Crops Analysis | March 10, 2022
Price action: Corn futures finished mostly 15 to 22 cents higher, with the May contract up 22 3/4 cents t $7.55 3/4. December corn firmed 15 cents to $6.51 3/4.
Fundamental analysis: Corn futures stood strong in the face of heavy selling in wheat today, due largely to export demand strength. But if the heavy selling in wheat continues, it will be difficult for corn to completely divorce itself, especially ahead of the weekend. If wheat trades lower again on Friday, corn would likely face selling pressure into the weekend. Export demand is providing fundamental support for corn, but money flow will remain the primary price driver.
There was expected to be a surge in global end-user buying of U.S. corn in the week following Russia’s invasion of Ukraine. It turns out there was even more buying than anticipated. Old-crop corn sales for the week ended March 3 topped 2.1 MMT (84.4 million bu.), which was a marketing-year high and far greater than expectations for 500,000 MT to 1.2 MMT. “Unknown destinations” was the lead buyer at 800,600 MT. However, sales for 2022-23 of 22,900 MT were lower than expected. Key will be how much additional panic buying there was over the past week. Those sales will be reported next Thursday. In Wednesday’s Supply & Demand Report USDA raised 2021-22 projected U.S. corn exports by 75 million bu. (to 2.5 billion bu.), “reflecting expectations of sharply lower exports from Ukraine.”
Brazil left its corn crop estimate unchanged at 112.3 MMT. That’s in line with Crop Consultant Dr. Michael Cordonnier’s forecast but below USDA’s 114 MMT projection. Three quarters of Brazil’s production comes from the safrinha crop, so the crop picture could still change, as late April through early June is the key pollination to grain fill period for the country’s second crop.
Technical analysis: May corn futures have spent the week consolidating after last Friday’s surge to the contract high at $7.82 3/4. The 10-day moving average at $7.29 provided support today and is backed ty Tuesday’s low at $7.28 3/4. A drop through those levels would make the Feb. 24 spike high at $7.16 1/4 next support. Above the contract high, bulls would target continuation chart resistance at the 2013 high at $8.00 and then the all-time high of $8.43 3/4.
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.
Price action: May soybeans closed up 14 1/2 cents at $16.86 1/4 and near mid-range. May soybean meal closed up $9.00 at $483.70, nearer the session high after hitting a contract high of $490.00. May bean oil closed up 53 points at 74.68 cents and near mid-range.
Fundamental analysis: Soybean and meal futures were boosted by strong numbers in today’s weekly export sales report from USDA. Old-crop soybean sales totaled 2.2 MMT, which was well above trade expectations. China at nearly 1.1 MMT and “unknown destinations” at 334,000 MT were lead buyers. Sales of 895,000 MT of beans were seen for the 2022-2023 marketing year, including China at 797,000 MT. Exports of 834,900 MT were up 11% from the previous week, but down 26% from the prior 4-week average. Meantime, weekly U.S. soymeal sales at 316,100 MT were up sharply from the previous week and 49% above the four-week average.
Soybean market bulls have been especially impressed by the strength in soybean meal futures lately, including today’s push to a contract high in May futures. With meal price action so strong, it suggests soybean futures have more upside price potential, too.
However, there are two worrisome outside-market elements that may work to limit further upside price potential in the soybean complex. First, crude oil has backed down from this week’s 14-year high of $130.50 to around $106. Crude oil bulls expended a lot of energy earlier this week and now may be exhausted. If crude did indeed put in a major market top this week, which price action now suggests, then raw commodity markets, including grain/soy futures, will find the going on the upside much tougher. Second, this week’s price action in winter wheat futures strongly suggests those markets have put in major tops. If wheat futures prices continue to struggle, soybeans would likely find any further price gains harder to achieve.
Soyoil futures saw price gains limited today as Malaysian palm oil futures prices pulled back overnight.
Technical analysis: Soybean, meal and bean oil bulls all have the solid overall near-term technical advantage. Soybean prices are in a four-month-old uptrend on the daily bar chart. The next near-term upside technical objective for bulls is closing May futures above solid resistance at the contract high of $17.59 1/4. The next downside price objective for bears is closing prices below solid technical support at $15.79. First resistance is seen at this week’s high of $17.34 and then at $17.59 1/4. First support is seen at today’s low of $16.61 1/2 and then at $16.50.
