Pro Farmer's Crops Analysis March 31, 2022
Price action: May corn futures closed up 10 3/4 cents at $7.48 3/4 today and near mid-range. December corn gained 27 3/4 cents at $6.83 3/4 and hit a contract high.
Fundamental analysis: Corn traders got a big surprise from USDA today, as corn planting intentions at 89.490 million acres were way below market expectations and down nearly 3.9 million acres from last year. High fertilizer prices and concerns about availability apparently significantly impacted producers’ planting decisions. However, today’s relatively moderate gains in May corn futures suggest more sideways and choppy trading at elevated levels in the near term. It will be tough for new-crop December futures to add to today’s solid gains if the nearby contracts don’t perform on the upside.
Meantime, U.S. corn stocks in all positions on March 1 were up 154 million bu. from last year but 27 million bu. below the average pre-report trade estimate.
Weekly U.S. corn export sales totaled 636,900 MT for 2021-22 and 286,800 MT for 2022-2023. Those numbers were in line with trader expectations.
It’s very likely that sharply lower crude oil prices today tempered buying interest in corn futures. If crude prices continue to slide, such would also be a significantly bearish element for the grain futures markets.
Technical analysis: May corn futures prices are now back in the middle of a sideways trading range at higher levels, suggesting more of the same in the near term. The bulls have the solid overall near-term technical advantage. The next downside target for the bears is closing May prices below chart support at this week’s low of $7.13 1/2. The next upside price objective for the bulls is to close May prices above solid chart resistance at the contract high of $7.82 3/4. First resistance is seen at $7.60 and then at today’s high of $7.70. First support is at today’s low of $7.32 1/2 and then at Wednesday’s low of $7.26 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.
Price action: May soybean futures fell 45 3/4 cents to $16.18 1/4, while November beans plunged 49 3/4 cents to $14.20 1/2. May soymeal dropped $5.60 to $467.50. May soyoil plunged 228 points to 69.94 cents.
Fundamental analysis: USDA’s report data hit the soybean market hard today as March planting intentions greatly topped expectations. Based on its early March survey, USDA estimated farmers intend to plant 90.955 million acres to soybeans, which would be up 3.8 million acres from last year and roughly 2.2 million acres more than traders expected. Less bearish but still negative were March 1 soybean stocks at came in 29 million bu. higher than the average pre-report estimate, though second-quarter disappearance was the second-highest on record behind last year.
Funds were active sellers across the soy complex today, especially the soybean soyoil markets. Hefty losses in the crude oil market contributed to the aggressive selling. Key is whether today’s monthly low closes in soybeans and soyoil attract fresh seller interest to start the new month or whether there are buyers under the markets. Active followthorugh selling on Friday would be the first sign of a shift in money flow in the soy complex.
Weekly old-crop soybean export sales were strong at 1.3 MMT for 2021-22, including 593,200 MT to China. Given soybean shortages out of South America, China is likely to continue to buy U.S. old-crop soybeans, especially if prices retreat. Total soybean export commitments stand at 97% of exports.
Technical analysis: May soybeans posted their lowest close since Feb. 25 and bears now have a slight short-term upper hand technically. Initial support is the psychological $16.00 mark, followed by the Feb. 25 low at $15.79. Violation of that level would swing short-term momentum heavily in bears’ favor. Bulls need a close above $16.38 to keep the short-term trend neutral.
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.
Price action: May SRW futures ended Thursday down 18 1/4 cents to $9.72 3/4, while May HRW dropped 14 3/4 cents to $10.29 3/4. May HRS futures surged 21 1/2 cents to $10.79 1/2.
Fundamental analysis: U.S. wheat remains less than competitive on the global market, as indicated by the weekly Export Sales results. Traders expected old-crop and new-crop sales results between zero and 300,000 MT, and 150,000 and 500,000 MT, respectively, with the USDA figures coming in at 95,000 and 81,300. High U.S. prices, a relatively expensive U.S. dollar on the foreign exchange market and the logistics of shipping wheat from North America to most customers in Eurasia and Africa presently add up to significant obstacles to U.S. wheat sales.
