Crops Analysis | March 11, 2022
Price action: May corn futures rose 6 3/4 cents to $7.62 1/2, up 8 1/4 cents from the end of last week. December corn rose 3 1/2 cents to $6.55 1/4, up 25 3/4 cents for the week and a lifetime-high close for the contract.
5-day outlook: Nearby corn futures gained for the fifth consecutive week, even as the wheat market sold off amid ongoing concern over Russia’s invasion of Ukraine and disruptions to global ag markets. Russia/Ukraine will continue to be the market’s primary focus next week. While corn market technicals are bullish, May futures failed to test or take out the previous week’s contract high at $7.82 3/4, which may signal limited buying interest and further sideways consolidation trade next week. USDA’s weekly export sales report March 17 will be studied closely for an indication of the level of panic buying among global importers, and traders will also watch for any additional USDA daily sales announcements. Another downdraft in wheat could prompt speculative funds to pare a hefty long position in corn.
30-day outlook: The Russia/Ukraine conflict promises to keep grain prices elevated for the foreseeable future, though the prospect that corn and wheat have established near-term tops must be considered. Speculative money flow will continue to be a key influencer. If grain markets remain in turmoil, USDA’s Prospective Plantings report March 31 may not be as big a tone-setter as usual. Before Russia’s invasion, we expected 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. The soybean/corn ratio ended the week at 2.28, down from 2.45 a month ago, based on new-crop futures. The ratio fell sharply as December corn rallied to contract highs, possibly signaling a market effort to “buy” more corn acres.
90-day outlook: An extended run of corn prices above $7.00 will eventually curtail demand and prompt a supply response, and the sub-$7.00 prices in deferred futures indicate traders see supplies becoming less tight over the long term. The market will require sustained demand from both domestic ethanol producers and export markets to maintain elevated levels through spring. China and other top global buyers have stepped up U.S. corn purchases recently, but fresh supplies from South America will soon be entering the pipeline. Early today, USDA announced a daily U.S. corn sale totaling 128,900 MT to “unknown destinations” for delivery in the 2021-22 marketing year. Today’s announcement follows yesterday’s stronger-than-expected weekly export sales report, which showed net U.S. corn sales for the week ending March 3 at 2.1 MMT, a marketing year high.
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 fell 10 1/4 cents to $16.76, up 15 1/2 cents for the week. November soybeans fell 1 1/4 cents to $14.91. May soymeal fell $6.60 to $477.10 per ton, up $16.70 for the week, while May soyoil rose 135 points to 76.03 cents per pound, up 323 points for the week.
5-day outlook: The Russia/Ukraine conflict will remain squarely in market focus next week. Wheat futures fell sharply this week, and further losses next week could spill over into other ag commodities. Crude oil futures and Malaysian palm oil also tumbled sharply late this week, and additional declines would make it difficult to generate buying interest in soybeans. South American weather emerged as a bearish factor late in the week, with beneficial rain reaching some dry areas of Brazil. Crop shortfalls in Argentina and Brazil are likely factored into current soybean prices.
30-day outlook: Russia/Ukraine will command market attention for the time being, with other key storylines including China’s six-week soybean buying spree. Further purchases could keep a floor under soybean futures, though nearby futures’ failure the past two weeks to make a serious run at the $17.59 1/4 posted Feb. 24 suggests the market has reached an exhaustion point. Early today, USDA reported a daily U.S. soybean sale of 264,000 MT for delivery to China during 2022-23. Since Jan. 28, USDA has reported a combined 6.84 MMT of soybean sales to China or “unknown destinations,” a more than 10-fold increase from the previous month. USDA’s March 31 Prospective Plantings is expected to show an increase in soybean acres.
90-day outlook: U.S. farmers were expected to increase soybean acres over corn this year, though recent moves in new-crop futures indicate beans may not be as favored as the crop was earlier this winter. The Russia/Ukraine war and spring weather in the U.S. are two long-term sources of uncertainty. We previously expected 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.
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: May SRW futures rose 19 1/2 cents to $11.06 1/2, down $1.025 for the week. May HRW futures rose 23 1/2 cents to $10.89 1/4, down $1.25 1/4 for the week. May spring wheat rose 15 1/2 cents to $10.70 1/4, down 76 3/4 cents for the week.
5-day outlook: Wheat futures capped a historically volatile week that saw May SRW contact trade in an exceptionally wide of range of $3.20 1/4, while nearby SRW posted a record high of $14.25 1/4. Despite today’s short-covering bounce, bearish “V-top” reversal patterns on the daily charts point to more technical selling pressure next week. Odds are high wheat futures put in major market tops. Still, look for continued high volatility, but likely not as high as seen this week.
30-day outlook: The continued closure of Ukraine’s ports and worries about the upcoming planting season for Ukraine grain crops during a full-blown war will keep wheat futures elevated. Weather in global wheat-producing regions has taken a back seat to geopolitics. World Weather Inc. said recent precipitation in U.S. HRW areas will improve topsoil moisture for early-season crop development when once warmer temperatures return next week. Cold weather in Russia this week should not produce permanent crop damage due to adequate snow cover. Chinese and Indian weather will remain good for most of their winter grains. The spring wheat planting forecast in USDA’s March 31 Prospective Plantings report could move the markets.
90-day outlook: USDA this week lowered 2021-22 U.S. wheat exports and reported uninspiring weekly U.S. export sales. The strong U.S. dollar is helping to keep U.S. wheat uncompetitive on most world markets. We expect the dollar to remain strong in the coming months. USDA also lowered its U.S. 2021-22 hard red spring wheat ending stocks forecast by 5 million bu., to 124 million. That’s a 14-year low and suggests continued tight global supplies of milling-quality wheat in the coming months. Still, HRS futures also show signs of a market price peak.
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 futures led the market higher, jumping 417 points to 121.03 cents per pound, up 461 points for the week and the highest closing price since March 1.
5-day outlook: Cotton futures ended strong after eroding much of this week amid concerns over geopolitics and the potential war and high oil prices will lead to recession. U.S. export sales continued falling short of the pace needed to justify USDA’s 2021-22 U.S. export forecast of 14.75 million bales. However, China’s state planning agency announced said it had issued a 400,000 MT quota (1.764 million bales) for cotton imports with a sliding tariff rate. That helped send cotton prices higher. The industry will continue focusing on U.S. cotton exports, as well as the economic and geopolitical outlook.
30-day outlook: Although the cotton industry’s main focus will likely remain on the export situation, trader attention will slowly shift toward the 2022-23 outlook and prospects for this year’s U.S. cotton crop. USDA’s March 31 Prospective Plantings will be studied closely. Given price strength in recent months, the industry is anticipating a sizeable increase in U.S. cotton plantings this year. In February, the National Cotton Council forecast an increase to 12.0 million acres from 11.22 million last spring. Keep an eye out for the results of the Pro Farmer producer survey to be published prior to the USDA release. The official USDA figure could clearly move the new-crop contracts. USDA analysts will also resume publishing their weekly Crop Progress reports on April 4.
90-day outlook: Old-crop cotton futures will continue watching U.S. export sales and shipments through spring, especially with the end of the 2021-22 crop year looming July 31. The economic outlook will also be analyzed closely, since apparel demand is one of the first things affected in a recessionary environment. The implications of the Russia/Ukraine war will be followed closely as well. Industry focus will eventually shift to the new-crop situation and outlook, with U.S. weather, especially over Texas, being of greatest interest. Whether La Niná persists through summer could prove to important.
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.
