needed moisture for dry winter wheat acreage in the Central Plains. “Enough snow will fall for some rise in topsoil moisture when it melts; though, more precipitation will be needed in order to have a notable impact on drought status,” World Weather said. Strategie Grains reported today it expects world wheat production to rise around 3.0% this year, to 762 MMT.
HRW bulls' next upside objective is closing March prices above solid technical resistance at the January high of $8.49 1/4. The bears' next downside objective is closing prices below solid technical support at the January low of $7.43 3/4. First resistance is seen at today’s high of $7.93 1/2 and then at $8.00. First support is seen at today’s low of $7.76 1/4 and 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.
Price action: March cotton futures fell 24 points to 127.33 cents per pound after rising earlier to $129.37 cents, a contract high for the third consecutive day. Deferred contracts ended higher.
Fundamental analysis: Nearby cotton futures faded under profit-taking and long liquidation after rising earlier to fresh 10-year highs. Weakness in March future also reflected speculative funds rolling bullish positions ahead to May and other deferred months. U.S. stocks climbed and the U.S. dollar slipped for a second day, providing some underlying support for cotton futures and potentially signaling renewed buying interest tomorrow. However, bulls may be reluctant to expand long positions ahead of Thursday’s weekly USDA export sales report.
Technical analysis: March cotton futures posted a fresh contract high at 129.37 cents in early trading before erasing gains. The mid-range close suggests the market is looking for direction, although bulls still hold a near-term technical advantage. Today’s high marks initial resistance, which is likely to be backed by psychological resistance in the 130.00-cent area. A breakout above that level would have bulls targeting 140.00. Psychological support at 125.00 is backed by last week’s highs at 124.78. The uptrend line in place since mid-December and 10-day moving average also place support near 124.00. A close below that support would have bears targeting the November high at 118.50.
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.
