Crops Analysis | March 16, 2022
Price action: May corn futures fell 28 cents to $7.30, the contract’s lowest closing price since $7.25 on March 2. December futures lost 21 1/2 cents to $6.29 3/4.
Fundamental analysis: Corn futures fell to a two-week low as winter wheat tumbled the 85-cent daily trading limits on reports of progress in Russia/Ukraine peace talks. Some reports said Ukraine and Russia have made progress on a 15-point neutrality plan to end the war. However, reports also said Ukraine has rejected the plan as it presently stands. The bottom line is the situation remains very fluid and it still appears much needs to occur for peace to break out in Ukraine. It does appear corn will continue to look to the wheat futures markets for near-term direction.
The big drop in crude oil prices recently is also a bearish underlying factor for the grains and the raw commodity sector in general. If crude continues to see price declines, it would be more difficult for corn futures prices to make much headway on the upside.
U.S. ethanol production during the week ended March 11 averaged 1.028 million barrels per day (bpd), down 2,000 bpd from the previous week but up 5.9% from the same week in 2021, according to the Energy Information Administration. Ethanol stocks rose 674,000 barrels to 25.945 million barrels, the highest since late April of 2020.
Traders are awaiting Thursday morning’s weekly USDA export sales report, which is expected to show net weekly U.S. corn sales of 700,000 to 1.4 million MT in the 2021-22 marketing year and zero to 200,000 MT in the 2022-23 marketing year.
Technical analysis: Corn futures bulls still have a near-term technical advantage. However, the prospect crude oil and wheat futures have likely topped out makes it likely corn may struggle to push prices much higher. Corn prices are in a six-month uptrend on the daily bar chart. The next downside target for the bears is closing May futures below psychological chart support at $7.00. The next upside objective for the bulls is to close May futures above solid resistance at the contract high of $7.82 3/4. First resistance is seen at $7.40, then $7.50. First support is at $7.25, then $7.15.
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 soybean futures fell 9 1/2 cents to $16.49 1/4, while May soyoil slumped 13 points to 73.55 cents per pound. May soymeal slid $6 to $478.00.
Fundamental analysis: Despite talk of a potential Russia/Ukraine ceasefire and wheat market plunge in response to that possibility, the soy complex remains relatively well supported. The market gave back a portion of its bullish reaction to yesterday’s NOPA report, which showed the soybean crush at 165.1 million bu. last month, down 9.4% from January but up 6.4% from February 2021. The numbers imply the full February U.S. crush at 175.0 million bushels, with the six-month total for the current crop and strong margins suggesting crushing industry demand for domestic beans will remain robust at least through spring.
The South American weather situation apparently hasn’t changed enough to reverse the damage done to harvest prospects in the December-February quarter. The talk of a possible improvement in the Russian/Ukraine situation also sank crude oil, which likely undercut soyoil. Soymeal futures continue holding up well, with May futures remaining within striking distance of the contract high at $491.60.
A survey of industry analysts indicated they expect tomorrow’s USDA weekly Export Sales report to show between 900,000 MT and 1.8 MMT of old-crop beans were sold to export customers during the week ended March 10. They see new-crop sales reaching the 500,000 MT to 1.2 MMT range. Soymeal sold for 2021-22 delivery is expected to fall between 100,000 and 300,000 MT.
Technical analysis: May soybean futures couldn’t sustain early gains and ended the day with a low-range close, giving bearish traders a slight short-term technical advantage. Still, the settlement wasn’t significantly below support at the contract’s 20-day moving average near $16.50 3/4. Additional support persists at the Feb. 10 high of $16.34 1/2. A drop below that level would open the door to a test of the psychologically important $16.00 level, then 40-day moving average support near $15.80 1/4. The contract’s 10-day moving average marks initial resistance around $16.69, then at Monday’s high of $16.97 3/4. A close above that level would have bulls targeting last week’s high at $17.34, then the contract high at $17.59 1/4.
A small head-and-shoulders topping formation has seemingly formed on the May soyoil chart, with resistance at the contract’s 10-day moving average of 74.36 cents per pound being backed by the ‘neckline’ near 76.50 and the top of the ‘head’ at 78.58. Support extends from the Feb. 28 high at 72.93 to the 20-day moving average near 72.56. A drop below that level would have bears targeting the 40-day moving average near 68.50.
