Crops Analysis | March 29, 2022

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Corn ­

Price action: Corn futures followed wheat futures sharply lower Tuesday, with the nearby May contract tumbling 22 1/4 cents to $7.26 1/4 and new-crop December falling 11 3/4 cents to $6.52 3/4.

Fundamental analysis: Talk that a cease-fire may be looming in the Russia/Ukraine conflict undercut the commodity markets badly today, as indicated by nearby crude oil futures dipping below $100 per barrel and soft red winter wheat futures plunging 85 cents per bushel at their lows. Corn joined the wheat and soy complexes in diving in response to the news, although the yellow-grain market’s reaction clearly was not as bearish. Confirmation of today’s talk could spur additional selling tomorrow, but the looming USDA reports could mitigate major moves as traders adjust their positions.

Many in the industry, especially those interested in new-crop prospects, will focus on the USDA’s Prospective Plantings Report. A Reuters survey indicates traders are expecting 2022 U.S. corn plantings to come in around 92 million acres, down from 93.4 million last year. This reflects ideas that soaring input costs will shift acres toward soybeans. USDA will also release its quarterly Grain Stocks at that same time (11:00 am, Thursday 3/31). That report may impact the market more than do the plantings numbers, since it holds substantial implications concerning winter demand for corn, as well as the size of domestic stockpiles available to the industry over the next six months. The Reuters survey puts the average of industry estimates at 7.877 billion bushels. The wide range of estimates at 457 million bushels suggests significant potential for a sharp futures reaction.     

Technical analysis: Although the late rebound from daily lows enabled a midrange close in May corn futures, the size of today’s drop gives bearish traders the short-term technical advantage. Indeed, today’s settlement price marked the contract’s lowest close since March 2. Look for initial support at today’s low of $7.13 ½, then at the contract’s 40-day moving average of $7.00 1/4. Having that pivotal moving average coinciding with the psychologically important $7.00 level could represent solid support. Conversely, a drop below that level would have bears targeting the contact’s Feb. 25 low of $6.55 1/4. Resistance at today’s high of $7.47 1/2 could prove formidable, since it’s reinforced by the contract’s 20- and 10-day moving averages near $7.47 and $7.49, respectively. A move above that area would open the door to a fresh test of the contract high at $7.82 3/4.

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.

 

Soybeans

Price action: May soybeans closed down 21 1/4 cents at $16.43 and in the lower end of today’s range. Prices also hit a four-week low today. May soybean meal closed down $12.90 at $466.00, nearer the daily low and hitting a three-week low. May bean oil closed down 79 points at 71.66 cents, nearer the session low and scoring a four-week low.

Fundamental analysis: Some positive comments from a Russian official during the Ukraine/Russia cease-fire talks helped to send corn and wheat futures sharply lower today, and soybeans followed. Front-month Nymex crude oil prices at one point today dropped to a low of $98.44 a barrel, which also pressured much of the raw commodity sector, including the soy markets.

The other bearish element in the soy markets today is increased Covid concerns in China. The rolling lockdowns in Shanghai have prompted concerns about impacts on global supply chains and overall economic activity, including demand coming from the world’s second-largest economy. 

Much of the grain trade reckoned the big trading day of the week would be Thursday, when USDA’s Prospective Plantings and Grain Stocks Reports are released. However, price action in soybeans, corn and wheat today produced serious near-term technical damage in all three markets, which suggests Thursday’s USDA data will have to be very bullish to reverse the present bearish near-term trajectory in the grain and soy markets. Thursday’s report is expected to show U.S. soybean acreage intentions of 88.7 million acres, based on a Reuters survey. If realized, that would be up from 87.2 million acres planted to soybeans last year. March 1 U.S. soybean stocks are expected to total 1.902 billion bu., which would be up from 1.562 billion bu. last year.

