Crops Analysis | February 2, 2022

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Corn ­

Advice: We advise hedgers and cash-only marketers to sell another 10% of 2021-crop and another 10% of expected 2022-crop production for harvest delivery.

Price action: March corn futures fell 12 1/4 cents to $6.22 1/2, after rising as high as $6.40 3/4 in overnight trade. December futures fell 4 3/4 cents to $5.73.

Fundamental analysis: Heavy profit-taking weighed on corn futures after prices earlier this week hit a contract high. Slumping wheat futures and prospects for eroding demand from the domestic ethanol industry also contributed pressure. U.S. ethanol production averaged 1.041 million barrels per day (bpd) during the week ended Jan. 28, up 6,000 bpd from the previous week, the Energy Information Administration reported. But ethanol stocks increased 1.379 million barrels to 25.854 million barrels, the highest since April 2020. Late yesterday, USDA reported U.S. corn processed for ethanol in December at a higher-than-expected 485.8 million bu.

Shrinking crop prospects in South America remain supportive but are likely factored into current prices. StoneX projected Brazil's first corn crop for 2021-22 at 25.3 MMT, down 1.5 MMT from the broker’s previous forecast of 26.8 MMT. Tomorrow’s weekly USDA export sales report is expected to show net U.S. corn sales of 600,000 MT to 1.3 million MMT for the week ended Jan. 27.

Technical analysis: March corn futures prices scored a bearish “outside day” down on the daily bar chart, and surging volatility this week suggests bullish momentum is waning and the market may be establishing a short-term top. Bulls retain a firm near-term technical advantage with prices still 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 closing March above solid resistance at this week’s contract high of $6.42 1/2. First resistance is seen at $6.25, then at $6.30. First support is at today’s low of $6.16 3/4, then at $6.10.

What to do: Get current with advised 2021- and 2022-crop sales.

Hedgers: NEW ADVICE – Sell another 10% of 2021-crop to get to 80% priced in the cash market. You should also sell another 10% of expected 2022-crop production for harvest delivery to get to 30% forward-priced.

Cash-only marketers: NEW ADVICE – Sell another 10% of 2021-crop to get to 80% priced. You should also sell another 10% of expected 2022-crop production for harvest delivery to get to 30% forward-priced.

 

Soybeans

Advice: We advise hedgers and cash-only marketers to sell another 10% of 2021-crop. We also advise all soybean producers to sell another 10% of expected 2022-crop production for harvest delivery.

Price action: March soybeans rose 16 3/4 cents to $15.45 1/4, the highest close for a nearby contract since June. March soyoil gained 15 points to 65.98 cents per pound, while March soymeal fell 90 cents to $435.10 after reaching a contract high at $447.60 in early trade.

Fundamental analysis: Soybean futures posted contract highs for the fifth straight day on fresh export business and expectations South America’s drought-damaged crops will drive more foreign demand to the U.S. Early today, USDA reported sales of 380,000 MT of soybeans for delivery to “unknown destinations” during the 2021-22 marketing year. Today’s announcement follows USDA-reported soybean sales to China or unknown destinations the previous three business days totaling 525,000 MT for 2021-22 and 2022-23.

StoneX lowered its estimate for Brazil's 2021-22 soybean crop by 7.5 MMT to 126.5 MMT, joining other private forecasters in cutting production expectations for the world’s top soybean exporter. Brazil produced 138 MMT last year. USDA late yesterday reported U.S. soybean crush at 198.2 million bu. in December, higher than trade expectations and a new monthly record.

These two developments, surging export activity and reduced South American production have obviously played major roles in the recent spike in soybean prices. However, today’s setback from intraday highs suggests the rally is losing upward momentum, which is a big reason we advised increasing price protection today. Bulls may ‘need to be fed’ more good news before they can force further short-term gains. The latest advance has also been aided by renewed equity and energy sector strength and by concurrent U.S. dollar losses.

Technical analysis: Bulls hold a strong technical advantage in soybean futures, although the late-session setback suggests the rally is losing momentum. Resistance is seen at the March contract high of $15.64. A close above that level would have bulls targeting the psychologically important $16.00 level, then last year’s continuation chart highs around $16.30 and $16.77. Today’s low at $15.26 represents initial support, with a drop below that level likely opening the door to a test of support at yesterday’s opening at $14.90. The 10-day moving average places additional support at $14.57 1/4.

Today’s high at 66.92 marked a fresh high for March soyoil futures and represents initial resistance. That’s likely backed by continuation chart highs of 68.17 and 69.18 posted last August and July, respectively. Bulls would be targeting the 70.00-cent level if they were able to force the market above those levels. Look for initial support at yesterday’s low of 64.08, with considerable backing from the 10-day moving average at 64.05. A close below those levels would likely have bears targeting the Jan. 20 low at 60.61, then the Jan. 18 low of 57.75.

