Crops Analysis | February 25, 2022
Advice: We advise corn hedgers and cash-only marketers to sell another 10% of 2021-crop to get to 90% sold. We also advise all corn producers to sell another 10% of expected 2022-crop for harvest delivery to get to 40% forward-priced.
Price action: May corn futures plunged 34 1/2 cents to $6.55 3/4, the lowest closing price since Feb. 18 but still up 3 cents for the week. December futures fell 25 cents to $5.79 3/4.
30-day outlook: Corn futures need strong domestic and foreign demand, plus strength in soybeans, to sustain elevated prices. The market continues to see signs of demand erosion in recent weeks, with ethanol production down sharply from late-2021 levels and exports running well behind last year’s pace. USDA today reported net 2021-22 U.S. corn sales of 1.041 MMT for the week ended Feb. 17, up 27% from the previous week, up 4% from the average for the previous four week and above trade expectations ranging from 500,000 to 900,000 MT. Still, U.S. export commitments (accumulated exports plus outstanding sales) lag last year’s levels by 19% (albeit narrower than the 21% shortfall a week ago). USDA’s March 9 Supply & Demand Report will be watched for any changes to the domestic and global balance sheets.
90-day outlook: Traders will increasingly shift attention to the U.S. spring planting outlook, along with development of Brazil’s safrinha second-crop corn. U.S. farmers are widely expected to plant fewer acres to corn due to high prices for fertilizer and other inputs. USDA, at its annual Outlook Forum this week, estimated U.S. corn plantings will decline to 92.0 million acres from 93.4 million in 2021 as high prices for fertilizer and other crop inputs favor soybeans. We currently expect U.S. corn plantings to decline 3 million acres this year to 90.4 million acres, though results from our spring acreage survey will give us a better idea of planting intentions.
What to do: Get current with advised 2021- and 2022-crop sales.
Hedgers: NEW ADVICE – You should sell another 10% of 2021-crop to get to 90% sold in the cash market. Also sell another 10% of expected 2022-crop for harvest delivery to get to 40% forward-priced.
Cash-only marketers: NEW ADVICE – You should sell another 10% of 2021-crop to get to 90%. Also sell another 10% of expected 2022-crop for harvest delivery to get to 40% forward-priced.
Soybeans
Advice: We advise hedgers and cash-only marketers to sell another 10% of expected 2022-crop for harvest delivery to get to 40% forward-priced.
Price action: May soybeans fell 69 1/2 cents to $15.84 1/2, down 19 1/4 cents for the week and the lowest closing price since Feb. 15. May soymeal fell $12.90 to $442.70 per ton, down $3.00 for the week. May soyoil fell 304 points to 68.93 cents per pound, up 132 points for the week.
5-day outlook: Soybeans took steep losses amid profit-taking following yesterday’s surge to 9 1/2-year highs. The Russia/Ukraine war will continue to be the market’s primary focus, as both countries are major wheat exporters, but the conflict is expected to have limited impact on soybeans, outside of soyoil and other vegetable oil markets. Ukraine is the world’s largest producer and exporter of sunflower seeds and sunflower oil. When combined with Russia, the two countries account for nearly 80% of global sunseed oil exports. Nearby soybean futures’ sharp pullback after briefly pushing above $17.00 yesterday suggests the market has reached an exhaustion point and further declines early next week may confirm a near-term top has been established. South America weather and harvest results will also be watched.
30-day outlook: Sustained demand is needed to maintain soybean prices at elevated levels, and signs emerged late this week that demand may be pulling back slightly. USDA today reported net weekly 2021-22 soybean sales totaling 1.233 MMT for 2021-22, down 6% from the previous week and down 1% from the prior four-week average. Sales topped trade expectations ranging from 500,000 MT to 1.2 MMT. Whether China continues to buy actively should be another price influencer. Early today, USDA reported daily soybean sales of 334,000 MT to China for 2022-23 and 285,000 MT to “unknown destinations.” Today’s sales were the latest in a four-week string of purchases. Since Jan. 28, USDA has reported a combined 4.399 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.
USDA’s March 9 Supply & Demand Report should produce a sharp drop in USDA’s Brazilian soybean crop estimate, and we anticipate a sizable increase in the U.S. export forecast.
90-day outlook: South America will fade from market focus as the North American spring planting season nears, with U.S. farmers widely expected to increase soybean acres. The soybean-to-corn ratio ended at 2.4 this week, near a four-month high posted last week and an indication the market is trying to “buy” more bean acres. USDA’s Prospective Plantings Report March 31 will set the market tone in early spring. We currently expect soybean plantings to increase 1.2 million acres from last year to 88.4 million acres, though our acreage survey will give us a better indication of planting intentions. At its Outlook Forum this week, USDA estimated U.S. soybean plantings at 88.0 million ac., up from 87.2 million last year and reflecting an expected response to sharply higher soybean prices due to drought-driven crop shortfalls in South America.
