Crops Analysis | April 7, 2022
Price action: May corn futures rose 1 1/4 cent to $7.57 3/4 and near the session high. December corn rose 4 1/4 cents to $7.09.
Fundamental analysis: The corn market’s choppy, sideways grind continued in nearby futures, with unwinding of bull spreads featured. Underlying bullish elements are keeping prices elevated, including disruptions from the Russia/Ukraine war and the short South American corn crop. However, corn market bulls need a new fundamental spark to push nearby futures prices above the recent trading range. Fresh fundamental news comes tomorrow with USDA’s monthly Supply & Demand Report. USDA is expected to lower its production estimate for Argentina’s corn crop and raise its forecast for Brazil’s. Argentina’s corn crop is expected to be near 52 MMT, down from 53 MMT in the USDA March estimate. Brazil’s corn crop is seen up, at around 115 MMT from 114 MMT reported last month.
USDA this morning reported net U.S. corn sales for the week ended March 31 at 782,400 MT for 2021-22, up 23% from the previous week but down 44% from the average for the previous four weeks. For the 2022-23 marketing year, net sales were 145,200 MT. For 2021-22, corn export commitments are 18% behind year-ago, the same as last week. USDA projects exports in 2021-22 at 2.500 billion bu., 9.2% below the previous marketing year.
Traders are beginning to pay more attention to weather patterns in the Corn Belt as planting season opens. World Weather Inc. said three rounds of precipitation are expected through April 18. Any field work will be impacted as temperatures will be cool enough that drying of soils be slow. However, the moisture will be beneficial in the driest areas from eastern Nebraska into western Iowa.
Technical analysis: May corn futures prices are in a sideways, choppy trading range at higher levels, though bulls have a solid near-term technical advantage. The next upside price 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 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 today’s low of $7.48 1/2, then at $7.40.
What to do: Get current with advised 2021- and 2022-crop sales.
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 soybeans rose 26 cents to $16.45 1/2, the contract’s highest close since March 30. May soymeal fell $1.60 to $460.20, while May soyoil rose 119 points to 73.02 cents per pound, near a two-week high.
Fundamental analysis: Soybeans climbed to the highest closing price in over a week after Brazil-based consultancy Conab trimmed its forecast for the country’s soybean crop below USDA’s March projection. Conab lowered its Brazilian soybean crop estimate to 122.4 MMT, down from 122.8 MMT last month. By comparison, USDA last month cut its projection for Brazil’s crop by 7 MMT, to 127 MMT. Conab also lowered its Brazil soybean export forecast to 77 MMT from 80.2 MMT.
USDA will likely make further cuts to its South American soybean estimates in its Supply & Demand Report Friday, reflecting damage from extensive drought. Based on the Reuters survey, USDA is expected to lower its Brazil forecast to 125.14 MMT. Argentina’s crop is expected to drop to 42.83 MMT from 43.5 MMT.
Also today, USDA reported net weekly U.S. soybean sales for 2021-22 totaling 800,700 MT, down 39% from the previous week and down 38% from the prior four-week average. Top buyers included China (435,700 MT, including 66,000 MT switched from “unknown destinations,” decreases of 2,300 MT, and 67,000 MT of late reportings). Net sales for 2022-23 totaled 298,500 MT. Sales were expected to range from 500,000 MT to 1.15 MMT for 2021-22 and 100,000 to 400,000 MT for 2022-23. Export commitments for 2021-22 are running at 7% behind year-ago, compared to 9% behind last week.
Technical analysis: Bulls gained further momentum in soybean futures with today’s strong close, which pushed May futures above the 10-day moving average and may have broken a two-week downtrend. But the market will require sustained buying interest to threaten the top of the trading range since late February. Initial resistance is seen at the 20-day moving average of $16.58 3/4. A push above that level may prompt bulls to target the late-March high at $16.83 3/4 and the high for the full month of March at $17.36 1/2. The April 4 low of $15.76 3/4 marks a key support level bears may target.
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 wheat fell 18 1/4 cents to $10.20. May HRW wheat fell 14 1/4 cents to $10.70 3/4. May spring wheat fell 9 1/4 cents to $10.99 1/2.
Fundamental analysis: Wheat futures were pressured by U.S. dollar strength and expectations for beneficial precipitation for drought-stressed crops in the U.S. Plains. World Weather said showers and thunderstorms are expected to increase in parts of the main HRW growing areas in the week ahead. However, the Texas and Oklahoma Panhandles, western Oklahoma and southwestern Kansas will likely miss out on the rains. Canada’s snow and rain frequency will increase across some of the drier areas in the Prairies. The same goes for the dry U.S. northwestern Plains, although there will be an ongoing need for more precipitation.
USDA reported net weekly U.S. wheat sales totaling 156,300 MT for the 2021-22 marketing year, up 65% from the previous week but down 11% from the prior four-week average. For 2022-23, net weekly U.S. wheat sales totaled 223,000 MT. Export commitments are running 24% behind a year-ago, the same as last week. USDA projects exports in 2021-22 at 800 million bu., down 19.4% from the previous marketing year. No major changes are expected for wheat in tomorrow’s USDA Supply & Demand Report.
Technical analysis: Winter wheat bulls and bears are on a level near-term technical playing field. SRW bulls' next upside price objective is closing May prices above solid resistance at $11.00. Bears' next downside objective is closing prices below solid support at the March low of $9.72. First resistance is seen at $10.50, then at this week’s high of $10.74. First support is seen at Tuesday’s low of $10.20, then $10.00.
HRW bulls' next upside objective is closing May futures above solid resistance at $11.64 1/2. Bears' next downside objective is closing prices below solid support at the March low of $9.93. First resistance is seen at $11.00, then at $11.25. First support is seen at Wednesday’s low of $10.61 1/2, then at $10.47 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.
Price action: May cotton futures dropped 249 points to 133.20 cents, the contract’s lowest settlement since March 24. December cotton futures rose 19 points to 114.69 cents.
Fundamental analysis: Traders continued to unwind bull spreads in the cotton futures, with new-crop December gaining on old-crop May. That has been a theme this week, suggesting traders sense the current wide old-crop/new-crop spread of roughly 18.5 cents needs to tighten further.
USDA reported weekly old-crop cotton sales at 62,900 running bales (RB), a marketing-year low and down sharply from the four-week average. But that’s not as negative as it would appear. Total cotton export commitments (exports plus outstanding sales) are already 3% over USDA’s export projection. There are plenty of sales on the books to hit USDA’s target, even if the number is increase in the agency’s Supply and Demand Report tomorrow. It’s now a matter of how much gets shipped in 2021-22 and how much carries into 2022-23. Either way, export demand is supportive.
Friday’s report is expected to show a modest, 40,000-bale uptick in old-crop ending stocks, which were projected at 3.5 million bales last month. The range of estimates extends from 3.2 million to 4 million bales. Global cotton ending stocks are also expected to increase modestly from last month, with the average estimate at 82.64 million bales versus the March projection of 82.57 million bales.
Technical analysis: May futures dropped below support at 134.05 cents and posted the first consecutive closes below the 10-day moving average since March 9-10. Bulls still hold the upper hand technically, but today’s price action signals at least a short-term top. Next support is the 20-day average at 130.71 cents.
The technical picture for December cotton remains firmly bullish. Tuesday’s contract high at 115.00 cents is initial resistance, with additional resistance on the continuation chart in the 116.48-cent to 116.67-cent range. Near-term support is at the 10-day moving average at 112.63 cents and then the last reaction low at 110.50 cents.
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.
