Crops Analysis | February 11, 2022
Price action: March corn futures rose 9 1/4 cents to $6.51, a gain of 30 1/2 cents for the week and the highest settlement for a nearby contract since mid-July. December futures rose 10 cents to $5.94 3/4 after posting a contract high at $5.97.
5-day outlook: Corn futures extended an overnight rebound from yesterday’s losses to end with a fourth consecutive weekly gain, supported by strength in soybeans and prospects for smaller South American crops. Market direction next week will hinge on soybean futures and speculative money flow. Large speculators hold a sizable net long position in corn, which may make the market vulnerable to a fund-driven sell-off if upside momentum falters. A repeat of this week’s disappointing weekly USDA export sales could embolden sellers.
30-day outlook: Corn futures remain in a five-month uptrend that sent March futures yesterday to a contract high at $6.62 3/4, which will serve as initial resistance. Failure to test those highs may indicate the market has reached a point of exhaustion and could establish a near-term peak. Corn futures will require continued strength in soybeans and/or wheat and sustained export demand to remain at elevated levels over the longer-term. U.S. exports continue to lag. USDA yesterday reported net U.S. corn export sales of 589,100 MT for the week ended Feb. 3, down 50% from the previous week and down 43% from the average for the previous four weeks. Corn export commitments so far in 2021-22 are running 21% behind year-ago levels.
90-day outlook: Market focus will increasingly shift to the U.S. spring planting outlook and South American weather will become less of a factor, though development of Brazil’s second-crop corn will be followed. High prices for fertilizer and other inputs are widely expected to prompt U.S. farmers to plant fewer acres to corn and shift some ground to soybeans. We expect U.S. corn plantings to decline 3 million acres this year to an estimated 90.4 million acres.
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 soybean futures rose 8 3/4 cents to $15.83, a gain of 29 1/2 cents for the week. March soybean meal rose $2.60 to $456.60 per ton, up $12.70 for the week. March soyoil rose 121 points to 65.72 cents per pound, up 36 points for the week.
5-day outlook: Soybean futures posted the fourth consecutive weekly gain and nearby futures closed at the highest price since June behind fresh export business and a reduced South American crop outlook. Additional cuts to private forecasters’ harvest estimates for Argentina and Brazil next week may support soybean futures, though with this week’s gains, the market appears to have factored in Brazilian production around 125 MMT, which is 9 MMT below USDA’s updated projection, released in the agency’s Supply & Demand Report earlier this week. Large speculators hold a hefty net long in soybean futures, which could lead to a long liquidation sell-off if the market fails to generate followthrough gains.
30-day outlook: Soybean futures will require sustained U.S. export strength to remain at elevated levels, and South America’s accelerating harvest will soon push fresh supplies into global markets. Traders will closely follow to see whether a recent uptick in soybean sales continues. China and other buyers have accelerated U.S. soybean purchases as South American crop prospects shrank. Earlier today, USDA reported a sale of 108,000 MT of soybeans for delivery to China during the 2022-23 marketing year. Since Jan. 28, USDA has reported a combined 3.07 MMT of soybean sales to China or unknown destinations. Over the month prior to Jan. 28, sales to China and unknown destinations totaled just 648,000 MT.
90-day outlook: The U.S. spring planting season will increasingly come into focus, with farmers widely expected to boost soybean acres. The soybean-to-corn ratio rose this week near the highest level in over four months, suggesting the market is trying to “buy” more bean acres. USDA’s annual Prospective Plantings report March 31 promises to set the market tone in early spring. We expect soybean plantings to increase 1.2 million acres from 87.2 million acres in 2021. Competition between crushers and exporters for smaller global supplies may keep a floor under the market, and strength in Malaysian palm oil or crude oil could boost soyoil.
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: March SRW wheat rose 26 1/4 cents to $7.97 3/4, the highest closing price since Jan. 25 and a gain of 34 1/2 cents for the week. March HRW wheat gained 23 1/4 cents to $8.24 1/4, up 38 1/2 cents for the week. March spring wheat rallied 19 1/4 cents to $9.61 1/2, up 48 1/2 cents on the week.
5-day outlook: Winter wheat futures settled at the highest prices in over two weeks on bargain-hunting in the wake of yesterday’s losses and spillover from strength in corn and soybeans. Today’s bullish weekly high closes bode for followthrough buying early next week. Wheat markets will continue to look to corn and soybeans for direction. Expanding drought in the U.S. Plains states and heightened Russia/Ukraine tensions will remain supportive underlying factors for at least the near term. Global supplies of milling quality-wheat also remain tight.
30-day outlook: Price upside probably will remain limited as long as weekly U.S. export sales stay disappointing. U.S. wheat export commitments are running 24% behind last year’s levels. Spring wheat futures’ recent outperformance versus winter wheat futures suggests the spring market may have established a near-term bottom. The 38% decline in Canadian wheat stockpiles at the end of 2021 reminds of the severe drought that persists in the Northern Plains.
90-day outlook: USDA’s Supply & Demand Report earlier this week showed higher-than-expected U.S. ending stocks and lower exports, which should cap rally potential in wheat futures. However, continued corn and soybean futures strength and general commodity market bullishness may keep a floor under prices. Choppy and sideways futures trading may persist into the spring. The March 21 Prospective Plantings report has potential to move the market, as will spring weather conditions across the Plains.
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 fell 38 points to 125.28 cents per pound, down 146 points for the week.
5-day outlook: The cotton industry will remain focused on U.S. cotton export sales and shipments. Weekly sales totals reported this week fell well short of previous weeks, compounding USDA’s 250,000-bale cut to its 2021-22 U.S. cotton export forecast. Weekly USDA export sales Thursday will be one key to price direction, while outside markets such as U.S. equities and crude oil could also exert influence.
30-day outlook: Next weekend will mark the annual meeting of the U.S. Cotton Council and the concurrent release of its survey concerning producer plantings this spring. The elevated price of cotton has many in the industry anticipating a big year-to-year increase in acreage, although dryness across the southern Plains may limit the rise. Otherwise, the industry’s focus will remain primarily on U.S. cotton exports and shipments. The shipment figures need to continue increasing to meet the commitments already on industry books. Signs that they aren’t matching the needed rate could undercut prices.
90-day outlook: Attention will increasingly focus on spring planting prospects. As weather warms, producers will monitor early growth of cotton seedlings across southern states and potential for a weather market if crop conditions prove poor. Otherwise, economic and geopolitical considerations have the potential to affect the cotton market. Outside markets such as equities, energy and the grain/soy complex, as well as the value of the U.S. dollar, might also affect cotton futures.
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.
