Crops Analysis | February 22, 2022

( )

Corn ­

Price action: March corn futures rallied 20 1/2 cents to $6.74 3/4, the highest closing price for a nearby contract since July. May futures gained 19 3/4 cents to $6.72 1/2, while new-crop December rose 8 cents to $6.05 3/4.

Fundamental analysis: Corn futures extended last week’s gains as escalating prospects for war between Russia and Ukraine spurred a broad upswing in commodity markets, including soybeans, wheat and crude oil. Intensifying concern over disruption to global grain trade prompted short covering as well as continued buying from large speculators. However, it’s likely corn will need strength in soybean and wheat prices to extend recent gains.

The likelihood of South American crop shortfalls also drove bullish sentiment. Crop Consultant Michael Cordonnier lowered his Argentina corn crop estimate by 1 MMT, to 49 MMT, after a week of dry weather across most of the country. Cordonnier left his Brazilian corn production forecast unchanged at 112 MMT. Also today, USDA reported a solid 1.578 MMT (62.1 million bu.) of U.S. corn inspected for export during the week ended Feb. 17, up from good sales of 1.456 MMT the previous reporting week.

Technical analysis: Bulls hold a strong near-term technical advantage with prices in a 5 1/2-month uptrend. The next downside target for bears is closing May futures below chart support at last week’s low of $6.35 1/4. The next upside price objective for bulls is to close May futures above solid resistance at $7.00. First resistance is seen at today’s contract high of $6.69 1/2, then at $6.75. First support is at today’s low of $6.56 1/4, then at $6.50.

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 rose 33 1/2 cents to $16.35, the highest settlement for a nearby contract since a nine-year closing high of $16.60 1/2 last May. March soybean meal rose $5.80 to $453.70 per ton and March soybean oil rose 258 points to 70.15 cents per pound, an eight-month high.

Fundamental analysis: Nearby soybean futures rose to a nine-month high as escalating Russia/Ukraine concerns fueled broad strength across commodity markets. Fresh export business and continued expectations for drought-driven crop shortfalls in South America contributed to soy complex strength. Argentina's 2021-22 soybean and corn crops could see yields continue to decline with abundant rains only expected to arrive in mid-March to relieve a lengthy period of dry weather, the Buenos Aires Grain Exchange said yesterday. Pro Farmer consultant Michael Cordonnier cut his Argentine soybean crop estimate by 1 MMT, to 39 MMT and left his Brazilian estimate unchanged at 124 MMT. Cordonnier also left his Paraguay soybean crop peg at 5 MMT.

The tighter supply outlook has fueled a nearly month-long buying spree from China and others that extended into this week. 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 3.65 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. Also today, USDA reported 975,102 MT (35.8 million bu.) of soybeans inspected for export during the week ended Feb. 17, down from 1.16 MMT the previous week. Expectations ranged from 900,000 MT to 1.25 MMT.

Technical analysis: Bulls are firmly in command in the soybean market, driving March futures to a contract high at $16.41, topping the previous high at $16.33. New-crop November futures posted a contract high at $14.83. Resistance on the continuation chart comes in around the nine-year intraday high at $16.77 1/4, reached May 12, then the psychologically important $17.00 level. Large speculators increased their bullish bets in soybean for the fourth straight week, based on Commodity Futures Trading Commission data, meaning the market may be vulnerable to a fund-driven sell-off if key support levels are breached. Key downside levels include the 10-day moving average at $15.85 3/4 and last week’s low at $15.42 1/4.

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.

 

Wheat

Price action: May SRW wheat rose 48 1/2 cents to $8.52 1/2, the contract’s highest closing price since Nov. 24. May HRW wheat surged 47 cents to $8.87. May spring wheat gained 26 1/2 cents to $9.87 3/4.

Fundamental analysis: Winter wheat futures closed at three-month highs amid concern Russia’s escalating aggression against Ukraine will spark a war that disrupts the global grain trade. Both countries are major grain producers and exporters. Ukraine shipped 42.5 MMT of grain so far in 2021-22, up 37% from the same stage last season, including 17.85 MMT of wheat and 18.68 MMT of corn,  according to Ukraine agriculture ministry data.

