Crops Analysis | April 20, 2022
Price action: July corn futures rose 9 3/4 cents to $8.09 1/2, while May futures rose 11 3/4 cents to $8.15 3/4, the highest settlement for a nearby contract since August 2012. December futures rose 1 1/2 cents to $7.48 1/2.
Fundamental analysis: Corn futures resumed a strong uptrend as strong near-term demand and supply disruptions from the Russia/Ukraine war encouraged bull spreading. Cool, wet conditions across much of the Midwest continue to delay fieldwork, supporting new-crop December futures, though it’s early enough that planting delays aren’t yet a significant concern. Frequent precipitation across the Midwest through April 26, along with cool temperatures, “will keep fieldwork to a minimum in most areas,” World Weather Inc. said today. The April 26 to May 4 period “will be drier overall and planting should increase,” the forecaster said.
U.S. ethanol production averaged 947,000 barrels per day (bpd) during the week ended April 15. That’s down 48,000 bpd from the previous week and 0.6% above the corresponding week last year. Ethanol stocks fell 461,000 barrels to 24.342 million barrels, the lowest since the week ended Jan. 14, 2022. Tomorrow’s weekly USDA export sales report is expected to show net U.S. corn sales in the 2021-22 marketing year at 950,000 to 1.5 million MT, whiles net sales for 2022-23 are expected at 400,000 to 800,000 MT.
Technical analysis: Corn futures bulls have a strong near-term technical advantage. The next upside objective for bulls is closing July futures above solid longer-term resistance at the record high of $8.43 3/4 in nearby futures. The next downside target for bears is closing prices below support at $7.50. First resistance is seen at the contract high of $8.14, then at $8.25. First support is at today’s low of $7.92, then at this week’s low of $7.83 3/4.
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: July soybeans rose 25 1/4 cents to $17.17, a lifetime-high close for the contract, while May futures rose 30 1/4 cents to $17.46 3/4, the highest settlement for a nearby contract since September 2012. July soymeal surged $6.70 to $466.30 and July soyoil gained 55 points to 78.75 cents.
Fundamental analysis: Nearby soybeans rallied to the highest levels in nearly a decade behind strength in soybean meal, tightness in global vegetable oil supplies and demand for U.S. exports. USDA’s announcement last Friday of a soybean sale to China totaling 661,000 MT sparked renewed optimism over U.S. exports even with fresh supplies from South America’s harvest increasingly available. Friday’s announcement was followed yesterday by a daily sale of 123,650 MT of soybeans for delivery to “unknown destinations” during the 2021-22 marketing year.
Palm oil demand is expected to jump in coming months, driven by a widening discount to rival vegetable oils, Reuters reported. Higher demand could further boost palm oil prices that have already soared 38% so far in 2022 as the war in Ukraine has disrupted supplies of sunflower oil.
USDA tomorrow is expected to report weekly soybean exports between 300,000 MT to 1.0 MMT for 2021-22 and 200,000 to 950,000 MT for 2022-23. Last week, USDA reported net soybean sales for the week ended April 7 totaling 548,900 MT for 2021-22, down 31% from the previous week and down 41% from the prior four-week average, but China was a featured buyer, at 435,500 MT, including 121,000 MT switched from “unknown destinations.”
Technical analysis: Bullish momentum in the soy complex accelerated as nearby soybeans closed strong and July soyoil posted a contract high for the second session in the past three, reaching 79.26 cents before setting back. Market bulls are now likely targeting the July futures contract high at $17.41, posted Feb. 24. Based on the continuation chart, further resistance is seen at $17.65, a 9 1/2-year intraday high reached in late February, and at the record high of $17.94 3/4, posted in September 2012. Initial support in July soybeans comes in around yesterday’s low at $16.82, followed by the 10-day moving average at $16.63. New-crop November futures also closed strong after rising near a two-month high at $15.33 1/4.
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: July SRW wheat fell 11 1/2 cents to $10.97 1/2, the contract’s lowest closing price since April 11. July HRW wheat fell 6 3/4 cents to $11.69 1/2. July spring wheat ended unchanged at $11.72 1/4.
Fundamental analysis: Winter wheat futures tumbled to the lowest levels in over a week on followthrough profit-taking and technical pressure from a weak close yesterday. Weakness in the U.S. dollar, supply disruptions from the Russia/Ukraine war and poor crop conditions in the HRW belt were largely disregarded today, though previous wheat downturns have been stemmed by renewed buying interest. While a declining dollar is often viewed bullishly for commodities, U.S. wheat remains uncompetitively priced on the global market.
USDA-reported net weekly U.S. wheat sales are expected to range from zero to 350,000 MT for 2021-22 and 150,000 to 400,000 MT for 2022-23, based on a Reuters survey. Last week, USDA reported net weekly sales totaling 96,100 MT for 2021-22, down 39% from the previous week and down 30% from the prior four-week average. For 2022-23, net sales totaled 225,200 MT. Net sales were expected to range from 100,000 to 250,000 MT for 2021-22 and 100,000 to 400,000 MT for 2022-23.
Technical analysis: Winter wheat technicals eroded further today as HRW and SRW markets posted soft closes for the second consecutive session. The July SRW contract appeared to violate an uptrend line drawn from the March low of $9.67 1/4, fueling indications the market may have established a near-term peak with yesterday’s “key reversal” lower. A push under support at the 20-day moving average at $10.63 1/2 could accelerate downward momentum. Resistance is seen at a possible double top around $11.43 to $11.43 1/2 hit the previous two sessions.
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: July cotton rose 55 points to 138.88 cents per pound, while new-crop December futures edged up 7 points to 121.02 cents.
Fundamental analysis: Cotton futures managed a modest bounce from yesterday’s sharp declines amid strength in crude oil, corn and other commodities and from weakness in the U.S. dollar. The cotton market will require strong exports to continue at elevated prices, and the dollar’s recent rally to two-year highs contributed to futures’ downturn over the past week. Disappointing weekly USDA export sales tomorrow could further embolden sellers. Last week, USDA reported net old-crop cotton sales for the week ended April 7 at 59,300 bales, down 76% from the average for the previous four weeks and a marketing-year low.
Technical analysis: Bulls still hold a technical advantage in cotton futures. Initial support extends from Tuesday’s low of 139.02 cents to the 10-day moving average near 138.77, with backing from the 20-day moving average at 137.14. A drop below the latter level would have bears targeting the April 11 low at 131.58, then the 40-day moving average at 128.87. Initial resistance is likely located between Tuesday’s high at 145.61 and last Thursday’s contract high at 146.14. A breakout above that range would have bulls targeting the psychologically important 150 level.
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.