The next upside price objective for meal bulls is to produce a close in May futures above solid technical resistance at $500.00. The next downside price objective for bears is closing prices below solid technical support at $460.00. First resistance comes in at today’s contract high of $490.00 and then at $495.00. First support is seen at $480.00 and then at today’s low of $473.30.
The next upside price objective for bean oil bulls is closing May futures above solid technical resistance at this week’s contract high of 78.58 cents. Bears' next downside technical price objective is closing prices below solid technical support at 70.00 cents. First resistance is seen at today’s high of 75.75 cents and then at 76.20 cents. First support is seen at this week’s low of 73.03 cents and then at 72.00 cents.
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.
Wheat
Price action: Winter wheat futures posted sharp losses, led by a $1.14 1/2 plunge in the May SRW contract, which finished at $10.87. May HRW wheat dropped 48 3/4 cents to $10.65 3/4. May HRS wheat fell 29 cents to $10.55. Daily trading limits revert to 85 cents for winter wheat futures on Friday.
Fundamental analysis: Price action was extremely volatile in the wheat market today. Futures gapped lower overnight, rebounded to fill the gaps and then saw buyer interest dry up early in daytime trade. There is no fundamental rhyme nor reason behind price action in the wheat market, as price moves continue to be driven by money flow. That’s unlikely to change anytime soon, meaning price volatility is likely to remain extreme.
While corn and soybeans had a rush of buyers over the past week, wheat showed just ordinary business. Weekly wheat export sales were uninspiring at 307,200 MT for 2021-22 and 63,000 MT for 2022-23. Despite major disruptions to wheat export business out of the Black Sea region that caused USDA to cut its export forecasts by 4 MMT (147 million bu.) for Ukraine and by 3 MMT (110 million bu.) for Russia, it also lowered the U.S. export forecast by 10 million bushels. While the export pace has been lagging, we still expect the U.S. to pick up some lost business out of the Black Sea region.
Technical analysis: The market is flashing stronger technical topping signals. May SRW futures have filled the March 4 gap at $11.34 after filling the March 7 and March 8 gaps on Tuesday. There are two gaps left – one from March 3 (from $10.70 to $10.59) and one from March 2 (from $9.85 1/4 to $9.84) – that are bears’ next targets. Initial resistance is at the psychological $11.00 mark, followed by the 10-day moving average just below $11.05. The 5-day average, which is now falling, is around $12.15 1/2.
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.
Cotton
Price action: May cotton closed down 61 points at 116.86 cents and near the session low. December futures dropped 25 points at 101.44 cents.
Fundamental analysis: The cotton futures market wobbled today as Nymex crude oil prices have backed down around $24 a barrel from this week’s 14-year high of $130.50. Recently the cotton futures market has trended sideways to lower while crude oil prices rocketed above $100 a barrel. Worrisome for the cotton market bulls is that up until just a few weeks ago cotton and crude oil had traded nearly in lock-step from early December until early February. A selloff in the U.S. stock market today also worked to limit any buying interest in cotton futures.
Today’s weekly USDA export sales report showed U.S. cotton net sales of 354,200 running bales (RB) for 2021-2022 were up 2% from the previous week and up 51% from the prior four-week average. Increases were primarily for China (170,300 RB) and Turkey (70,500 RB). Net cotton sales of 68,200 RB for 2022-2023 were primarily for Turkey (28,600 RB) and Pakistan (12,600 RB). U.S. cotton exports of 321,300 RB were down 9% from the previous week and 1% from the prior four-week average. The destinations were primarily to China (108,800 RB) and Pakistan (61,800 RB). While U.S. cotton export sales have been strong lately, the shipments pace at present will not meet USDA’s 2021-22 forecast for a total of 14.75 million bales.
Technical analysis: Cotton futures bulls have the overall technical advantage. However, prices are now in a choppy downtrend on the daily bar chart. The next upside price objective for bulls is to produce a close in May futures above solid technical resistance at 122.00 cents. The next downside price objective for bears is to close prices below solid technical support at 112.50 cents. First resistance is seen at this week’s high of 119.16 cents and then at 120.00 cents. First support is seen at this week’s low of 115.37 cents and then at 114.00 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.
