Crops Analysis | April 14, 2022
Price action: May corn futures rose 6 3/4 cents to $7.90 1/4, up 21 1/2 cents for the week and the highest settlement for a nearby contract since September 2012. December corn fell 1/2 cent to $7.35 1/4 after reaching $7.39, a contract high for the fourth consecutive day.
30-day outlook: The nearby May contract enters delivery in about two weeks, meaning trade focus will soon shift to July futures and other deferred contracts. Midwest weather and planting progress will be closely followed over the next month. If soggy conditions persist, some farmers may decide to shift land initially intended for corn over to soybeans. Regular rounds of mostly light precipitation will occur through Wednesday in the Midwest, and with cool temperatures common, drying rates will be low enough that planting will be sluggish during the dry days, World Weather Inc. said today. Above-normal precipitation is expected for the eastern half of the Midwest for much of April.
90-day outlook: Spring and summer weather will be among the biggest longer-term market drivers for corn, though continuing concern over supply disruptions from the Russia/Ukraine war may keep prices elevated. Recent export numbers have been strong, but it’s questionable whether shipments can sustain such a pace with South American supplies increasingly available. USDA today reported net U.S. corn sales for the week ended April 7 of 1.333 MMT for 2021-22, up 70% from the previous week and up 26% from the average for the previous four weeks. Export commitments are still 17% behind year-ago, but narrowed the 18% gap from last week. USDA projects corn exports in 2021-22 at 2.500 billion bu., 9.2% below the previous marketing year.
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 soybean futures rose 6 1/4 cents to $16.82 1/4 and for the week fell 6 3/4 cents. May soybean meal rose $3.20 to $461.40, down $6.80 for the week. May soybean oil hit another contract high and gained 80 points to close at 78.91 cents, up 379 points for the week.
5-day outlook: The technically bullish weekly high closes today in nearby soybean and soymeal futures sets the stage for followthrough buying interest early next week. Beans were boosted in part by a daily U.S. sale of 132,000 MT of soybeans for delivery to China during the 2021-22 marketing year. Today’s announcement marked China’s first daily U.S. soybean purchase since April 6. Bulls are hoping more daily sales to China will be announced next week.
30-day outlook: Strong export demand for U.S. soybeans is needed in coming weeks to keep futures elevated. However, USDA today reported weekly U.S. soybean sales of 548,900 MT for 2021-22 were down 31% from the previous week and down 41% from the prior four-week average. A strong U.S. dollar will make U.S. soybeans less price-competitive on world markets. Bulls are also concerned that any prolonged cool, wet weather in the Corn Belt the next few weeks may prompt producers to switch intended corn acres to soybeans.
90-day outlook: Lofty crude oil and palm oil prices and tight global vegetable oil supplies amid the Russia/Ukraine war will continue to prop up the soy complex. It appears the Russia-Ukraine conflict will be protracted, which suggests grain and oilseed prices will remain at historically high levels for at least the next few months—especially as inflation worries are building, prompting more near-term demand as end-users look to stock up to beat any future price increases.
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 futures fell 17 cents to $10.96 1/2 after hitting a three-week high earlier. For the week, May SRW gained 45 cents. May HRW wheat fell 20 cents to $11.54, but still rose 47 1/4 cents this week. July spring wheat fell 12 1/4 cents to $11.46 3/4.
5-day outlook: Wheat futures took routine profit-taking pressure following recent impressive gains. Prices are still in near-term uptrends on the daily bar charts, suggesting some technically related buying interest will resume early next week. Disappointing weekly U.S. export sales numbers also prompted selling interest in futures. USDA reported net weekly wheat sales totaling 96,100 MT for 2021-22, down 39% from the previous week and down 30% from the prior four-week average. Monday’s weekly USDA crop condition ratings will be closely scrutinized, following poor readings in early April.
30-day outlook: The U.S. dollar index hit a two-year high and the greenback looks to remain strong in coming weeks. That’s worrisome for wheat market bulls, as U.S. wheat is already comparatively pricey on world markets. Dry weather and drought in the U.S. Plains states will keep a floor under futures in coming weeks. World Weather reports little to no precipitation is expected in the HRW region over the next seven days, with the exception of the eastern fringes of the region where some occasional showers and thunderstorms will occur. Spring wheat may benefit from the moisture from the recent blizzard. However, traders are not yet convinced that moisture will provide much of a boost to the region’s acreage or production prospects. Canadian Prairies wheat regions are also in need of precipitation.
90-day outlook: The Russia/Ukraine war and disruption to grain trade in the Black Sea region will remain a bullish element on the front burner of the grain markets for at least the next few months. Reduced wheat supplies coming from top producers like France will also underpin wheat futures. However, USDA’s recent cut to 2021-22 U.S. wheat exports suggests any significant upside price potential in wheat futures will be capped.
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 fell 79 points to 141.98 cents per pound after reaching 146.14 cents earlier in the day. The contract posted a weekly gain of 9.57 cents.
5-day outlook: Bulls may find it difficult to build on this week’s strong gains after today’s USDA export sales report showed net old-crop sales of just 59,300 bales during the week ended April 7. That fell 6% short of the previous week’s marketing-year low and implied high prices are stifling export demand. New-crop sales at 132,000 bales were better but didn’t offset the negative influence of the old-crop result. Having the weekly old-crop sales figures dive from routine readings over 300,000 bales to the 60,000 area suggest the market needs to correct lower to reignite foreign buying. The sharp setback from the early high won’t help the bullish cause either. Strength spilling over from the other commodity markets, particularly crude oil, soybeans and gold could spur renewed cotton gains, but the U.S. dollar index’s recent surge won’t help the bullish cause, since greenback strength boosts the cost of U.S. cotton to export customers.
30-day outlook: Old-crop traders will watch weekly USDA export sales in coming weeks, since substantial increases in the commitment totals could boost the USDA’s U.S. cotton export forecast for 2021-22 above the latest projection at 14.75 million bales. That would prove supportive of stronger prices. On the other hand, new-crop traders will be focusing on domestic cotton plantings and spring weather. Persistent dryness across the Southwest seemingly bodes ill for the size of the fall 2022 U.S. harvest, which in turn could keep deferred futures working their way higher. Thus, traders will keep a close eye on the weekly USDA Crop Progress reports released Monday.
90-day outlook: The same factors affecting the outlook for old- and new-crop futures will surely remain dominant into summer. The export situation will continue influencing old-crop cotton values, whereas spring plantings and weather will drive shifts in new-crop prices. Continued inflation could keep supporting the commodity markets, but a recession might undercut the market as consumers worry more about what they’re going to eat rather than what they wear. The geopolitical situation may also affect the market, especially if events drive the value of the U.S. dollar up or down.
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.
