Crops Analysis | February 15, 2022
Price action: March corn futures fell 17 3/4 cents to $6.38, the lowest closing price in a week. December corn fell 8 1/2 cents to $5.89 3/4.
Fundamental analysis: Heavy profit-taking and long liquidation weighed on corn futures following last week's climb to contract highs, while weakness in other major commodities, including crude oil, and apparent easing in Russia-Ukraine tensions, contributed to pressure on the grain markets. Followthrough selling tomorrow in crude oil would likely spill over into grains.
Drought-related crop damage in South America continues to support futures, though losses are likely factored into current price levels. Crop consultant Dr. Michael Cordonnier kept his Brazilian corn crop estimate at 112 MMT but cut his Argentine corn crop forecast by 1 MMT, to 50 MMT.
Technical analysis: Despite today’s weak prices, corn futures suffered no significant chart damage. However, strong follow-through selling pressure tomorrow could foster beliefs the market has established a near-term peak. Corn bulls still have a near-term technical advantage with prices in a five-month uptrend. The next downside target for bears is closing March futures below support at the February low of $6.10 1/4. The next upside objective for bulls is closing March above solid resistance at the contract high of $6.62 3/4. First resistance is seen at $6.45, then at $6.50. First support is at today’s low of $6.35 1/2, then at $6.30.
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 fell 18 3/4 cents to $15.51 1/4, the contract’s lowest closing price since $15.44 1/4 on Feb. 3. March soybean meal fell $9.60 to $438.80 per ton. March soyoil fell 18 points to 65.63 cents per pound.
Fundamental analysis: March soybeans fell to the lowest levels in over a week as eroding chart patterns encouraged fund liquidation. Crop losses in South America have likely been priced in, and continued price declines would strongly suggest the market established a near-term peak with the nine-month highs posted last week. Slumping crude oil continued to weakness across commodity markets.
Cordonnier slashed his Brazilian soybean crop estimate by 6 MMT to 124 MMT, saying conditions in southern Brazil are worse than expected and there may be additional yield losses due to drought. He also lowered his Argentine soybean crop forecast by 2 MMT to 40 MMT. “Record high or near record high temperatures coupled with scant rainfall over the past several months have resulted in a catastrophe for soybean producers in southern Brazil and the growing season is not over,” he said in a weekly report.
U.S. soybean crushing last month fell short of expectations. The National Oilseed Processors Association reported January soybean crushing at 182.216 million bu. during January, down 2.3% from a record-high monthly crush of 186.438 million bushels in December and 1.3% below the January record of 184.654 million bushels set last year. Processors had been expected to crush 186.677 million bu. in January. Soyoil stockpiles as of Jan. 31 totaled 2.026 billion lbs, the second largest end-of-month stocks since April 2020 and up 12.6% from 1.799 billion lbs held by NOPA members at the end of January 2021.
Technical analysis: Technicals have weakened this week, though soybean futures remain in a strong uptrend and have moved out of overbought territory. March soybeans today fell as low as $15.42 1/2, the lowest intraday price since $15.32 on Feb. 4, and closed below the 10-day average for the first time since Jan. 18. Key support is seen in the $15.25 to $15.30 area, which would mark at 38.2% retracement of the recent rally. A push below that level would have bears targeting $15.00. Resistance is seen at yesterday’s high at $15.99 1/2 and at the contract high of $16.33.
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 fell 19 1/2 cents to $7.79 3/4. March HRW wheat fell 22 1/2 cents to $8.06. March spring wheat tumbled 23 cents to $9.53 per bushel.
Fundamental analysis: Wheat futures fell on apparent easing of Russia-Ukraine tensions and general commodity market weakness, led by a drop of over $3 in Nymex crude oil. Reports early today said Russian troops were backing away from the Ukrainian border, which followed recent comments from Russian officials that diplomacy may be a way to move forward on the matter.
World Weather Inc. said “wild” weather conditions will impact much of winter wheat country the next 48 hours. This includes severe thunderstorms from the southeastern Great Plains through the Delta to the Tennessee River Basin, heavy rain and local flooding in the northern Delta and a part of the Ohio River Basin and a band of impressive snowfall coming out of the Kansas and passing through Missouri to Michigan.
HRW bulls have a near-term technical advantage. HRW bulls' next upside objective is closing March prices 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 $8.30 1/4, then at this week’s high of $8.44 1/4. First support is seen at today’s low of $7.97 1/4, then at 7.85.
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 11 points to 123.04 cents per pound, while December futures rose 54 points to 104.08 cents.
Fundamental analysis: Cotton futures were pressured by broad commodity sector weakness that was led by a drop of over $3 in Nymex crude oil, though selling in cotton was limited by weakness in the U.S. dollar. The ongoing roll of positions from the expiring March contract and into its deferred counterparts also factored into price action. First notice day for the March contract is Feb. 22.
Cotton futures mostly recovered from a slide yesterday triggered by 2022 U.S. acreage and production forecasts from the weekend meeting of the National Cotton Council. Acreage and production forecasts, at 12.0 million ac. and 17.3 million bales, respectively, topped industry expectations, but the muted negative response and today’s rebound suggest the numbers weren’t surprising. Look for traders to start focusing upon Thursday’s weekly USDA Export Sales report, although a bearish follow through in the grain and soy markets could drag cotton lower as well.
Technical analysis: Bears have gained the short-term technical edge in the wake of recent losses, especially after the March future couldn’t seriously challenge resistance at its early 10- and 20-day moving averages near 125.60 and 124.44, respectively. Additional resistance is layered up to the Feb. 1 contract high at 129.37. A bullish breakout would have bulls targeting the 140.00 level. Monday’s low at 121.62 marks initial support, with backing from the January 24 low at 119.20, which is closely backed by the 40-day moving average at 119.09. A drop below that point would have bears targeting the 105.00 area.
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.
