Crops Analysis | February 16, 2022

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Corn ­

Price action: March corn futures rose 9 cents at $6.47, near the session high.

Fundamental analysis: Corn bulls showed fresh power in the wake of yesterday’s losses, supported by smaller production prospects for South America, improved ethanol demand and strong outside markets, such as crude oil. Large speculators appear determined to press the bullish case in corn, bolstered by soybean futures near nine-month highs. U.S. ethanol production increased 15,000 barrels per day (bpd) to an average of 1.009 million bpd during the week ended Feb. 11, up 11% from the same week last year, according to the Energy Information Administration. Ethanol stocks rose 684,000 barrels to 25.48 million barrels.

Traders await tomorrow’s weekly USDA export sales report, which is expected to show U.S. corn sales of 500,000 to 1 million MT in the 2021-22 marketing year, and sales of zero to 250,000 MT in the 2022-23 marketing year.

Technical analysis: Bulls have a solid near-term technical advantage and showed fresh power today. Prices are in a five-month uptrend on the daily bar chart. 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 to closing March above solid resistance at the contract high of $6.62 3/4. First resistance is seen at $6.50, then at this week’s high of $6.56 3/4. First support is at $6.40, then at this week’s low of $6.35 1/2.

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 jumped 36 1/4 cents to $15.87 1/2, the highest close in a week. March soyoil surged 134 points to 66.97 cents per pound, the highest close for a nearby contract since July 20. March soymeal leapt $10.60 to $449.40.

Fundamental analysis: The soy complex mounted a strong comeback from losses the past two sessions, boosted by further indications that Southern America’s shrinking crop prospects has stirred increased demand from top buyers such as China. Early today, USDA reported a daily sale of 132,000 MT of soybeans for delivery to China during the 2022-23 marketing year. Since Jan. 28, USDA has reported a combined 3.2 MMT of soybean sales to China or “unknown destinations.” By comparison, over the month prior to Jan. 28, sales to China and unknown destinations totaled just 648,000 MT.

Drought-driven reductions to South America’s crops continued to underpin the soy complex, reinforced by reports Paraguay will run of out beans to crush by mid-2022. Resurgent crude oil futures and near-record palm oil prices contributed to soy complex price strength, though the potential for a downward reversal looms if and when traders conclude the bullish news is fully reflected in prices.

Technical analysis: The rebound renewed bulls’ advantage over the short-term technical outlook, especially after the March soybeans closed above its 10 day moving average near $15.70. That price represents initial support, with backing from yesterday’s low at $15.42 1/4. The 20- and 40-day moving averages put additional support around $15.14 and $14.40 1/2, respectively. A fresh bullish move above initial resistance at Monday’s high of $15.99 1/2 would open the door to a test of last week’s contract high at $16.33, whereas a drop below the 40-day moving average would have bears targeting $14.00.

March soyoil futures climbed to a fresh contract high and posted a new high close as well, at 67.01 and 66.97, respectively. Look for short-term support at the contract’s 10- and 20-day moving averages near 65.25 and 64.65, respectively, then at the Feb. 9 low of 62.70. The continuation chart puts the bulls’ next target in the 69.00- to 70.00-cent range.

In March soymeal, short-term technicals seems well-balanced around $450.00. The strong rebound from support at yesterday’s low of $437.90 indicated the market’s underlying strength, but the bulls’ inability to force a close above resistance at the 10-day moving average ($449.69) and the psychologically important $450.00 level indicates they’re not out of the woods yet. Look for additional resistance at recent highs around $464.00, with a push above that area opening the door to a fresh run at the contract high of $477.90. A drop below short-term support would have bears targeting the contract’s 20- and 40-day moving averages near $429.10 and $418.10, respectively.

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.

 

Wheat

Price action: March SRW wheat rose 3/4 cent to $7.80 1/2. March HRW wheat rose 2 cents to $8.08. March spring wheat ended Wednesday unchanged at $9.53.

Fundamental analysis: Wheat futures ended mixed after trading in narrow ranges as traders eyed the Russia-Ukraine standoff. A Russian invasion of Ukraine could disrupt wheat exports out of the Black Sea region, though tensions appeared to ease in recent days following Moscow's announcement that some of its troops were returning to base after drills.

USDA tomorrow is expected to report weekly net U.S. wheat sales of 75,000 to 500,000 MT for 2021-22 and zero to 150,000 MT for 2022-23. Last week, USDA reported net U.S. wheat sales for 2021-22 totaling 84,800 MT for the week ending Feb. 10, up 48% from the previous week but still down 75% from the prior four-week average. U.S. wheat export commitments are running 24% behind last year’s levels.

Also today, Jordan tendered to buy 120,000 MT of optional origin milling wheat. Iran tendered to buy 60,000 MT each of corn, soymeal and feed barley from unspecified origins. Japan received no offers in its tender for 80,000 MT of feed wheat and 100,000 MT of feed barley. Syria made no purchase in its tender to buy 200,000 MT of milling wheat.

Technical analysis: Winter wheat bulls retain a slight near-term technical advantage as prices chop around the middle of ranges that have held most of this year. In March SRW futures, bulls' upside objectives include closing March futures above solid resistance at the January high of $8.31 1/2. Bears' downside objectives include closing March below solid support at the January low of $7.35 1/2. In March HRW, bulls' upside objectives include closing futures above solid resistance at the January high of $8.49 1/4. Bears' downside objectives include closing prices below solid support at the January low of $7.43 3/4.

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 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.

 

Cotton

Price action: March cotton futures fell 113 points to 121.91 cents per pound, the lowest closing price since Jan. 27, while May cotton fell 129 points to 119.49 cents.

Fundamental analysis: Cotton futures ended near three-week lows on eroding near-term technicals and continued long liquidation following the market’s climb to contract highs at the beginning of this month. Initial weakness in U.S. stocks contributed to pressure on futures, along with lingering effects of bearish USDA supply and export projections last week. Traders continued to monitor the Russia-Ukraine standoff. U.S. and NATO said Russia was still building up troops around Ukraine despite Moscow's insistence it was pulling back.

Tomorrow’s weekly USDA export sales report will be studied closely. A repeat of disappointing numbers may generate additional selling pressure in futures. Last week, USDA reported net U.S. cotton net sales of 185,200 running bales (RB) for 2021-22, down 44% from the previous week and down 47% from the prior four-week average.

Technical analysis: Bullish momentum has waned over the past week as nearby futures dropped under 10- and 20-day moving averages, but the longer-term uptrend remains intact for now. In March futures, the Feb. 14 low at 121.62 cents is seen as initial support, backed by the Jan. 24 low of 119.20 cents and the 40-day moving average at 119.51 cents. A drop below the latter price would have bears targeting the 105.00 area. Resistance is seen at the Feb. 1 contract high at 129.37 cents, and a bullish breakout above that level would have bulls targeting 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.

 

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