What to do: Get current with advised 2021- and 2022-crop sales.
Hedgers: NEW ADVICE – You should sell another 10% of expected 2022-crop for harvest delivery to get to 40% forward-priced. You should be 95% sold in the cash market on 2021-crop.
Cash-only marketers: NEW ADVICE – You should sell another 10% of expected 2022-crop for harvest delivery to get to 40% forward-priced. You should be 85% sold on 2021-crop.
Advice: We advise hedgers and cash-only marketers to sell another 10% of 2021-crop to get to 90% sold. Hedgers should also lift the 20% hedge in March SRW futures. Our exit was $8.66 3/4 for a $1.0975 loss. We advised adding a 10% 2021-crop hedge in July SRW futures. Our fill on that position was $8.75 1/4. We also advised all wheat producers to sell another 10% of expected 2022-crop for harvest delivery to get to 40% forward-priced.
Price action: Winter wheat futures more than erased yesterday’s strong gains given today’s expanded (75-cent) trading limits. May SRW futures plunged 75 cents to $8.59 3/4 but still gained 55 3/4 cents for the week. May HRW futures dropped 75 cents to $8.91 but gained 40 cents for the week. May spring wheat futures fell their daily limit of 60 cents to $9.60 1/4 and were down a penny for the week. Daily trading limits remain at 75 cents for winter wheat contracts and 60 cents for spring wheat on Monday.
5-day outlook: The wheat market was turbulent this week and won’t likely be much if any less volatile next week. Focus will remain on the war between Russia and Ukraine. While there is concern about wheat supplies coming out of the Black and Azov Seas since the two countries combined account for nearly 30% of global wheat exports, money flow and emotion will have much more to do with next week’s price action than fundamentals or rationale.
30-day outlook: The longer the conflict persists, the greater chance it will disrupt global wheat movement. Russia-based consultant SovEcon estimates Ukraine has around 6 MMT of wheat and Russia has 7 MMT to 7.5 MMT of wheat left to ship for 2021-22. American wheat is not competitively priced on the global market, but some business could come to the U.S. if the war persists as world milling quality wheat supplies are tight.
90-day outlook: U.S. winter wheat crop conditions continue to deteriorate. The arctic blast is the latest hit to the HRW crop in the Southern and Central Plains that already faces major drought stress. The drought- and winterkill-damaged HRW crop will need a cool, wet, spring to set new tillers. Unfortunately, the spring forecast offers little hope for meaningful relief.
What to do: Get current with advised 2021- and 2022-crop sales.
Hedgers: NEW ADVICE – You should sell another 10% of 2021-crop to get to 90% sold in the cash market. You should also lift the 20% hedge in March SRW futures. Our exit was $8.66 3/4 for a $1.0975 loss. Add a 10% 2021-crop hedge in July SRW futures. Our fill on that position was $8.75 1/4. You should also sell another 10% of expected 2022-crop for harvest delivery to get to 40% forward-priced.
Cash-only marketers: NEW ADVICE – You should sell another 10% of 2021-crop to get to 90% sold You should be 80% priced on 2021-crop. You should also sell another 10% of expected 2022-crop for harvest delivery to get to 40% forward-priced.
Price action: May cotton futures fell 53 points to 118.63 cents per pound, the lowest closing price since Jan. 25 a weekly drop of 2.53 cents
5-day outlook: Cotton futures extended weakness stemming from a midweek breakdown in the wake of Russia’s invasion of Ukraine, as equity markets’ sharp initial declines and the U.S. dollar’s upswing raised concern over foreign demand for U.S. commodities. Cotton’s increasingly bearish tone appeared to mute USDA’s weekly Export sales report today. Weekly sales for 2021-22, at 247,000 bales, were up 56% from the previous week but down 7% from the prior four-week average. But for 2022-23, net sales of 218,200 bales were impressive and weekly shipments, at 376,100 bales, were also strong. Still, the numbers seemed to fall short of the pace needed to get U.S. commitments for the 2021-22 shipped by the July 31 end to the current crop year. Next week’s outlook doesn’t seem all that promising in the absence of followthrough stock market gains and/or U.S. dollar losses.
30-day outlook: The U.S. export outlook, particularly for old-crop cotton will likely remain the short-term focus of traders during March. Exceptions may arise when USDA releases its monthly Supply and Demand report March 9 and its Prospective Plantings report March 31. Many traders will look to gauge the 2022 seeding and harvest prospects once USDA’s weekly crop condition ratings begin.
90-day outlook: The new-crop outlook will become increasingly dominant in the minds of traders, especially when USDA begins releasing its weekly Crop Progress reports in early April. Traders more heavily invested in the old-crop situation and the U.S. industry’s ability to meet export commitments will continue monitoring the export data. Spring weather over the prime production belt from west Texas through the Southeast will be closely followed, especially if drought develops. Economic and geopolitical developments also hold the potential to move the market, as was demonstrated this past week.
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.
