Crops Analysis | February 14, 2022
Price action: March corn futures rose 4 3/4 cents to $6.55 3/4, the highest close for a nearby contract since $6.83 on July 14. December corn rose 3 1/2 cents to $5.98 1/4 after posting a contract high.
Fundamental analysis: Corn futures rebounded late from earlier weakness behind reports Ukraine president Volodymyr Zelensky said he expects Russia will invade his country Wednesday, potential disrupting global grain trade. But Bloomberg reports the comments appeared to be sarcastic about other world leaders predicting a specific date for a Russian attack.
USDA reported 1.455 MMT (57.3 million bu.) of corn inspected for export during the week ended Feb. 10, up from 1.065 MMT the previous week and above expectations ranging from 950,000 to 1.4 MMT. Inspections are still running 12.5% behind year-ago, compared to 13.9% behind last week. USDA projects exports in 2021-22 at 2.425 billion bu., 11.9% below the previous marketing year.
Crop production in Brazil and Argentina has been greatly hurt by drought and little relief is expected for some of the driest areas. Paraguay and Brazil’s Parana, Santa Catarina and Rio Grande do Sul states “will see a restricted rainfall pattern through Saturday and fieldwork should advance well while immature crops in the drier areas see rising levels of crop stress,” World Weather Inc. said today. “Most of the remainder of Brazil will see regular rain during the next 10 days that will be supportive of crop development while slowing fieldwork.”
Large speculators scaled back their bullish bets in the corn market earlier this month but still retain a large net long position. The managed money net long in corn futures and options fell 35,219 contracts to 337,332 contracts for the week ended Feb. 8, according to the Commodity Futures Trading Commission’s Commitments of Traders report.
Technical analysis: Bulls retain an upper hand in corn futures, with the market still in a strong uptrend over the past five months. Bulls will target the contract high at $6.62 3/4 reached Feb. 10. Initial support comes in around Friday’s low at $6.37 3/4 and the 10-day moving average at $6.35 1/2. But the market is approaching overbought levels and funds hold a sizable net long, which could lead to long liquidation is futures fail to generate further upside this week.
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: Soybean futures posted losses today, with the March contract down 13 cents to $15.70 and the November contract down 1 1/2 cents to $14.42 1/2. But soybeans ended 18 to 20 cents off their intra-day lows. March soymeal dropped $8.20 to $448.40. March soyoil firmed 90 points to 65.81 cents.
Fundamental analysis: Soybean futures fell on followthrough pressure after corrective losses the final two days last week, with money flow the primary driver. There was no change in market fundamentals; rather, weakness reflected traders taking profits and lightening some long positions. Money flow will likely be just as important if not more so than fundamentals to near-term price action.
Traders have major South American production losses factored into current prices. But what they likely haven’t fully factored in is how much that could boost exports and cut into old-crop ending stocks. Weekly export inspections at 42.4 million bu. were within the range of pre-report estimates, but stronger than the normal seasonal levels. Today’s figure lowered the required pace to hit USDA’s forecast to an average of 18.7 million bu. the remainder of the marketing year.
Traders should get another bullish demand figure tomorrow from NOPA’s crush report for January, which is expected to be an all-time record. If so, that would mark the third month out of the first five in 2021-22 that saw a new record crush. We expect crush to come in higher than the average pre-report estimate of 186.7 million bushels.
Technical analysis: March soybean futures closed above the 10-day moving average after trading below it for much of the day and established a key near-term support level at today’s low of $15.51 1/2. A drop below that level would open the downside to the $15.25 area, a 38.2% retracement of the price surge from mid-January to last week’s contract high. Initial resistance is the psychological $16.00 mark, followed by last week’s contract high at $16.33. Above that, resistance on the continuation chart is at the 2008 high of $16.63, the 2021 high of $16.77 1/4 and the 2012 all-time high of $17.94 3/4.
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 1 1/2 cents to $7.99 1/4 and March HRW wheat rose 4 1/4 cents to $8.28 1/2, the highest settlements for both contracts since Jan. 25. March spring wheat rose 4 1/2 cents to $9.66, the highest close since Jan. 4.
Fundamental analysis: Winter wheat futures rebounded late today to end near three-week highs following a report of Ukraine President Zelensky warning that Russia will attack Ukraine Wednesday. The report seemed to contradict earlier news that Russia’s foreign minister said there could be a path forward on diplomacy. Grain traders will continue to monitor this situation extra closely.
USDA in its weekly export inspections report said 435,188 MT (16.0 million bu.) of U.S. wheat were inspected for export during the week ended Feb. 10, up from 433,921 MT the previous week. Market expectations ranged from 200,000 to 550,000 MT. The numbers were in line with seasonal tendencies.
Wheat producers in the U.S. Plains are expected to receive some relief from dryness over the next few weeks, but likely not until March, World Weather said. Expected storms will favor eastern parts over the west, but enough moisture will occur in many areas to stimulate greening and early season crop development. “When temperatures warm sufficiently, however, moisture deficits in the soil will remain, especially in the south,” the forecaster said. “And as soon as the temperatures turn notably warm the evaporation rates will begin outpacing the moisture and that is when trouble will begin to this year’s crop.” The most likely time frame for the biggest bout of warmer and drier weather that will threaten crop development will begin in mid-April and continue into May, said the weather forecaster.
HRW bulls' next upside 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 today’s high of $8.44 1/4, then at $8.49 1/4. First support is seen at today’s low of $8.10, then at 8.00.
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 235 points to 122.93 cents per pound, the lowest close since Jan. 27, while May futures fell 230 points to 120.61 cents.
Fundamental analysis: Cotton futures fell to the lowest levels in over two weeks behind pressure from a stronger U.S. dollar and weakness in U.S. stocks. Early declines in grain futures also weighed on cotton. The U.S. dollar index climbed near a two-week highs as ongoing concern Russia may invade Ukraine spurred “risk-off” trade and a move toward “safe-haven” assets. Price direction in cotton the rest of this week will be influenced by outside markets and exports. USDA’s recent cut to its U.S. 2021-22 export projection continues to hang over the market, and last week’s export sales report was disappointing.
The National Cotton Council (NCC) projected U.S. cotton acreage will rise 7.3% this year to 12.0 million acres, based on its annual producer survey. Assuming the state-level 10-year average abandonment rates and five-year average yields, NCC estimated 2022 harvested area at 9.8 million acres with an overall abandonment rate of 18.9%. U.S. production is estimated to be 17.3 million bales with an average yield of 850 pounds per acre.
Technical analysis: The longer-term uptrend remains intact but technicals have turned bearish as futures’ eroded in recent sessions, with March cotton closing under its 20-day moving average for the first time since Dec. 21. Further price downside this week would reinforce ideas the market has established a near-term peak with last week’s contract highs. Key support levels in March futures include today’s low at 121.62, followed by 120.00 cents and 118.50 cents. Upside objectives for bulls include closing March futures above last week’s contract high 129.37 cents and at solid resistance at 140.00 cents.
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.
