Crops Analysis | March 7, 2022
Price action: Corn futures finished mixed. May corn dropped 3 1/2 cents to $7.50 3/4, while December corn firmed 13 1/4 cents to $6.42 3/4.
Fundamental analysis: Corn futures were unable to sustain strong gains posted during the overnight session, despite wheat trading sharply higher to limit up and broad strength in commodities. Today’s price action was corrective in nature as traders took some profits out of the long side of the market and also unwound bull spreads. While additional corrective trade is possible Tuesday, another surge in wheat futures would likely bring buyers back to the corn market.
Money flow will continue to be the primary price driver in the corn market, but traders should keep a close watch on demand. Weekly USDA export inspections were strong again at 62.3 million bushels. That lowered the weekly required pace to hit USDA’s current export forecast to 43.3 million bushels. We anticipate USDA will raise its export forecast on Wednesday to reflect reduced shipments out of Ukraine due to the war situation.
Technical analysis: May corn futures posted an inside day down on the daily price chart. Near-term resistance is last Friday’s high at $7.82 3/4, followed by the 2013 high at $8.00 and the all-time high at $8.43 3/4 on the continuation chart. The 5-day moving average near $7.40 1/2 is initial support, followed by $7.34 1/2, which would be a 38.2% retracement of the rally from the Feb. 25 reaction low to the contract high. A 50% retracement would be near $7.19 1/2.
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 fell a penny to $16.59 1/2, after rising as high as $16.96 3/4 overnight. May soybean meal fell $1.70 to $458.70 and May soybean oil rose 142 points to 74.22 cents.
Fundamental analysis: Nearby soybeans extended a technically driven setback as traders awaited USDA’s Supply and Demand Report on Wednesday. While the Russia/Ukraine war continued to push wheat prices higher, the escalating conflict is less of a factor for the soybean market, which continued to show signs of exhaustion and a potential near-term top. USDA is expected to lower its projections for South American production, but the crop shortfall appears to be reflected in current soybean market prices. Private forecasters continued to scale back South America outlook. AgRural lowered its estimate for Brazil’s soybean crop to 122.8 MMT.
Drought-driven crop losses in South America are driving soybean export business to the U.S., and China continues to snap up cargoes. USDA reported daily soybean sales of 132,000 MT for delivery to China, equally divided between 2021-22 and 2022-23. Since Jan. 28, USDA has reported a combined 5.96 MMT of soybean sales to China or unknown destinations. Also today, USDA reported 766,250 MT (28.2 million bu.) of soybeans inspected for export during the week ended March 1, up from 738,266 MT the previous week. Expectations ranged from 400,000 MT to 1.475 MMT.
Technical analysis: Bullish momentum is fading as May soybeans failed again to penetrate stiff resistance just under $17.00, a level that’s capped gains for almost a week. The inability to push above that level may eventually prompt large speculators to cut a sizable net long position. Further resistance is seen at the contract high of $17.59 1/4 posted Feb. 24. Support at the 20-day moving average of $16.21 is backed by strong the psychological $16.00 level. 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 wheat rose the expanded 85-cent limit to $12.94, while nearby futures hit a record high. May HRW wheat rose 37 cents to $12.51 1/2. SRW and HRW daily trading limits expand to $1.30 on Tuesday. May spring wheat rose 50 1/2 cents to $11.97 1/2.
Fundamental analysis: The Russia/Ukraine war continued to fuel concern over disruptions to the global grain trade, raising questions over when Ukrainian shipments will resume as well as how much seeding can be done as war rages. While HRW contracts and several SRW contracts retreated from limit-up gains, prices likely will remain elevated. Earlier today, USDA reported 343,463 MT of U.S. wheat inspected for export during the week ended March 1, down from 429,984 MT the previous week.
USDA’s monthly Supply and Demand Report Wednesday will likely take a back seat to geopolitics. However, ending global wheat stockpiles were already heading for a five-year low in 2021-22 before the Russian invasion of Ukraine, making Wednesday’s USDA data of keener interest.
HRW bulls' next upside price objective is closing May futures above solid resistance at $13.00. Bears' next downside objective is closing prices below solid support at $11.50. First resistance is seen at $12.75, then at $13.00. First support is seen at today’s low of $12.03 1/4, then at $11.57 3/4.
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 rose 52 points to 116.94 cents per pound after dropping earlier to 115.37 cents, a seven-week intraday low.
Fundamental analysis: Cotton futures rebounded from initial declines as the escalating Russia/Ukraine conflict drove rallies in crude oil and wheat markets. Early declines stemmed from weakness in U.S. stocks and strength in the U.S. dollar, which posted a 22-month high today against a basket of global currencies. Cotton market focus is shifting to Wednesday’s USDA Supply and Demand Report, which is expected to show an increase in projected U.S. exports and a slight decline in global stockpiles. U.S. exports in the 2021-22 marketing year will be revised higher by about 136,000 bales, to 14.89 million bales, based on a Bloomberg survey of analysts.
Large speculators cut their bullish bets in the cotton market for the fourth consecutive week, CFTC data showed. The managed money net long in cotton futures and options fell 168 contracts, to 74,489 contracts in the week to March 1, the lowest net long since the week ended Dec. 21.
Technical analysis: Cotton futures’ technical posture eroded further even with today’s rebound, as the market continued a pattern of lower lows. May futures’ push under support at the February low of 115.86 cents may have bears targeting the 100-day moving average at 113.12 cents and further at 112.65 cents. For market bulls, upside objectives include the 10-day moving average at 119.30 cents and Friday’s high at 120.15 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.
