Crops Analysis | April 5, 2022
Corn
Price action: May corn futures rose 9 1/4 cents to $7.59 3/4, the contract’s highest settlement since $7.62 1/2 on March 11. December corn rose 7 1/2 cents to $7.06 1/2 and posted a contract high for the fourth consecutive session, touching $7.12 1/2.
Fundamental analysis: Nearby corn futures climbed to the highest levels in over three weeks behind strength in the wheat market, which surged on unexpectedly low initial USDA crop progress ratings reported Monday afternoon. Speculative bulls in the corn market are also gaining confidence and likely adding to positions as prices have posted an impressive rebound from last week’s spike to a four-week low.
Corn prices were also supported by early concerns over cool and wet weather in the Corn Belt and more in the forecast, especially after USDA last week projected surprisingly low U.S. corn seedings. Also today, Brazil’s safrinha crop outlook is “still good” despite recent dryness, World Weather Inc. said. Mato Grosso and northern Mato Grosso do Sul are expected to receive little to no rain over the next 10 days, but subsoil moisture should remain favorable, and some timely rain will fall later this month.
Technical analysis: May corn futures are in the upper portion a sideways trading range at higher levels and the bulls have momentum, which suggests the bulls will likely soon mount a challenge of the contract high at $7.82 3/4. The bulls have a solid near-term technical advantage. The next upside objective for bulls is to close May futures above solid resistance at the contract high. The next downside target for bears is closing May prices below support at last week’s low of $7.13 1/2. First resistance is seen at $7.70, then $7.75. First support is at today’s low of $7.49 1/4,then $7.40.
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 rose 28 3/4 cents to $16.31, the highest closing price since March 30. May soymeal rose $10.80 to $465.90 per ton and May soyoil rose 7 points to 72.41 cents per pound.
Fundamental analysis: Soy complex futures climbed behind strength in wheat and concerns over disruptions to global vegetable oil markets from Russia’s war with Ukraine. Malaysian palm oil futures surged as much as 4.5%, its biggest percentage gain in nearly a month, and Nymex crude oil futures also rose overnight. But crude oil’s pullback during U.S. hours limited buying in soyoil. Concerns over restricted supplies from South America also supported soybeans. Leaders from Argentina’s major transportation union are urging a national strike April 11 to demand an increase in grain freight rates amid a shortage of fuel supplies and high prices.
Also today, Pro Farmer crop consultant Michael Cordonnier said high fertilizer costs may slow soybean expansion in Brazil during 2022-23. “Brazilian soybean farmers have expanded their soybean acreage for 15 years in a row, but any potential expansion in 2022-23 may be one of the smallest in recent memory,” the consultant said in a report. He noted that Itau BBA, a consultant, estimated Brazilian soybean acreage will increase only 0.5% in 2022-23. By comparison, for 2021-22 growing season, soybean acreage increased 3.8% to 40.7 million hectares (100.5 million acres).
Technical analysis: Bulls regained firmer footing in soybean futures as the May contract closed back above the 50-day moving average, currently about $16.16, after settling below that indicator the previous two sessions. But prices remain in a two-week downtrend. May soybeans rose as high as $16.35 1/4 after gaining 19 1/2 cents yesterday. Initial resistance is seen at the 40-day moving average at $16.43 1/4, followed by the 10-day moving average around $16.53 1/4. Key support is seen at a 2 1/2-month intraday low of $15.76 3/4 posted yesterday.
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: May SRW wheat rose 35 cents to $10.45 1/4, the contract’s highest closing price since $10.57 on March 28. May HRW wheat rose 45 cents to $10.82 3/4, the highest closing price since March 25. May spring wheat rose 26 3/4 cents to $11.11 3/4, the highest settlement since March 8.
Fundamental analysis: Winter wheat futures gapped higher at the open of overnight trading after USDA reported lower-than-expected crop ratings Monday afternoon. USDA’s first crop condition ratings of the spring indicated drought damage to the U.S. winter wheat crop was worse than previously thought. Late yesterday, USDA reported 30% of the U.S. winter wheat crop in “good” or “excellent” condition as of yesterday, about 10 percentage points under analysts’ expectations.
When USDA’s initial crop condition ratings of the spring are plugged into the weighted Pro Farmer Crop Condition Index (0 to 500-point scale, with 500 being perfect), the HRW crop plunged 51.9 points from last fall to 272.6, while the SRW crop dropped 19.1 points to 342.2. The HRW CCI rating at the beginning of April is 57.3 points below the five-year average and the lowest since 2011. The SRW CCI rating is 14.4 points below the five-year average to start spring.
Ukraine's grain traders union UGA has asked the government to cancel wheat export curbs as domestic stocks are high and the shipments would not affect Ukrainian food security, the union said. In March, Ukraine introduced export licenses for wheat, corn and sunflower oil. Two weeks later, the government cancelled export restrictions on corn and sunoil.
Technical analysis: Winter wheat bulls regained some momentum with the gains so far this week, suggesting the market may have established a near-term bottom last week. But futures may also be in the process of settling into a sideways consolidation pattern as traders monitor the Russia/Ukraine war and the development of the U.S. crop. May SRW wheat jumped to $10.74 overnight, leaving a gap between yesterday’s high at $10.14 1/2 and today’s low at $10.20. SRW bulls' upside objectives include closing May futures above the 20-day moving average at $10.87 1/2 and above solid resistance at $11.00. Bears' downside objectives include closing today’s gap and pushing below last week’s low at $9.72.
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: Old-crop cotton futures slipped Tuesday, with the May contract falling 41 points to 137.53 cents per pound. December futures climbed 106 points to 114.82 cents.
Fundamental analysis: USDA’s first Crop Progress report of the season showed cotton plantings at 4% complete, which is only slightly behind the five-year average at 6%. Just three states reported plantings had started, with Arizona, California and Texas seedings seen at 11%, 10% and 6%, respectively. The new-crop gains probably reflected concurrent corn and grain market strength as much as anything else, especially if one believes the various crops are “bidding for acreage” at this point. With projected cotton plantings up only about 9% from spring 2021, despite nearby futures trading about 70% over the same levels reached one year ago, the market clearly wants to keep those acres in cotton.
Recent equity market strength may be encouraging cotton bulls by indicating concern over a potential U.S. recession are exaggerated. That may mean mid-2022 apparel demand will not suffer as substantially as some have anticipated. However, the S&P 500 index declined today, as did the petroleum markets, which may explain old-crop cotton weakness.
Technical analysis: Bulls still hold the technical advantage in May cotton futures. The contract found solid support at its 10-day moving average, around 135.83, last Friday and again Monday, but couldn’t build upon yesterday’s strong advance today. Look for initial resistance at today’s high of 140.45, then at the March 28 contract high of 141.80. A breakout above that level would likely have bulls targeting 145.00, then 150.00. A drop below the contract’s 10-day MA would open the door to a test of the 130.00-cent area, then 125.00 and the 40-day moving average near 124.65.
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.