Today’s gains likely were driven in part by large speculators buying back shorts. Managed money’s net short in SRW wheat increased 5,106 contracts during the week ended Feb. 15 to 34,658 futures and options contracts, the largest since July 2020, according to CFTC data. However, many if not most of those new, big fund shorts likely scrambled to liquidate positions today, further fueling price gains in wheat futures.

USDA reported a daily sale of 120,000 MT of HRW wheat for delivery to Nigeria, divided evenly between 2021-22 and 2022-23 marketing years. USDA also reported 539,366 MT (19.8 million bu.) of wheat inspected for export during the week ended Feb. 17, up from 459,377 MT the previous week.

Montana and Colorado released monthly crop condition updates last Friday and Kansas, Oklahoma and Texas are expected to release updates tonight. In Montana, USDA said February brought little moisture, with precipitation for the month ranging from 0.1 to 1 inch in most areas. The northeastern corner of the state was exceptionally dry and received trace amounts of precipitation. Overall, 92% of Montana continues to experience drought conditions.

Technical analysis: Winter wheat bulls hold a solid near-term technical advantage and gained more power today. SRW bulls' next upside price objective is closing May futures above solid resistance at the contract high of $8.79. Bears' next downside objective is closing prices below solid support at $7.80. First resistance is seen at $8.60, then at $8.70. First support is seen at $8.34, then $8.20.

HRW bulls' next upside price objective is closing May futures above solid resistance at the contract high of $8.92. Bears' next downside objective is closing prices below solid support at $8.00. First resistance is seen at $8.92, then at $9.00. First support is seen at $8.69, then at $8.50.

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 led deferred contracts lower, falling 188 points to 121.11 cents per pound, while most-active May dropped 87 points to 120.29 cents. 

Fundamental analysis: Today was first-notice day for the March contract, which explains its comparatively large loss versus deferred futures, as many long position holders continued to roll positions forward. Cotton futures declined despite sharp gains in crude oil, soybean and grain markets. The lack of U.S. dollar strength also seemed encouraging. Weakness in U.S. stocks weighed on cotton as well amid concern economic weakness could hurt consumer apparel demand. The geopolitical situation, especially Russia/Ukraine, will probably continue dominating the markets during the days ahead, with cotton futures being involved only peripherally.

Technical analysis: May cotton futures posted an “inside day” and posted a mid-range close. Bears seem to hold a slight technical advantage after the market failed to take out resistance at the 10- and 20-day moving averages of 121.58 cents and 121.80 cents, respectively. A breakout above that range would have bulls targeting the contract high at 125.83 cents, then 130.00 cents. Initial support is at last Friday’s low of 119.52 cents, then at the 40-day moving average near 117.90 cents. A drop below that level would have bears looking to test support at the former contract high of 116.67 cents, then the psychological 115.00-cent level.

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.

 

Latest News

After the Bell | March 27, 2024
After the Bell | March 27, 2024

After the Bell | March 27, 2024

Pro Farmer's Daily Advice Monitor
Pro Farmer's Daily Advice Monitor

Pro Farmer editors provide daily updates on advice, including if now is a good time to catch up on cash sales.

Market Watch | March 27, 2024
Market Watch | March 27, 2024

Cash cattle prices soar to all-time high.

Baltimore Bridge Collapse: Limited Impact on Trade Basis Channel Reopening Timeline
Baltimore Bridge Collapse: Limited Impact on Trade Basis Channel Reopening Timeline

RFK Jr. VP | Dairy cattle bird flu update | John Deere layoffs | Dollar/yen exchange rate 34-year high

Ahead of the Open | March 27, 2024
Ahead of the Open | March 27, 2024

Corn and soybeans each favored the downside overnight, with corn leading the way lower. Wheat showed relative strength and went into the break near unchanged.

First Thing Today | March 27, 2024
First Thing Today | March 27, 2024

Corn, soybeans and wheat extended Tuesday’s losses during the overnight session.