Crops Analysis | April 8, 2022
Price action: May corn futures rose 11 cents to $7.68 3/4, up 33 3/4 cents for the week and a lifetime-high close for the contract. December corn rose 7 cents to $7.16 after scoring a contract high for the third day this week.
5-day outlook: Corn futures ended the week on a strong note with support from a rally in the wheat market and ongoing concern over disruptions stemming from Russia’s war with Ukraine, which overshadowed USDA’s Supply & Demand Report. USDA left its old-crop corn ending stocks projection at 1.440 million bu., contrary to expectations for a decline of 25 million bu. Focus next week will shift back to Midwest weather and planting progress, which likely will remain slow with rain forecast in much of the region. USDA releases its next weekly crop progress report Monday afternoon. July futures are now the most-active contract.
30-day outlook: Planting delays aren’t yet a significant concern for the market, though continued wet conditions could provide support for new-crop December futures. Three rounds of precipitation are expected in the Midwest through April 18, World Weather Inc. said today. “Fieldwork will be sluggish as temperatures will often be cool enough that drying rates are too low to allow for much fieldwork to occur between precipitation events,” the forecaster said. “Most of the precipitation should not be heavy enough to cause lasting delays to fieldwork if drier weather were to follow. Drier weather will return Apr. 19-22 and planting may quickly become aggressive if the fourth week of the month is warm and dry.” As of April 3, the U.S. corn crop was 2% planted, equal to the average for the previous five years.
90-day outlook: Assuming the corn crop is planted without major delays, there’s a strong chance USDA’s unexpectedly low seedings estimate, at 89.49 million ac., will be revised higher, which would be bearish for new-crop futures. For nearby futures, sustained strong demand will be required to keep prices at elevated levels. In its Supply & Demand Report, USDA raised estimated 2021-22 food, seed and industrial use by 25 million bu., to 6.810 billion bu., and held its exports forecast unchanged at 2.5 billion bu. But recent export results continue to lag last year’s levels. Weekly export sales for the week ended March 31 were down 31% from the prior four-week average, and export commitments so far this marketing year are down 18% from 2020-21.
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 soared 43 1/2 cents to $16.89, up $1.06 1/4 for the week and the contract’s highest close since March 25. November soybeans gained 29 1/4 cents to $14.95 1/2, a two-week high. May soymeal rallied $8 to $468.20 per ton and May soyoil rose 210 points to 75.12 cents per pound.
5-day outlook: Nearby soybeans climbed to a two-week high after USDA reduced its forecasts for Brazil production and U.S. stockpiles. USDA, in its Supply & Demand update, cut its old-crop soybean ending stocks forecast by 25 million bu. from last month to 260 million bu., consistent with expectations. Brazil’s expected soybean crop was lowered to 125.0 MMT for 2021-22 from 127.0 MMT in March, slightly lower than expectations. Focus next week will shift to Midwest weather and planting progress, and near-term export business.
30-day outlook: A wet Midwest outlook through the middle of April indicates fieldwork will be slow for the near term. An extension of soggy conditions into May could prompt some farmers to switch acres initially slotted for corn over to soybeans, suggesting USDA’s record Prospective Plantings estimate, 90.96 million ac., may be too low. Even higher soybean plantings would be bearish for new-crop futures, though the November contract’s strong performance this week (a gain of 88 3/4 cents), indicates market skepticism acreage will ultimately reach USDA’s projection.
90-day outlook: As crops are planted, longer-term price direction hinges on summer weather and export demand. USDA increased its forecast for 2021-22 soybean exports by 25 million bushels, to 2.115 billion bu., reflecting scaled-up demand for U.S. supplies as drought slashed South America’s crop. But recent export activity has turned lackluster, with China purchasing with less frequency. USDA yesterday reported weekly net 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. Export commitments for 2021-22 are running at 7% behind year-ago, compared to 9% behind last week.
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 rose 31 1/2 cents to $10.51 1/2, up 65 cents for the week. May HRW wheat rose 36 cents to $11.06 3/4, up 93 3/4 cents for the week. May spring wheat advanced 27 3/4 cents to $11.27 1/4, up 62 cents for the week.
5-day outlook: Winter wheat bulls turned in a technically bullish weekly high closes, suggesting followthrough, chart-based buying will develop early next week. Fundamental support stemmed from USDA’s larger-than-expected reduction to projected global wheat supplies at the end of the 2021-22 marketing year. USDA pegged wheat stocks at 278.42 MMT, down from 281.51 MMT in March and a drop of 4.2% from 2020-21. Analysts expected only a slight cut. USDA also raised its old-crop U.S. wheat ending stocks estimate by 25 million bu. from last month to 678 million bu., 22 million bu. above the average pre-report estimate.
30-day outlook: Weather in U.S. and Canada wheat country will likely continue to be a bullish element for wheat markets in the coming weeks. World Weather Inc. said no serious relief from dryness is expected in southwestern Canada’s Prairies in the next 10 days, but some snow will fall across a part of the region. A more significant snow event may impact a part of the northwestern U.S. Plains April 12-13 that may help improve topsoil moisture for a short period of time. U.S. HRW wheat areas will continue dry across the western high Plains region during the next 10 days to two weeks, while some rain occurs periodically farther to the east. In only one year, 1996, has the U.S. winter wheat crop gotten off to a worse spring start, based on USDA condition ratings.
90-day outlook: The Russia-Ukraine war and its implications for Ukraine grain production and Black Sea shipping will remain on the front burner of the grain futures markets for at least the next several weeks, which will continue to keep a floor under wheat futures prices even at their presently historically elevated levels.
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 fell 79 points to 132.41 cents per pound, down 214 points for the week. New-crop December rose 79 points to 115.48 cents.
5-day outlook: U.S. cotton sales total for the week ended March 31, at just 62,900 bales, marked the lowest of the 2021-22 crop year, weighing on nearby May futures. Traders seemingly ignored the fact that the shipments figure at 455,500 bales represented the second time in the past three weeks in which the export figure to hit a marketing-year high. Traders in old-crop futures will continue focusing upon export prospects for the balance of the crop year (ending July 31), but those more interested in the new-crop outlook will be watching the weather and the cotton plantings numbers indicated on Monday’s USDA Crop Progress report. Still, the latter report seems likely to have limited influence in the short run, since cotton plantings have yet to start in several states.
30-day outlook: Weekly USDA Export Sales reports will likely continue driving events in old-crop cotton futures through early spring, especially if the sales numbers bounce back toward recent averages, since total commitments (shipments plus outstanding sales) have already surpassed USDA’s 14.75 million bale export forecast for 2021-22. But the cotton market’s general focus will almost surely shift toward new-crop prospects, especially if spring weather over the main cotton-growing areas of Texas don’t improve from their current drought-stricken condition. Weekly USDA Crop Progress reports will take on increasing importance.
90-day outlook: Spring weather will come to the fore, since conditions in prime growing areas, especially in West Texas, will dictate the likely size of the fall 2022 cotton harvest. Traders will also keep an eye on U.S. cotton exports and shipments, with an increasing portion of that attention focusing upon the potential carryover of commitments into the new crop year. The larger that shift, the larger the export potential for 2022-23. Outside events, especially on the economic and geopolitical fronts will also influence the cotton outlook. Developments concerning commodity inflation will also garner considerable trader attention, with fluctuations in crude oil prices being a key to market sentiment.
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.
