Crops Analysis | March 21, 2022
Price action: Corn futures finished mostly 14 to 18 cents higher and closed in the upper portion of today’s range. May corn firmed 14 1/2 cents to $7.56 1/4, while December futures strengthened 18 1/2 cents to $6.64.
Fundamental analysis: Corn futures rode strong gains in the wheat market and broad commodity strength to a dominating performance by bulls to start the week. While there are some fundamental factors corn traders will be playing closer attention to now that spring has officially begun, price action in the wheat market and money flow remain the two primary price drivers.
Corn export demand remains supportive, though it’s not strong enough to drive the market higher on its own. USDA’s weekly corn export inspections totaled 1.466 MT (57.7 million bu.), which dropped the required average weekly pace to reach USDA’s forecast of 2.5 billion bu. for 2021-22 to 45.6 million bushels. Corn inspections are running 15.0% behind year-ago, whereas USDA projects exports will decline 9.2% from last year.
The optimism for stronger exports over the final five-plus months of 2021-22 is largely driven by drastically slowed shipments coming from Ukraine amid the war with Russia. There are no indications the conflict will end or even ease anytime soon. The U.S. will be in line to pick up some of Ukraine’s business, which is why USDA upped its corn export forecast by 75 million bu. earlier this month.
Technical analysis: May corn futures are holding within the sideways consolidation range of the past two-plus weeks, which is outlined by the March 3 low of $7.22 and the March 4 high at $7.82 3/4. An upside breakout from that range would have bulls targeting the psychological $8.00 level, which is also the 2013 high on the continuation chart. A downside breakout would point the contract toward a test of the psychological $7.00 mark and possibly the Feb. 25 reaction low at $6.55 1/4.
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 rose 23 cents to $16.91, a lifetime-high close for the contract. May soymeal rose $4.30 to $481.30. May soyoil rose 142 points to 73.71 cents per pound.
Fundamental analysis: Nearby soybeans extended overnight gains and pushed back above $17.00 behind rallies in wheat and crude oil. Nymex crude surged more than $7 to near a two-week high above $112.00 a barrel. The soy complex is likely to be a follower of other markets this week as the Russia/Ukraine war continues. Soybeans are not a major factor in the conflict, but Ukraine is the world’s largest producer and exporter of sunflower seeds and sunflower oil, which competes with soyoil.
Signs of slower export demand could limit price upside in soybeans. China slowed U.S. soybean purchases over the past week after buying actively starting in late January. USDA reported 544,986 MT (20 million bu.) of soybeans inspected for export during the week ended March 17, down from 796,785 MT the previous week. Expectations ranged from 500,000 to 850,000 MT. Inspections are running 20.6% behind year-ago, compared to 21.0% last week. USDA’s 2021-22 export forecast of 2.090 billion bu. is 7.6% below 2020-21.
AgRural reported Brazil had harvested 69% of its 2021-22 soybean crop as of March 17, compared to 59% at the same time last year. Exports of Malaysian palm oil products for March 1-20 were down around 8% from Feb. 1-20, Reuters reported. Malaysia has maintained its April export tax for crude palm oil at 8%, a notice on the Malaysian Palm Oil Board website showed.
The managed money net long in soybean futures and options fell for the third straight week, dropping 1,024 contracts during the week ended March 15 to 170,690 contracts, according to CFTC data.
Technical analysis: Bulls gained momentum as May soybeans rose as high as $17.10, the contract’s highest intraday price since $17.34 on March 9. A push above the March 9 high, also the high for the month, may have bulls targeting the contract high of $17.59 1/4, posted Feb. 24. Initial support comes in around last week’s low at $16.38, with further support at the Feb. 10 high of $16.34 1/2 and at the psychological $16.00 level.
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
Fundamental analysis: Continued global grain trade disruptions due to the Russia/Ukraine war helped to boost wheat prices, as did big gains in crude oil futures. Importantly, however, since the early-March slump in wheat futures from contract and multi-year highs, the bulls have not been able to put together two solid up-days in a row. If bulls cannot show good follow-through buying strength tomorrow, choppy and sideways trading will likely continue.
Wheat prices did come off their daily highs today, possibly due in part to beneficial precipitation hitting the U.S. Plains states today and Tuesday. Parts of the U.S. HRW wheat belt are expected to receive 0.5 to 1.5 inches of moisture this week, with heavy snow possible in southwestern Kansas into the northern Texas Panhandle and southeastern Oklahoma. USDA’s first weekly crop condition ratings of the season are April 4 and will be closely scrutinized. Right now, market expectations are still for poorer conditions to be seen in early April.
USDA today reported 330,632 MT of U.S. wheat inspected for export during the week ended March 17, up from 307,218 MT the previous week. These numbers are on pace to meet USDA’s projections for the current marketing year.
Technical analysis: Recent choppy price action has formed a bear flag on the daily bar SRW chart for May futures. SRW bulls' next upside price objective is closing May prices above solid resistance at $12.00. The bears' next downside objective is closing prices below solid support at last week’s low of $10.31 3/4. First resistance is seen at $11.50, then at $11.60 3/4. First support is seen at $11.00, then at today’s low of $10.61 3/4.
HRW bulls have the overall near-term technical advantage. The HRW bulls' next upside objective is closing May futures above solid resistance at $12.00. Bears' next downside objective is closing May below solid support at $10.35 1/2. First resistance is seen at $11.50, then at $11.64 1/2. First support is seen at $11.00, then at today’s low of $10.70 1/4.
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 rose 315 points to 130.01 cents per pound, the highest settlement for a nearby contract since July 2011. May cotton also posted a contract high at 131.71 cents.
Fundamental analysis: Cotton futures rallied to the highest levels in nearly 11 years behind strong demand, active buying from speculators and the crude oil market’s $7-plus rally. High oil prices make cotton substitute polyester more expensive. “The big power today is large fund and speculative money pouring into cotton,” Rogers Varner, president of Varner Brokerage, told Reuters. Broad strength across commodity markets, including wheat, fueled a bullish tone.
Recent USDA export sales data continued to convey solid demand for U.S. cotton. Last week, USDA reported new weekly U.S. cotton sales of 371,400 running bales of cotton for 2021-22, up 5% from the previous week and up 34% from the average for the previous four weeks.
Large speculators reduced their bullish bets in the cotton market for the sixth consecutive week, according to Commodity Futures Trading Commission data. The managed net long position in cotton futures and option fell by 3,079 futures and options contracts to 67,127 in the week to March 15, data showed. That was the lowest net long since late July.
Technical analysis: Cotton bulls have a strong overall technical advantage after gapping higher today and pushing above the previous contract high. Based on continuation charts, upside targets start around 140.00 cents and 150.00 cents, levels last traded in June and July 2011. Downside targets include the gap created today by the May contract’s low at 127.10 cents and Friday’s high at 126.86 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.