Technical analysis: Soybean bulls still have the overall near-term technical advantage. However, a four-month-old uptrend on the daily bar chart has stalled out with today’s bearish downside “breakout” from the sideways trading range at higher levels. The next near-term upside technical objective for bulls is closing May futures above solid resistance at the contract high of $17.59 1/4. The next downside price objective for bears is closing prices below solid technical support at $15.50. First resistance is seen at $16.50 and then at today’s high of $16.73. First support is seen at today’s low of $16.22 and then at $16.00.

The next upside price objective for fading meal bulls is to produce a close in May futures above solid technical resistance at the contract high of $494.70. The next downside price objective for bears is closing prices below solid technical support at $450.00. First resistance comes in at $475.00 and then at today’s high of $478.70. First support is seen at today’s low of $460.20 and then at $455.00.

The also-fading bean oil bulls today saw a three-month-old uptrend on the daily bar chart negated. The next upside price objective for bulls is closing May prices above solid technical resistance at 75.00 cents. Bears' next downside technical price objective is pushing and closing prices below solid technical support at 68.00 cents. First resistance is seen at today’s high of 73.45 cents and then at this week’s high of 74.60 cents. First support is seen at today’s low of 70.52 cents and then at 70.00 cents.

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

Price action: Winter wheat futures finished mostly 40-plus cents lower. May SRW wheat fell 42 3/4 cents to $10.14 1/4, while May HRW plunged 46 cents to $10.24 1/2. Spring wheat ended mostly 35 to 36 cents lower, with the May contract down 36 1/2 to $10.43.

Fundamental analysis: Wheat futures sharply extended losses at the end of overnight trade on reports of constructive progress in peace talks between Russia and Ukraine. While it’s yet to be determined if this will lead to an actual ceasefire, today’s price action shows how sensitive to headlines the wheat market, in particular, has become. Barring a sharp escalation of the war, bulls have lost the upper hand and bears now have short-term momentum on their side.

Today’s price action means Thursday’s USDA reports likely need to be extremely bullish for bulls to regain the upper hand. If Thursday’s report data is bearish, it would give funds even more incentive to liquidate long positions and pump money into the short side of the market. Money flow will remain a key market driver for wheat and the rest of the commodity sector, and they now have incentive to flow money into the short side of markets.  

Technical analysis: Today’s price action in May SRW wheat confirmed a downside breakout from the bear flag formation on the daily chart. That would project the contract to the $8.50 area. Initial support is today’s low at $9.72, which lines up with the 40-day moving average, followed by the 50-day average near $9.36 and the 100-day average near $8.67 1/2. To negate the breakout from the bear flag formation, bulls need a close above old support at $10.31 3/4.

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 plunged 226 points to 136.81 cents. December cotton dropped 26 points to 111.04 cents.

Fundamental analysis: Cotton futures got caught up in the wave of selling tied to renewed hopes of a ceasefire between Russia and Ukraine. All things considered, today’s price action in the cotton market was tame compared to what happened in other markets like grain and soy futures. Still, bulls are now tasked with defending their upper hand.

The sharp drop in the U.S. dollar index helped mute some of the outside pressure for the cotton market today. Cotton is highly export driven, which means any significant drop in the dollar may encourage stronger buying from global end users.

Traders will likely be looking forward to Thursday’s early release of the weekly USDA Export Sales report tomorrow. A shipments figure in the ballpark of last week’s huge 442,700-bale result would likely be supportive. Thursday’s March planting intentions are the next fundamental data to come at the market. Cotton planting intentions are expected to come in around 12 million acres, based on the average pre-report estimate from a Reuters poll. But given the sharp runup in prices and significant increase in the spring insurance price compared to year-ago, there is a high level of uncertainty on acreage intentions.

Technical analysis: May cotton futures posted an inside day down on the daily chart following Monday’s huge price surge. Monday’s high at 141.80 cents is initial resistance. Above that, resistance comes from the continuation chart, with the next level being a 38.2% retracement of the surge from the 2008 low to the 2011 all-time high, which is around 154.00 cents. The 10-day moving average at 130.13 cents is near-term support.

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.

 

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