Crops Analysis | March 3, 2022
Price action: May corn futures retreated from limit-up gains earlier to close 22 3/4 cents higher at $7.47 3/4. December corn firmed 2 3/4 cents to $6.12.
Fundamental analysis: Corn futures were again supported by surging wheat prices and concerns about global grain trade amid the ongoing Russia/Ukraine conflict. But the market sold off around 12 cents from session highs, and whether that pullback leads to end-of-week profit-taking will likely depend on the wheat market, where nearby contracts finished limit up for a third straight day.
Fundamentally, freight markets and basis at ports signal a significant pickup in export business. Some of that was confirmed this morning as USDA reported daily corn sales of 337,000 MT to “unknown destinations” for 2021-22. Earlier this week, there was unconfirmed talk China bought at least 10 cargoes of U.S. corn for spring delivery to replace Ukrainian supplies. That would suggest more daily sales are coming.
Net weekly corn export sales totaled 485,100 MT for 2021-22 and 222,800 MT for 2022-23. But those sales were as of Feb. 24, the day Russia invaded Ukraine. Next week’s report will be far more telling as it will show any panic buys from global importers after the conflict got underway. Ukraine is a major exporter of corn and export sources signal it had 13 MMT to 14 MMT (512 million bu. to 552 million bu.) of supplies left to ship in 2021-22. Global end-users must find replacements for those bushels.
Technical analysis: Bulls have full control in May corn futures, with this week’s surge extending the already well-established uptrend. Today’s high at $7.60 is initial resistance, followed by the 2021 high at $7.75, the 2013 high at $8.00 and the all-time high from 2012 at $8.43 3/4 on the continuation chart. The contract is overbought at 74.8% on the 14-day Relative Strength Index, but short-term momentum indicators aren’t reliable price predictors during volatile times. Last week’s high at $7.16 1/4 is near-term support, followed by the rapidly rising 5-day moving average that was at $7.09 today.
What to do: Get current with advised 2021- and 2022-crop sales.
Hedgers: You should be 90% sold in the cash market on 2021-crop. You should also have 40% of expected 2022-crop production forward-sold for harvest delivery.
Cash-only marketers: You should be 90% sold on 2021-crop. You should also have 40% of expected 2022-crop production forward-sold for harvest delivery.
Soybeans
Price action: May soybean futures rose 2 3/4 cents to $16.80 1/4 but finished off a one-week high at $16.99 posted overnight. May soybean meal rose $5.40 to $453.40. May soybean oil fell 106 points to 74.81 cents per pound after earlier posting a contract high at 77.33 cents.
Fundamental analysis: Nearby soybeans gained on spillover from the wheat market’s steep rally but faded on profit-taking and indications that stepped-up Chinese demand and a South American crop shortfall are factored into prices. The Russia/Ukraine war promises to keep the soy complex elevated for the time being on uncertainty over vegetable oil exports from the Black Sea region. Russia and Ukraine account for about 80% of global sunflower oil exports.
China continued a string of U.S. soybean purchases that began in late January. Early today, USDA reported a daily soybean sale of 132,000 MT to China, equally divided between the 2021-22 and 2022-23 marketing years. Since Jan. 28, USDA has reported a combined 5.596 MMT of soybean sales to China or unknown destinations, a more than seven-fold increase from the pace the previous month.
Net weekly U.S. soybean export sales totaled 857,000 MT for 2021-22, down 31% from the previous week and down 34% from the prior four-week average. Net weekly sales totaled 1.386 MMT for 2022-23, including 1.26 MMT for China. Sales were expected to range from 600,000 MT to 1.05 MMT for 2021-22 and 600,000 MT to 1.3 MMT for 2022-23.
Technical analysis: Bulls retain their short-term technical advantage in soybeans but the market shows increasing signs of exhaustion. May soybeans rose as high as $16.99 but faded in the face of resistance around the $17.00 area, which also capped gains the previous two days. Further resistance is seen at the contract high of $17.59 1/4 posted Feb. 24. Support at the 10- and 20-day moving averages of $16.46 1/4 and $16.08 1/2, respectively, is backed by strong psychological support at $16.00. A close below $16.00 would have bears targeting the Feb. 15 low at $15.46 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 40% of expected 2022-crop production forward-sold for harvest delivery.
Cash-only marketers: You should be 85% sold on 2021-crop. You should also have 40% of expected 2022-crop production forward-sold for harvest delivery.
Price action: May SRW and HRW futures both rose the expanded daily limit of 75 cents for the second consecutive day, settling at $11.34 and $11.50 3/4, respectively. Nearby SRW closed at a 14-year high. May spring wheat rose the 60-cent daily limit to $11.18 1/4. HRW and SRW futures price limits will remain at 75 cents tomorrow.
Fundamental analysis: Wheat futures extended a steep rally as Russia’s invasion of Ukraine throws the global grain trade into turmoil. Ukrainian ports have been closed since the war began a week ago, casting growing uncertainty on grain supplies from the Black Sea region with global wheat stockpiles already heading for a five-year low. Russia and Ukraine account for about 29% of global wheat exports, 19% of corn exports and 80% of exports of sunflower oil. Argentina's government today said it would establish a mechanism to control domestic wheat prices and temper food inflation.
Also today, USDA reported net weekly U.S. wheat sales totaling 300,000 MT for 2021-22, down 42% from the previous week but up 54% from the prior four-week average. Net sales totaled 69,800 MT for 2022-23. Sales were expected to range from 200,000 to 650,000 MT for 2021-22 and 50,000 to 275,000 MT for 2022-23.
Technical analysis: Wheat market bulls gained more momentum today after nearby SRW futures closed at the highest level since February 2008, though markets have grown increasingly overbought and at risk for a correction lower. May SRW futures ended today at 84.3 on the Relative Strength Index, well into overbought territory. Based on continuation charts, upside targets in May SRW futures include the February 2008 high at $13.34 1/2. Upside targets in May HRW include the continuation high of $13.40 in March 2008. Initial support in both HRW and SRW is seen around $11.00.
What to do: Get current with advised 2021- and 2022-crop sales.
Hedgers: You should be 90% sold on 2021-crop in the cash market. You have 10% of 2021-crop hedged in July SRW futures at $8.75 1/4. You should be 40% forward-priced for harvest delivery on expected 2022-crop production.
Cash-only marketers: You should be 90% sold on 2021-crop. You should be 40% forward-priced for harvest delivery on expected 2022-crop production.
Price action: May cotton futures surged 126 points to 119.80 cents and nearer the session high.
Fundamental analysis: The cotton market benefited gained support from crude oil futures’ rally to a 13 1/2-year high at $116.57, although oil tumbled by the close on speculation a nuclear deal with Iran could boost global supplies. A rise in the U.S. dollar index to a 21-month high also tempered cotton’s gains, as did a U.S. stock market that remains wobbly.
USDA reported net weekly U.S. cotton sales of 348,600 running bales (RB) for 2021-22, up 41% from the previous week and up 51% from the prior four-week average. Increases were primarily for Vietnam (96,900 RB), China (75,800 RB) and Turkey (63,600 RB). Net sales for 2022-23 totaled 105,200 RB, primarily for Vietnam (75,800RB) and Mexico (15,000 RB). Exports of 354,100 RB were down 6% from the previous week but up 14% from the four-week average. China was the primary destination (143,600 RB).
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.