Traders expected total U.S. wheat plantings to come in at 47.771 million acres when the annual USDA Prospective Plantings report was released at 11:00 am CDT, but the all-wheat figure was stated at ‘just’ 47.351 million. That seemed bullish on its face, but having other spring wheat plantings come in 601,000 acres below expectations centered the industry’s bullish attention on that number and robbed the winter wheat markets of upward momentum. Winter wheat plantings for 2021-22 were revised down to 34.2 million acres, which represented a drop of less than 1% from the previous estimate.
Wheat stocks as of March 1 were stated at 1.025 billion bushels, down just 20 million bushels from the average pre-report estimate. While this did represent a 286 million-bushel drop below the comparable year-ago figure, the modest disparity from forecasts greatly limited the market reaction. Unfortunately for demand prospects, implied disappearance during the third quarter of the 2021-22 crop year reached just 353 million bushels, the lowest ever for the quarter.
Look for sustained strength in HRS futures to support the winter wheat contracts, although the strong tendency for seasonal weakness in the latter market could make for tough sledding. Wheat futures may garner some spillover support from the corn market, since corn plantings fell well short of expectations.
Technical analysis: Bears seem to hold the short-term technical advantage at this juncture. Having May SRW futures fail at the contract’s 10-day moving average of $10.72 1/2 at today’s high, then reverse sharply, emphasized the strength of resistance at that level. It’s backed by the 20-day moving average near $11.15 1/2. A close above that level would have bulls targeting the March 22 high at $11.69 1/4, then the $12.00 level. Initial support is marked by the contract’s 40-day moving average at $9.85 1/4. It also halted Monday’s drop at $9.72, which now represents additional support. A drop below that point would have bears targeting the $8.50 area.
The May HRW chart looks quite similar to that for May SRW futures, although support in the $10.00 area held today. That’s backed by its 40-day moving average near $9.93. The May HRS chart also holds some similarities, in that its 40-day moving average near $10.32 is also acting as solid underlying support. Bulls were able to push the contract price up to $11.16 1/4 in response to today’s low plantings forecast, but proved unable to sustain the move above its 10- and 20-day moving averages near $10.80 and $10.89 1/2, respectively.
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.
Fundamental analysis: Nearby May cotton futures began Thursday by matching Wednesday’s contract high close at 139.84 cents per pound. It then moved lower in seeming response to negative USDA data. The weekly USDA Export Sales report indicated old-crop sales for the week ended March 24 netted just 234,000 bales, down 24% from the week prior and 32% below the four-week average. The shipments figure at 331,100 bales tumbled 25% from the marketing year high posted the week before. New-crop sales were a bright spot at 111,700 bales, but that hardly offset the negative nature of the other results.
The late-morning release of the annual USDA Prospective Plantings Report indicated U.S. producers plan to plant 12.234 million acres of cotton, up 9% annually, when a 12.0 million figure was anticipated by the industry. This result was not especially bearish, particularly when one considers the drought dominating much of the Texas cotton-growing region. However, when combined with today’s outside market action in which crude oil and the equity indexes were down significantly, whereas the U.S. dollar turned higher, the cotton market decline wasn’t surprising. The weekly export data will almost surely remain the key to price action in old-crop futures, whereas spring weather and the condition of the soon-to-be-planted 2022 crop will be the main drivers of moves in the new-crop contracts.
Technical analysis: Bulls still hold the short-term technical advantage in cotton futures. The May contract couldn’t sustain Wednesday’s strong close, with today’s high at 140.67 now representing initial resistance. It’s backed by Monday’s contract high at 141.80. A breakout above that level would likely have bulls targeting the five-cent price levels (i.e. 145.00, 150.00) soon thereafter. Look for initial support at the 10-day moving average near 134.50. A drop below that level would likely have bears targeting the 130.00 level, then the 40-day moving average at 123.74.
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.
