Crops Analysis | April 6, 2022
Price action: May corn futures fell 3 1/4 cents to $7.56 1/2 and near mid-range. December futures fell 1 3/4 cents to $7.04 3/4.
Fundamental analysis: The corn market saw mild profit taking from shorter-term traders, following firm gains posted the first two days this week. Sharp losses in Nymex crude oil futures, which hit a three-week low of $95.73, also limited buying interest in grain markets. Weather forecasters are predicting a wetter and cooler weather pattern for parts of the U.S. Corn Belt late this week, which may delay early planting. However, it’s too early in spring for traders to get too concerned over any delayed plantings because of wet weather.
U.S. ethanol production averaged 1.003 million barrels per day (bpd) during the week ended April 1, down 33,000 bpd from a week ago but 2.9% above the comparable week last year. Ethanol stocks dropped 626,000 barrels, to 25.903 million barrels.
Tomorrow’s weekly USDA export sales report is expected to show U.S. corn sales of 475,000 to 1 million metric tons in the 2021-22 marketing year and sales of 100,000 to 400,000 MT in the 2022-23 marketing year. Traders are also waiting for USDA’s monthly Supply & Demand Report Friday.
Technical analysis: May corn futures are in a sideways and choppy trading range at higher levels, though 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 of $7.82 3/4. 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 this week’s high of $7.68, then at $7.75. First support is at Tuesday’s low of $7.49 1/4, then at $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.
Price action: May soybean futures fell 11 1/2 cents to $16.19 1/2 after rising overnight to $16.43, a high for the week. May soybean meal fell $4.10 to $461.80 per ton, while May soyoil fell 58 points to 71.83 cents per pound.
Fundamental analysis: The soy complex came under pressure from profit-taking and corrective selling overnight following firm gains the previous two days, as traders continued to monitor U.S. weather and Russia’s war with Ukraine. China returned to the U.S. market as a buyer after an absence of over a week. USDA reported a daily sale of 132,000 MT of soybeans for delivery to China during the 2021-22 marketing year. That marked the first USDA-announced soybean sale to China since a 132,000-MT purchase on March 28.
USDA tomorrow is expected to report weekly net U.S. soybean sales of 500,000 MT to 1.15 MMT for 2021-22 and 100,000 to 400,000 MT for 2022-23. Last week, USDA reported strong sales of 1.3 MMT for 2021-22, including 593,200 MT to China. China may continue to buy U.S. old-crop soybeans, considering crop shortfalls in South America.
Technical analysis: Bulls gained ground in soybean futures early this week even with today’s declines and may be in the process of settling into a sideways consolidation as trader see how export demand and spring weather develop. But prices remain in a two-week downtrend, and the April 4 low of $15.76 3/4 marks a key support level bears may target. May soybeans overnight reached $16.43, a high for the week, before retreating. Initial resistance is seen around the 10- and 40-day moving averages, both around $16.44.
What to do: Get current with advised 2021- and 2022-crop sales.
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 wheat fell 7 cents to $10.38 1/4. May HRW wheat rose 2 1/4 cents to $10.85 after falling earlier as low as $10.61 1/2. May spring wheat fell 3 cents to $11.08 3/4.
Fundamental analysis: Wheat futures fell under mild profit-taking and corrective pressure that began overnight before recovering losses later in the U.S. session, with HRW contract turning higher. USDA’s unexpectedly poor crop ratings released Monday limited selling interest as traders watched for Russia/Ukraine developments, including the potential for scaled up sanctions on Russia.
Elsewhere, plentiful rains have boosted soil moisture across Australia, improving the outlook for a potential bumper wheat crop as planting starts. Many farmers are expected to keep their regular crop rotations. Kazakhstan will limit wheat exports to 1 MMT and wheat flour exports to 300,000 MT until June 15. The limits would take effect within two weeks, according to the country’s Agriculture Minister.
USDA tomorrow is expected to report net weekly U.S. wheat sales of 50,000 to 500,000 MT for 2021-22 and 50,000 to 250,000 MT for 2022-23. Last week, USDA reported net weekly sales of 95,000 MT and 81,300 MT, respectively, illustrating U.S. wheat’s uncompetitive prices relative to other top producers.
Technical analysis: Despite today’s price declines, winter wheat bulls and bears appear to be on a level near-term playing field amid prospects the market established a near-term bottom last week. Futures may be settling into a sideways consolidation pattern as traders monitor the Russia/Ukraine war and the development of the U.S. crop.
May SRW wheat traded within yesterday’s range overnight after gaining 35 cents yesterday to $10.45 1/4, the contract’s highest close since $10.57 on March 28. The lead contract’s rally yesterday left a 5 1/2-cent gap on the daily bar chart that may be targeted by market bears. SRW bulls' upside objectives include closing May futures above the 20-day moving average at $10.69 1/2 and above solid resistance at $11.00. Bears' downside objectives include closing the early-week gap and pushing below last week’s low at $9.72, a key support level.
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.
Price action: Cotton futures sagged, with nearby May falling 184 points to 135.69 cents per pound and new-crop December sliding 32 points to 114.50 cents.
Fundamental analysis: The cotton market seems to be shifting in concert with the equity indexes this week, with traders apparently thinking the economic outlook will greatly influence consumer demand for cotton. Thus, today’s downside followthrough to yesterday’s stock market pullback seemed to drag cotton lower again. Ultimately, apparel demand is often one of the first things to suffer in a recession, which in turn reduces cotton demand. Today’s drop in crude oil futures likely spurred selling as well.
The outlook seems more supportive than that, since total U.S. cotton exports for the 2021-22 crop year, plus sales commitments for this year, have essentially matched USDA’s forecast of 14.75 million bales. Even if the pace of shipments fails to reach the forecast level, the underlying implication is that those loads not shipped by the end to the current crop year on July 31 will be shifted to the 2022-23 crop year. That looks very favorable to next year’s demand outlook, whereas the modest 9% increase in prospective 2022 U.S. cotton plantings reported by the USDA last week, along with the Plains drought, indicate a moderate increase in U.S. production.
Technical analysis: While bulls definitely hold the short-term technical advantage in new-crop cotton futures, their advantage in the nearby May contract is less clear after it closed below support at its 10-day moving average for the first time since March 10 today. Initial support now stems from last Friday’s low at 134.12. It’s 20- and 40-day moving averages place additional support at 130.58 and 124.94, respectively. A drop below the latter figure would open the door to a retest of the contract’s March low at 115.37. Today’s high marks initial resistance at 138.44, with additional resistance likely at yesterday’s high of 140.45, then at the contract high of 141.80. Bulls would probably target the 145.00 level, then 150.00 on a breakout to fresh highs.
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.
