Crops Analysis | April 1, 2022
Price action: Corn futures traded mixed to end the week, with nearby May futures falling 13 3/4 cents to $7.35 and December futures rising 4 1/4 to $6.88. May corn dropped 19 cents for the week, while December corn firmed 19 cents.
5-day outlook: Traders actively unwound bull spreads the final two days this week. Given the shockingly low corn acreage intentions, we suspect more of that price action is likely next week. If the soybean and wheat markets extend this week’s heavy price pressure, it will be difficult for corn to find buyers, as funds would likely move into liquidation mode.
30-day outlook: March planting intentions are just that – plans as of early March, which can change. Fertilizer prices and availability obviously played a role in producers indicating they intend to plant fewer acres to corn than soybeans this year. If spring weather is favorable and fertilizer supplies are adequate, it wouldn’t surprise us to see a little more corn planted than farmers indicated. But it’s unlikely corn acres would rise sharply from March intentions of 89.5 million acres.
90-day outlook: The sharp reduction in acres and a possible drag on yield due to reduced fertilizer usage could significantly pull down U.S. production. USDA’s initial 2022-23 balance sheets released in May will reflect March planting intentions. The question is whether USDA sticks with its trendline yield forecast of 181 bu. per acre. Barring nearly ideal weather, that seems high to us.
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 closed the day down 35 1/2 cents at $15.82 3/4, hitting a five-week low, and for the week tumbled $1.27 1/2. May soybean meal futures hit a four-week low and closed down $17.50 at $450.00 and on the week lost $37.90. May soybean oil futures rebounded from a five-week low earlier to finish 126 points higher at 71.20 cents and for the week fell 355 points.
5-day outlook: This week’s technically bearish downside “breakouts” and bearish weekly low closes in May and July soybeans and meal futures set the table for followthrough chart-based selling in both markets early next week. Soybean bulls had their worst trading week since last summer and speculative bears are now smelling blood, including big funds. USDA’s surprisingly bearish U.S. soybean planting intentions number, which greatly topped market expectations, will likely continue to weigh on futures prices next week. March 1 U.S. soybean stocks also topped trader expectations.
30-day outlook: Bulls are hoping the big pullback in prices this week will put U.S. soybeans in a better export position in the coming weeks, with the South American crop flowing into export channels. USDA Thursday reported weekly old-crop U.S. soybean export sales were strong at 1.3 MMT for 2021-22, including 593,200 MT to China. Given the shorter soybean crops in South America this year, China is likely to continue to be a better buyer of U.S. old-crop soybeans.
90-day outlook: Spring/early summer weather and its impact on planting and early growing conditions is always a wildcard and will most certainly be a market factor for soybean prices in the coming months. However, the new element this year is the Russia/Ukraine war and its impact on major outside markets, including crude oil, the U.S. dollar and the U.S. stock indexes. Soybeans will be more impacted by these outside markets in the coming months, mainly because the outside markets are likely to be more volatile on a daily basis. The likelihood that crude oil prices have put in a major top is one bearish element for the soybean market that could keep speculative market bulls more in check.
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: Wheat futures finished on or near session lows. May SRW wheat fell 21 1/2 cents to $9.84 1/2 today and plunged $1.17 3/4 for the week. May HRW wheat dropped 16 3/4 cents to $10.13, which was down 97 3/4 cents for the week. May HRS wheat declined 14 1/4 cents to $10.65 1/4 and was down 39 cents for the week.
5-day outlook: Bulls must defend this week’s lows to avoid heavier selling pressure next week. If support at Tuesday’s lows falters, it would confirm this week’s technical downside breakout and likely spur a fresh wave of fund liquidation and fresh selling. USDA will release its first national winter wheat crop conditions of the spring on Monday, which will confirm sharp declines since last fall. But any fundamental support could be ignored if funds are aggressive sellers and money flows out of the long side of the market.
30-day outlook: Given moisture deficits in HRW wheat areas, timely spring rains are needed to “save” the crop. Even then, acreage abandonment is likely to be higher than normal in the Southern Plains this year. If the worst acres are abandoned and taken out of the mix, the national average yield would improve, but it would curb production. Decisions on whether some acres will be torn up and planted to other crops will be made over the next month.
90-day outlook: U.S. spring wheat planting intentions came in well shy of expectations. The market could still “buy” some acres, but it that’s going to happen, HRS futures must move aggressively higher. Moisture deficits remain a concern in the U.S. Northern Plains – and in the Canadian Prairies – but spring wheat may be a better option than some other crops, depending on fertilizer availability.
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.
5-day outlook: Cotton futures traded weakly in the wake of Thursday’s weekly USDA Export Sales data and the annual Prospective Plantings Report. Neither was particularly bearish, with the export data being somewhat disappointing and expected cotton plantings at 12.234 million acres only modestly exceeding industry expectations. We are more inclined to blame concurrent front-end crude oil weakness, signaling a weakening commodity outlook, along with equity index losses and U.S. dollar strength for the subsequent cotton slide. The latter two developments suggest reduced domestic and export demand, respectively. We tend to doubt cotton futures will reclaim their recent bullish momentum in the absence of fresh supportive news on the export front.
30-day outlook: Next Monday’s first-of-the-year USDA Crop Progress report will probably state U.S. cotton plantings around 5% complete; that was the 2016-20 average, with nothing reported on the first 2021 report. We expect little futures market reaction to cotton progress at this point, but that will change as the planting season progresses and crop condition ratings are reported. Given the widespread dryness in Texas, traders are unlikely to be very optimistic about the size of the 2022 U.S. crop at this juncture. Traders in old-crop futures will continue concentrating on the weekly USDA Export Sales data, particularly the shipments totals. Those need to routinely top 400,000 bales in order to justify USDA’s 2021-22 cotton export forecast at 14.75 million bales. Failure to get those levels would probably undercut futures.
90-day outlook: Weather conditions, particularly in the Texas cotton growing region, will very likely become the most important factor affecting cotton prices later this spring. Current dryness seemingly bodes ill for production and quite well for price prospects. Thus, the weekly Crop Progress data will be watched closely. In addition, the economic outlook could become increasingly important, especially if it looks as if a U.S. and/or global recession is coming, since apparel demand is probably one of the first things to suffer as consumers tighten their collective belts. The events of the Russia/Ukraine war and their impact on the energy and grain markets might also exert considerable influence over prices. In addition, the potential for a Chinese invasion of Taiwan looms over the markets.
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.
