Crops Analysis | February 3, 2022
Price action: March corn futures fell 5 3/4 cents to $6.16 3/4, the contract’s lowest closing price since $6.16 1/4 on Jan. 21. New-crop December futures fell 4 3/4 cents to $5.68 1/4.
Fundamental analysis: Corn futures settled near a two-week low on profit-taking and technical selling in the wake of the early-week rally to nine-month highs. Expected drought-driven production shortfalls in South America remain supportive for corn prices, but crop losses have likely been factored in and the market likely requires sustained export business and an extended rally in soybeans to hold at elevated levels.
USDA reported net U.S. corn sales of 1.175 MMT for the week ended Jan. 27, down 16% from the previous week but up 47% from the average for the previous four weeks. Sales were within expectations ranging from 600,000 MT to 1.3 million MMT. No sales were reported for 2022-23. Exports of 1.177 MMT were down 19% from the previous week and down 1% from the prior four-week average. U.S. corn export commitments still lag last year’s pace by about 20%.
Also today, USDA reported daily corn sales cancellations of 380,000 MT to China for 2021-22.
Technical analysis: Bullish momentum faltered this week, with March corn heading for its first weekly decline in the past three, and an eroding technical posture makes the market susceptible to further long liquidation from speculative funds. The market may be in the process of establishing a near-term top. Initial support in March futures is seen at the 40- and 50-day moving averages at $6.04 1/2 and $6.00, respectively. Resistance comes in at the nine-month high posted Jan. 31 at $6.42 1/2. A close below $6.00 may have bears targeting the January low of $5.85 1/4.
What to do: Get current with advised 2021- and 2022-crop sales.
Hedgers: You should be 80% priced in the cash market on 2021-crop. You should also have 30% of expected 2022-crop production forward priced for harvest delivery.
Cash-only marketers: You should be 80% priced on 2021-crop. You should also have 30% of expected 2022-crop production forward priced for harvest delivery.
Soybeans
Price action: March soybeans fell 1 cent to $15.44 1/4 after gaining earlier to $15.60. March soybean meal rose $2.00 to $437.10. March soybean oil fell 23 points to 65.75 cents.
Fundamental analysis: Soybean futures fell for the first day in the past eight sessions under corrective profit-taking pressure following a sharp rally to contract highs earlier this week. Bullish fundamentals, including South American crop losses, remain in place, but are mostly factored into prices at current levels. Weather in South America remains overall bullish amid shrinking soybean crop production estimates. Argentina's Buenos Aires grain exchange lowered its forecast for the country’s 2021-22 soybean production by 2 MMT to 42 MMT. Consultancies Cogo and Datagro lowered their forecasts for Brazil’s 2021-22 soybean production. Cogo estimated the soybean crop at 125 MMT, down from its previous forecast of 131 MMT. Datagro estimated the crop at 130 MMT, down 12.05 MMT from its December estimate.
Argentina is expected to have warmer and drier weather this weekend into next week, World Weather Inc. said. However, subsoil moisture is still rated well from Buenos Aires to southern Cordoba, which will support crops in those areas. Southern Brazil’s rainfall over the next several days will bring some relief to crop moisture stress. Faster soybean harvesting will occur as the south dries out again for a while next week, said the weather forecaster.
USDA today reported net weekly U.S. soybean sales for 2021-22 totaled 1.096 MMT, up 7% from the previous week and up 56% from the four-week average. Net sales of 881,800 MT were reported for the 2022-23 marketing year.
Technical analysis: Soybean futures bulls have a solid near-term technical advantage with prices in a three-month uptrend. However, the market is overbought and due for a downside correction. The next near-term upside technical objective for the bulls is closing March futures above solid resistance at $16.00. The next downside objective for bears is closing prices below solid support at $14.25. First resistance is seen at the contract high of $15.64, then at $15.75. First support is seen at $15.00, then at Tuesday’s low of $14.85.
Soymeal bulls have a solid near-term advantage, though the market is short-term overbought and due for a downside correction. The next upside objective for soymeal bulls is closing March futures above solid resistance at $450.00. The next downside price objective for the bears is closing prices below solid support at $400.00. First resistance comes in at today’s high of $444.00, then at the contract high of $447.60. First support is seen at today’s low of $431.60,then at $425.00.