Soymeal has slipped since May futrues posted a contract high at $491.60 Monday. Resistance at that level backs initial resistance at the March 11 high of $485.70. A bullish breakout would have bulls targeting the psychologically important $500.00 level. Look for support at the contract’s 10- and 20-day moving averages of $472.83 and $461.61, respectively, with a drop below those levels opening the door to a test of support around $450.00, then the 40-day moving average at $443.33.
What to do: Get current with advised 2021- and 2022-crop sales.
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 wheat fell the 85-cent daily trading limit to $10.69 1/4, the contract’s lowest closing price since $10.59 on March. 2. March HRW wheat fell the 85-cent limit to $10.72 1/2. May spring wheat fell 60 cents to $10.50 1/4, the lowest settlement since Feb. 28.
Fundamental analysis: Wheat futures tumbled sharply as hopes for a ceasefire fueled optimism that shipment from two of the world’s largest grain exporters may eventually be fully restored. Ukraine and Russia reportedly have made “significant” progress on a tentative 15-point neutrality plan to end the war. The plan includes a ceasefire and Russian withdrawal if Kyiv declares neutrality and accepts limits on its armed forces. Ukrainian President Volodymyr Zelenskiy said peace talks were sounding more realistic, but more time was needed. Combined, Russia and Ukraine account for nearly 30% of global wheat exports and almost one-fifth of world corn exports.
In the U.S., forecasts have turned wetter for some HRW ground of the U.S. Plains, which has been gripped by drought for months. There will be some beneficial precipitation Thursday, “however, a larger precipitation event is expected late Sunday through Tuesday,” World Weather Inc. said today. “This event is likely to give most of the region meaningful rainfall. Dryness relief from these two rain events may be temporary; however, it will at least make conditions more favorable for greening.”
USDA’s weekly export sales report tomorrow is expected to show net U.S. wheat sales of 250,000 to 600,000 MT for 2021-22 and zero to 100,000 MT for 2022-23. Last week, net sales of 307,200 MT for 2021-22 were up 2% from the previous week and up 21% from the average for the previous four weeks.
Technical analysis: This week’s price action provides strong signals that winter wheat futures have established major market tops. Daily charts suggests a bear flag or bearish pennant pattern may be forming in SRW and HRW. SRW bulls' next upside price objective is closing May futures above solid resistance at $12.00. Bears' next downside objective is closing prices below solid support at last week’s low of $10.43 1/4.
HRW bulls' next upside objective is closing May futures above solid resistance at $12.00. Bears' next downside objective is closing prices below solid support at last week’s low of $10.35 1/2. First resistance is seen at today’s high of $11.64 1/2, then at $11.75. First support is seen at $11.00, then at this week’s low of $10.51 1/2.
What to do: Get current with advised 2021- and 2022-crop sales.
Hedgers: NEW ADVICE -- Sell another 10% of expected 2022-crop production for harvest delivery to get to 50% forward-priced. 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.
Cash-only marketers: NEW ADVICE -- Sell another 10% of expected 2022-crop production for harvest delivery to get to 50% forward-priced. You should be 90% sold on 2021-crop.
Cotton
Price action: May cotton futures rose 120 points to 119.80 cents per pound, within the range of the past week.
Fundamental analysis: Cotton futures gained behind weakness in the U.S. dollar and strength in U.S. equities, which suggested optimism over the U.S. economic outlook and hopes for a ceasefire between Russia and Ukraine. Reports that Shanghai will not shut down despite Covid concerns also supported cotton. While China's main ports remain open and vessels are continuing to dock, congestion is building up and some container ships are re-routing to avoid expected delays, according to ship owners, analysts and supply chain managers.
Traders await tomorrow’s USDA weekly export sales report for a gauge on demand from China and other top foreign buyers. Last week, USDA report net U.S. cotton net sales totaling 354,200 running bales (RB) for 2021-2022, up 2% from the previous week and up 51% from the prior four-week average. While U.S. cotton export sales have been strong lately, the recent shipment pace may not meet USDA’s 2021-22 forecast for a total of 14.75 million bales.
Technical analysis: Bears and bulls have battled on a level playing field amid sideways trade in recent weeks, but bulls appeared to gain a slight upper hand with today’s higher close. A May futures break above the March 11 high at 121.73 cents could have bulls targeting the March 1 high at 123.31 and the mid-February high at 125.13 cents. Support is marked by the 10-day moving average near 118.17, then yesterday’s low of 117.05. A drop below that level would open the door to a test of the March 7 low of 115.37, then the 110.00 area.
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.