Today’s March soymeal reversal from a fresh high at $447.60 marks that price as stiff resistance. A push above that level would open the door to a test of the continuation high of $456.0 posted last May. Look for initial support around the Jan. 7 high of $531.80, then at yesterday’s low of $417.10. A close below that level would have bears targeting the $400 level once again.

What to do: Get current with advised 2021- and 2022-crop sales.

Hedgers: NEW ADVICE -- Sell another 10% of 2021-crop to get to 95% sold in the cash market. You should also sell another 10% of expected 2022-crop production for harvest delivery to get to 30% forward-priced.

Cash-only marketers: NEW ADVICE -- Sell another 10% of 2021-crop to get to 85% sold. You should also sell another 10% of expected 2022-crop production for harvest delivery to get to 30% forward-priced.

 

Wheat

Advice: We advise hedgers and cash-only marketers to sell another 10% of 2021-crop and another 10% of expected 2022-crop production for harvest delivery.

Price action: March SRW wheat futures fell 14 cents to $7.55, the contract’s lowest closing price since $7.41 1/2 on Jan. 14. March HRW wheat fell 16 3/4 cents to $7.69 1/2, the lowest close since $7.45 on Jan. 14. March spring wheat fell 7 cents to $9.08.

Fundamental analysis: Winter wheat futures erased overnight gains on profit-taking following recent gains and prospects for moisture relief in the U.S. Plains. Easing concern that a potential Russian invasion of Ukraine may disrupt the global wheat trade also weighed on futures. Beneficial snow will continue today and tomorrow in the Plains HRW belt with the exception of north-central Kansas and central Nebraska, where no snow is expected, World Weather said today. The snow “will be enough to raise topsoil moisture some when it melts and will be enough to protect crops from subzero Fahrenheit temperatures” tomorrow and Friday, the forecaster said. “Some minor crop damage may occur in snow-free areas of Nebraska and northern Kansas” tomorrow morning.

Tomorrow’s USDA export sales report will be studied closely to see if a recent uptick in foreign demand was sustained. Net U.S. wheat sales for 2021-22 are expected to range from 200,000 to 675,000 MT for the week ended Jan. 27. Last week, USDA reported net sales of 676,700 MT for 2021-22, a marketing-year high, along with sales of 60,000 MMT for 2022-23. But total export commitments (exports plus outstanding sales) were still 21% behind year-ago and 16% behind the five-year average.

Technical analysis: Winter wheat technicals have turned increasingly bearish as prices slumped over the past week, with March SRW dropping under key moving averages including the 100-day, currently about $7.75 1/2. March SRW futures are nearing critical support levels, including a January low at $7.35 1/2, a breach of which would solidify beliefs the market established a near-term high late last month and will work lower. Other support levels include the 200-day moving average of $7.42 3/4. In March HRW futures, key support comes in at the January low of $7.43 3/4 and the 200-day moving average at $7.36.

What to do: Get current with advised hedges. Wait on a price rebound to extend wheat sales.

Hedgers: NEW ADVICE – Sell another 10% of 2021-crop to get to 80% priced in the cash market. You have hedges covering 20% of 2021-crop in short March SRW wheat futures at $7.57. You should also sell another 10% of expected 2022-crop production for harvest delivery to get to 30% forward-priced.

Cash-only marketers: NEW ADVICE – Sell another 10% of 2021-crop to get to 80%. You should also sell another 10% of expected 2022-crop production for harvest delivery to get to 30% forward-priced.

 

Cotton

Advice: We advise cotton hedgers and cash-only marketers to sell another 10% of expected 2022-crop production for harvest delivery to get to 50% forward-priced.

Price action: March cotton futures fell 100 points to 126.33 cents per pound, while December futures rose 52 points to 102.95 cents.

Fundamental analysis: Cotton futures fell a second straight day as traders awaited tomorrow’s USDA weekly export sales report. Weakness in the U.S. dollar limited price declines. Optimism over the global economy and foreign demand continued to underpin cotton prices, as did beliefs the market must compete for acres with other crops, such as soybeans, as the spring planting season nears.

Last week, USDA reported net weekly U.S. cotton sales of 391,300 running bales (RB) for 2021-22, up 43% from the previous week and up 55% from the prior four-week average. 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.

Technical analysis: March cotton futures extended declines after posting a fresh contract high early yesterday at 129.37 cents before erasing gains, suggesting the market may be shifting into a consolidation phase. Near-term, market bulls hold an advantage with prices in a consistent uptrend since early December.

Yesterday’s high marks initial resistance, along with 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: NEW ADVICE -- Sell another 10% of expected 2022-crop production for harvest delivery to get to 50% forward-priced. You are 100% priced in the cash market on 2021-crop.

Cash-only marketers: NEW ADVICE -- Sell another 10% of expected 2022-crop production for harvest delivery to get to 50% forward-priced. You should be 90% priced on 2021-crop.

 

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