Soyoil bulls also have a firm near-term technical advantage with prices are in a six-week uptrend. The next upside objective for bulls is closing March futures above solid resistance at 68.00 cents. Bears' next downside objective is closing prices below solid support at last week’s low of 61.22 cents. First resistance is seen at the contract high of 66.92 cents, then at 67.50 cents. First support is seen at today’s low of 64.92 cents, then at this week’s low of 64.08 cents.
What to do: Get current with advised 2021- and 2022-crop sales.
Hedgers: You should be 95% sold in the cash market on 2021-crop. You should also have 30% of expected 2022-crop production forward priced for harvest delivery.
Cash-only marketers: You should be 85% sold on 2021-crop. You should also have 30% of expected 2022-crop production forward sold for harvest delivery.
Price action: SRW wheat futures finished mostly around 3 cents lower, with the March contract down 3 1/4 cents at $7.51 3/4. HRW wheat closed fractionally on either side of unchanged in most contracts, with March down 1/2 cent to $7.69. Spring wheat futures ended 4 to 7 cents lower, with the March contract down 7 1/4 cents to $9.00 3/4.
Fundamental analysis: The wheat market faced followthrough selling most of the day, but all things considered, today’s closes could have been worse for market bulls. Winter wheat contracts finished in the upper portion of today’s ranges, aided by sharp losses in the U.S. dollar index, which helped mute a poor weekly export sales figure.
USDA reported weekly sales of just 57,500 MT for 2021-22 and 103,500 MT for 2022-23. The old-crop sales were down sharply from a marketing-year high of 676,700 MT the previous week and the second lowest for 2021-22. The average of sales the past two weeks is 367,100 MT, which is about the “normal” weekly pace in 2021-22. Basically, exporters did two weeks’ worth of business two weeks ago, which left little for the past week. Total old-crop wheat export commitments (exports plus outstanding sales) are running nearly 23% behind year-ago as of Jan. 27, whereas USDA projects a 17% decline. The export pace needs to pick up or USDA will have to further reduce its forecast.
Technical analysis: Bulls still have longer-term control in SRW wheat futures, though bears have the short-term upper hand. Bulls must defend support at the January low of $7.35 1/2 or their longer-term control would be in jeopardy. A close below the January low would open downside risk to the $7.00 area. A close above the 5-day moving average around $7.64 1/2 is needed to give the first signal of a potential short-term low.
What to do: Get current with advised 2021- and 2022-crop sales.
Hedgers: You should be 80% priced in the cash market on 2021-crop. You have hedges covering 20% of 2021-crop in short March SRW wheat futures at $7.57. You should also have 30% of expected 2022-crop production forward priced for harvest delivery.
Cash-only marketers: You should be 80% priced on 2021-crop. You should also have 30% of expected 2022-crop production forward priced for harvest delivery.
Price action: March cotton futures rose 129 points to 127.62 cents, near the session high.
Fundamental analysis: Cotton bulls were boosted as Nymex crude oil futures rose over $90 a barrel to a seven-year high. A weaker U.S. dollar index also worked in favor of the cotton bulls. Cotton traders brushed off weakness in U.S. stocks. USDA reported net weekly U.S. cotton sales of 332,100 running bales (RB) for 2021-22, down 15% from the previous week but up 10% from the prior four-week average. Increases were primarily for China (90,200 RB) and Vietnam (58,700 RB). Net sales of 315,100 RB for 2022-23 went primarily for Bangladesh (105,600 RB) and China (61,600 RB). Exports of 302,100 RB, a marketing-year high, were up 53% from the previous week and up 81% from the prior four-week average. The destinations were primarily China (132,000 RB) and Pakistan (44,000 RB). Today’s export numbers were especially impressive given the recent strong rally in cotton prices, suggesting continued strong demand.
What to do: Get current with advised 2021- and 2022-crop sales.
Hedgers: You are 100% priced in the cash market on 2021-crop. You should also be 50% forward-priced for harvest delivery on expected 2022-crop production.
Cash-only marketers: You should be 90% priced on 2021-crop. You should also be 50% forward-priced for harvest delivery on expected 2022-crop production.
