Crops Analysis | March 25, 2022
Price action: Corn futures finished firmer. May corn rose 5 3/4 cents to $7.54, up 12 1/4 cents for the week. December corn firmed 1 1/2 cents to $6.69, up 23 1/2 for the week.
5-day outlook: May corn futures have spent the past three weeks pivoting around $7.50 and we suspect that will continue through at least Wednesday next week as traders prepare for Thursday’s Prospective Plantings and Grain Stocks Reports. That data has potential to move the market. While much of the pre-report attention is on planting intentions, March 1 stocks could be the real market over, as the range of pre-report estimates from a Bloomberg survey is a wide 457 million bushels. Someone is going to be surprised by that data.
30-day outlook: While global food supply shortages remain a concern, recent sideways price action suggests much of that has been factored into prices for now. Focus will shift to U.S. acreage and weather. Traders will use USDA’s March planting intentions as a benchmark from which to add or subtract acres based on spring weather. The extended forecast from the National Weather Service suggests the spring planting pace could be quick, with above-normal temps likely and the only area expected to see above-normal precip being the eastern Corn Belt.
90-day outlook: There is a lot of export business Ukraine was expected to supply that will need to be filled over the coming months. USDA raised its U.S. export forecast by 75 million bu. this month, signaling the U.S. would pick up a portion of that business. But the current export pace is lagging what’s needed to get to USDA’s forecast, so the export pace will be closely monitored.
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 9 1/2 cents to $17.10 1/4, up 42 1/4 cents for the week, while November soybeans gained 3 3/4 cents to $14.96 3/4. May soybean meal rose $2 to $487.90 per ton. May soybean oil rose 46 points to 74.75 cents per pound.
5-day outlook: Nearby soybeans rose for the fourth day in the past five as exports showed signs of perking up this week and Malaysian palm oil futures surged 7.0% for the week amid tight supplies. Focus next week will revolve to a large extent around USDA’s March 31 Prospective Plantings Report, which is widely expected to reflect an outlook for increased U.S. soybean acreage. U.S. soybean plantings in 2022 are expected to increase 1.7 million acres from 2021 to 88.9 million acres, based on the Bloomberg survey. The projected acres would be the highest soybean plantings since 90.2 million acres in 2017. USDA also releases its quarterly Grain Stocks Report on March 31, which could have big implications for old-crop prices.
30-day outlook: Price direction over the next month will be driven by export demand and U.S. spring weather. Fresh supplies from South America’s harvest are increasingly moving into the global export pipeline, which may dampen buying of U.S. soybeans. China returned to the U.S. market this week after a brief absence. This morning USDA reported a daily sale of 132,000 MT of soybeans for delivery to China during the 2021-22 marketing year. The announcement follows two daily soybean sales announcements earlier this week totaling 558,000 for delivery to “unknown destinations” for 2021-22. But continued lackluster weekly exports will make it difficult for nearby soybeans to hold above $17.00. USDA yesterday reported net weekly soybean sales totaling 412,200 MT for 2021-22, down 67% from the previous week and down 70% from the prior four-week average.
90-day outlook: North American weather will be a major price driver through spring for grains and the soy complex. Tight global vegetable oil supplies, stemming partly from Russia/Ukraine war disruptions, may keep prices elevated. Canada is crushing the smallest amount of the oilseed in more than four years, in another sign that vegetable oil prices may keep rising. In February, the processing of canola in Canada dropped 21% from a year ago to 629,153 MT, according to Statistics Canada. European oilseed crushers and vegoil refiners and bottlers are replacing sunflower oil with the rapeseed variety to make up for the loss of Ukrainian oil-crop exports, industry group FEDIOL said.
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: Nearby winter wheat futures ended a two-week losing streak as market focus shifted to U.S. spring weather and the planting outlook. Disruptions from the Russia/Ukraine war may keep futures elevated for the near-term but appear to be priced in for now. USDA’s Prospective Plantings Report March 31 will be one key to price direction. U.S. seedings of other spring wheat and durum are expected to rise about 500,000 acres to 13.5 million ac., based on the Bloomberg survey. USDA also releases its quarterly Grains Stocks Report March 31.
30-day outlook: Drought conditions in Kansas and other HRW states improved following recent rain and snow, and more precipitation is expected around the middle of next week. The amount of U.S. winter wheat considered in drought conditions decreased to 70% for the week ended March 22, according to the U.S. Drought Monitor noted on Thursday. USDA rated winter wheat drought as 21% “moderate,” 31% “severe,” 16% “extreme” and 2% “exceptional.” But irreversible damage has been done to some of the crop. USDA’s first crop conditions of the season April 4 are expected to reflect the likelihood of greater-than-normal acreage abandonment.
90-day outlook: U.S. wheat futures markets appeared to establish major tops earlier this month. However, historical patterns indicate the markets still hold potential to rally sharply, and a significant turn for the worse in the Russia/Ukraine conflict could spark another upside run. Otherwise, a tepid export pace will make it difficult to sustain current price levels. USDA reported net weekly wheat sales at 155,700 MT for 2021-22 during the week ended March 17, down 51% from the prior four-week average. U.S. wheat export commitments so far in 2021-22 are running 24% behind a year-ago, versus 23% behind last week. USDA projects 2021-22 exports at 800 million bu., down 19.4% from the previous marketing year.
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 surged the daily trading limit if 500 points to 135.90 cents per pound, up 904 points for the week the highest settlement for a nearby contract since mid-2011.
5-day outlook: Cotton futures rallied on demand optimism and concern over worsening drought conditions in key growing regions such as Texas. Market direction next week will hinge in part around USDA’s Prospective Plantings report March 31. U.S. 2022 cotton seedings are expected to rise to 12.3 million ac. from 11.2 million ac. in 2021, based on the Bloomberg survey. USDA’s weekly export sales will be also be of interest.
30-day outlook: Export demand and spring weather will be key price drivers over the next month. Persistent dryness in west and south Texas cotton regions is becoming a growing concern, with rainfall potential prospect expected to be poor for the next 10 days to two weeks. Continued slippage in export sales numbers could deflate some of the bullishness over global demand. USDA reported net weekly U.S. cotton net sales of 307,500 running bales (RB) for 2021-22, down 17% from the previous week and down 7% from the prior four-week average. The recent shipments pace continues to fall short of the rate needed to meet the USDA’s 2021-22 U.S. cotton export forecast at 14.75 million bales.
90-day outlook: Spring weather promises to be a major long-term price influencer as drought persists across many key U.S. growing areas. USDA weekly crop condition reports beginning in April will be closely followed, and outside markets such as crude oil and U.S. equities could also factor into cotton direction. Nymex crude oil ended the week at over $113 a barrel, up over $8.00 for the week.
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.
