Crops Analysis | March 17, 2022
Price action: May corn futures jumped 24 1/2 cents to $7.54 1/2, while December futures gained 15 1/4 cents to $6.45.
Fundamental analysis: Indications of strong export demand sent corn futures higher. USDA reported a daily sale of 136,000 MT of corn to “unknown destinations” for 2021-22 delivery. Also today, USDA reported net weekly U.S. corn sales of 1.836 MMT for 2021-22, down 14% from the previous week but up 64% from the average for the previous four weeks. Top buyers included Japan (538,400 MT, including 94,500 MT switched from unknown destinations), unknown destinations (303,000 MT) and Mexico (235,100 MT, including decreases of 35,400 MT). For 2022-23, net sales totaled 204,000 MT.
Traders expected net U.S. corn sales of 700,000 to 1.4 million MT for 2021-22 and zero to 200,000 MT for 2022-23. A portion of these gains likely reflects the Russia/Ukraine war driven global grain business to the U.S. Unless the two countries reach a ceasefire soon, corn demand seems likely to persist.
Look for an increasing industry focus on the new crop outlook, with USDA’s annual Prospective Plantings report March 31 likely setting the market tone for early spring. USDA’s weekly Crop Progress reports begin April 4. Also, the March 31 USDA Grain Stocks report could give the old-crop contracts a jolt if results diverge significantly from industry expectations.
Technical analysis: Today’s rally seemingly restored a technical advantage to bulls they appeared to lose yesterday, when May corn fell below the 10-day moving average near $7.49 1/2, appearing to open the door to sizeable followthrough losses. But today’s strong advance pushed the price back above the 10-day moving average, restoring that level as initial support.
Look for additional support at today’s low of $7.28 1/2, then at the 20-day moving average near $7.16. A drop below that level would have bears targeting psychologically important $7.00 and eventually the 40-day moving average near $6.75. Initial resistance is marked by Monday’s high of $7.67 1/2, with backing from the contract high at $7.82 3/4. A push above that level would have bulls targeting the $8.00 level.
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 rose 19 1/4 cents to $16.68 1/2. May soybean meal fell $3.90 to $474.10 per ton, the lowest closing price since March 8. May soybean oil rose 108 points to 74.63 cents per pound.
Fundamental analysis: Nearby soybeans gained for the first time in five days as an $8-plus rally in crude oil futures and Argentina’s expected plan to raise taxes on soybean oil and soymeal exports overshadowed uninspiring U.S. export numbers. Argentina is weighing raising taxes on soybean oil and meal exports as part of a plan to tamp down soaring inflation, a government source told Reuters. A hike to soy product export taxes was widely speculated immediately after the country shut off export registrations for soymeal and soyoil Sunday.
USDA reported net weekly U.S. soybean sales totaling 1.253 MMT for 2021-22, down 43% from the previous week and down 11% from the prior four-week average. Top buyers included China, at 395,500 MT, including 66,000 MT switched from unknown destinations and decreases of 66,700 MT. For 2022-23, net sales totaled 477,000 MT, with lead buyers including China (406,000 MT) and unknown destinations (71,000 MT). Expectations for 2021-22 ranged from 900,000 MT to 1.8 MMT and expectations for 2022-23 ranged from 500,000 MT to 1.2 MMT.
U.S. soybean export commitments are running at 11% behind year-ago, compared to 13% behind last week. USDA projects exports in 2021-22 at 2.09 billion bu., down 7.6% from the previous marketing year.
Technical analysis: May soybean futures extended the sideways consolidation trade that’s persisted much of this month. With the exception of a brief spike higher March 9, that range encompasses a high at $17.06 1/2 and a low at $16.34 1/2. Bullish momentum has faded in recent weeks, but soybeans still retain a firm chart posture, provided May futures don’t breach support at this month’s low. A push under the March 4 low at $16.34 1/2 would have bears targeting the Feb. 25 low at $15.79. For bulls, upside targets include the March 9 high at $17.34 and the contract high at $17.59 1/4, posted Feb. 24.
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
Fundamental analysis: Wheat futures gained in a short-covering rebound following yesterday’s limit-down losses. Optimism for a potential ceasefire between Russia and Ukraine pressured prices overnight, but the war continues to limit selling interest. The global grain trade remains disrupted, particularly exports from the Black Sea region, from which a substantial amount of Ukraine shipments originates. The war could remove from the world market about 11 MMT of Black Sea wheat exports and some 12 MMT of corn exports in 2021-22, according to France's Strategie Grains. Strategie Grains cut its forecast for 2021-22 wheat exports out of Ukraine by almost 6 MMT and from Russia by 5 MMT due to the war. To partially offset those losses, the consultancy raised its estimate for wheat shipments from the 27-member European Union this season by 2 MMT, to 32.5 MMT.
Weekly U.S. wheat export sales were disappointing. USDA reported net U.S. weekly sales totaling 145,900 MT for 2021-22, down 53% from the previous week. For 2022-23, net sales totaled 325,600 MT. Traders expected net sales of 250,000 to 600,000 MT for 2021-22 and sales of zero to 100,000 MT for 2022-23. U.S. wheat export commitments are running 23% behind a year-ago, the same as last week. USDA projects exports in 2021-22 at 800 million bu., down 19.4% from the previous marketing year.
Technical analysis: Despite today’s gains, winter wheat futures appear to have established major market tops, with nearby SRW contracts dropping to a two-week intraday low at $10.31 3/4, down over $2.00 from the contract high of $13.63 1/2 posted March 8. Downside targets in May SRW include a chart gap between the March 1 high at $9.84 and the March 2 low at $9.85 1/4. Upside targets in May SRW include closing above solid resistance at $12.00. In May HRW, key support is seen at last week’s low of $10.35 1/2, followed by a downside target at a gap between the March 1 high at $10.03 and the March 2 low at $10.06.
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 also have 50% of expected 2022-crop forward-sold for harvest delivery.
Cash-only marketers: You should be 90% sold on 2021-crop. You should also have 50% of expected 2022-crop forward-sold for harvest delivery.
Cotton
Price action: May cotton rose 206 points to 121.86 cents per pound, the highest closing price since March 1.
Fundamental analysis: Sharp gains in crude oil, solid gains in U.S. stocks and a slumping U.S. dollar index boosted cotton futures. The cotton futures bulls have shown resilience the past three weeks, even when crude oil and stock indexes were under pressure. This suggests the cotton futures market could retest its February contract and multi-year highs in the near term.
USDA reported net weekly U.S. cotton export sales of 371,400 running bales (RB) for 2021-22, up 5% from the previous week and up 34% from the prior four-week average. Increases were primarily for China (144,700 RB) and Turkey (59,300 RB). Net sales of 49,000 RB for 2022-23 were primarily for Pakistan (20,100 RB) and Turkey (9,700 RB). Exports of 325,500 RB were up 1% from the previous week, but down 2% from the prior four-week average. The destinations were primarily to China (121,700 RB) and Pakistan (59,500 RB). U.S. cotton exports continue falling short of expectations, which may limit the upside in futures in the near term.
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.
