Crops Analysis | March 18, 2022
Price action: May corn futures fell 12 3/4 cents to $7.41 3/4, a drop of 20 3/4 cents for the week. December futures rose 1/2 cent to $6.45 1/2, down 9 3/4 cents for the week.
5-day outlook: Nearby corn futures extended overnight declines amid spillover from slumping wheat markets and pre-weekend profit-taking as traders continued to monitor the Russia-Ukraine war. The war will continue to consume market focus in the week ahead, with corn likely to take direction from the wheat market. Winter wheat futures appear to have established a major top, and further declines could prompt selling in corn. Speculative money flow will also be key to corn market direction, as large speculators hold a sizable net long in corn futures. Ukraine warned the World Trade Organization (WTO) it may have to limit exports of agricultural products to ensure domestic food supplies, Geneva trade officials reported from the meeting this week of the WTO Committee on Agriculture.
30-day outlook: Focus will increasingly shift to the U.S. spring planting season and USDA’s March 31 Prospective Plantings report, which will help set market direction in the months ahead. We estimate 2022 U.S. corn plantings at 91.9 million acres, down 1.5 million acres from 2021, based on results from the Pro Farmer/Doane planting intentions survey. Surprisingly, our survey indicates combined corn and soybean acres will decline 900,000 acres to 179.7 million acres, while cotton and wheat acres increase. Brazil’s safrinha corn crop is off to a good start and may be a market factor, though Argentina’s crop was hurt by drought, leave less available for export.
90-day outlook: Demand from export markets and domestic ethanol producers will be two keys to the longer-term outlook. A recent uptick in export demand likely driven by disruptions from the Russia-Ukraine war has been reflected in recent USDA export figures, helping narrow a gap with last year’s shipments. As of March 10, year-to-date corn export commitments for 2021-22 were 14% behind the same period in 2020-21, compared to 16% the previous week. But $7.00-plus corn will eventually pinch demand. With December futures trading nearly $1.00 under nearby May, the market is indicating supplies aren’t as concerning over the long haul. Spring weather and summer outlooks also bear watching, as any signs of dryness or drought are sure to spark renewed concern.
What to do: Get current with advised 2021- and 2022-crop sales.
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 1/2 cent to $16.68, down 8 cents for the week. May soybean meal rose $2.90 to $477.00 per ton, down 10 cents for the week. May soybean oil fell 234 points to 72.29 cents per pound, down 374 points for the week and the contract’s lowest closing price since Feb. 25.
5-day outlook: Nearby soybeans erased overnight gains amid weakness in grains and a plunge in Malaysian palm oil. Price weakness this week stemmed in part from signs that U.S. soybean export demand is slowing, with USDA reporting disappointing weekly sales yesterday and China pulling back from a recent buying spree. Malaysian palm oil posted a 16% weekly decline, its largest since 1986, after Indonesia abandoned export volume curbs. Price direction next week will hinge on export business, as well as outside markets like crude oil which tumbled sharply this week. Soy traders will also continue to closely follow the Russia/Ukraine war.
30-day outlook: Focus will shift to the U.S. spring planting season and the prospect for an increase in soybean acres, which makes USDA’s March 31 Prospective Plantings report pivotal for the market’s direction in early spring. We expect U.S. soybean plantings at 87.8 million ac. in 2022, up 600,000 acres from 2021, but slightly lower than the 88.0 million ac. from USDA’s annual Outlook Forum in late February. Barring a severe turn for the worse in the Russia/Ukraine war, the soybean market will likely be driven by export demand and U.S. spring weather.
90-day outlook: Soymeal and soyoil markets appear to have established near-term tops and fresh soybean supplies from South America are in the pipeline, providing competition for U.S. beans. Strong crushing demand and war tensions could keep a floor under prices for the foreseeable futures, but nearby soybeans’ failure the past three weeks to test the $17.59 1/4 contract high posted Feb. 24 suggests the market may have put in a top. U.S. soybean exports have closed a gap with last year’s levels, with export commitments running at 11% behind year-ago as of March 20, compared to 13% behind the previous week. Still, USDA projects exports in 2021-22 at 2.09 billion bu., down 7.6% from 2020-21.
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
5-day outlook: Technically bearish weekly low closes in winter wheat futures after a highly volatile trading week set the table for some follow-through selling pressure early next week. Wheat traders will be watching a big storm forecast to hit the U.S. Plains states Sunday through Tuesday, with ideas significant precipitation will benefit the thirsty wheat crops in the region.
30-day outlook: Technicals strongly suggest U.S. wheat futures markets have established major tops. However, wheat trading history suggests the markets may make another strong run to the upside, without setting new for-the-move highs. Continued uncertainty surrounding the Russia/Ukraine war will very likely keep a price floor under the wheat futures markets that is not far below present levels.
USDA’s first weekly crop condition ratings of the season are April 4 and will be closely scrutinized. Right now, market expectations are for poorer conditions to be seen in early April. The March 31 USDA Prospective Plantings report will come into focus. Based on the Pro Farmer/Doane survey, “other” spring wheat and durum plantings are expected at 14.1 million acres, up about 1.0 million from last year.
90-day outlook: A second week in a row of lackluster U.S. wheat export sales this week, combined with the U.S. dollar index still not far below its recent nearly two-year high, provided reminders that U.S. wheat prices are still struggling to compete with other wheat-producing nations on the world market. If the Russia-Ukraine war shows signs of ending, U.S. wheat futures prices would very likely quickly tumble.
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 futures closed 500 points higher at 126.85 cents per pound, a lifetime-high close for the contract and a weekly gain of 582 points.
5-day outlook: Strong mill buying and diminished availability of domestic cotton reportedly powered this week’s late surge, with the lack of deliveries against the expired March contract seemingly emphasizing the latter development. Traders are likely reacting to the persistently strong export sales numbers being reported by the USDA lately, although the shipments pace continues falling short of the rate needed to meet the USDA’s 2021-22 U.S. cotton export forecast at 14.75 million bales. The industry’s focus will likely remain upon the export situation through next week.
30-day outlook: The cotton market’s focus will shift toward new-crop seedings in late March. Of particular interest will be USDA’s Prospective Plantings report March 31. Look for the cotton seedings figure to come in around 12.0 million acres, based on the Pro Farmer/Doane survey, along with the National Cotton Council projection. Weekly USDA export sales will be monitored, as well as weekly USDA Crop Condition reports beginning on April 4.
90-day outlook: Spring weather will play an increasingly significant role in the coming weeks, especially with widespread dryness already dominating much of the main Texas cotton growing region. Weekly USDA Crop Progress reports will help traders keep tabs. The question of U.S. cotton shipments to overseas customers will likely be answered during spring. Either the export pace will accelerate and justify the USDA’s forecast, or department analysts will be forced to revise the projected total downward. That could greatly influence old-crop prices. Outside events, especially the strength of the global economy and consumer apparel demand will be closely monitored, as will the geopolitical situation and particularly the Russia/Ukraine war. The U.S. dollar, as well as the prices of commodity leaders, such as crude oil, gold and grains, will also impact the cotton outlook.
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.
