Crops Analysis | January 10, 2022
Price action: March corn futures settled 7 cents lower at $5.99 3/4 after falling as low as $5.96 1/4. December futures fell 3/4 cent to $5.57.
Fundamental analysis: Corn futures fell under profit-taking pressure following last week's gains and spillover from sharp declines in the soy complex. South American weather remains a key market factor, with little rain and hot temperatures expected from Paraguay to Brazil’s Rio Grande do Sul and western Parana through Saturday. But there are increased rain chances in the outlook for next week. USDA is expected to revise lower its projections for South American corn production on Wednesday.
USDA reported a daily corn sale totaling 132,000 MT to Mexico, including 77,000 MT for 2021-22 and 55,000 MT for 2022-23 delivery. Today’s announcement followed a daily sale last Friday for 176,784 MT of corn to Mexico in the current marketing year.
Also, USDA reported 1.023 MMT (40.3 million bu.) of corn inspected for export during the week ended Jan. 6, up from 759,563 MT (29.9 million bu.) the previous week and within trade expectations ranging from 600,000 MT to 1.25 MMT. For the 2021-22 marketing year to date, corn inspections totaled 14.1 MMT, down 15% from the same period in 2020-21.
USDA reports Jan. 12 will include the agency’s final estimate for the 2021 U.S. corn crop, along with updates on South American production, Dec. 1 stocks and updates to the domestic and global balance sheets. The U.S. corn crop is expected to be revised up about 7 million bu., to 15.069 billion bu., based on a Reuters survey of analysts. Quarterly stocks have consistently been a figure corn traders have struggled to gauge.
Large speculators reduced their bullish bets in corn for the first time in five weeks but still hold a sizable net long position, which may make the market vulnerable to liquidation pressure if USDA delivers any bearish surprises this week. The managed money net long in corn futures and options fell 7,440 contracts during the week ended Jan. 4 to 365,905 contracts, the Commodity Futures Trading Commission’s weekly Commitments of Traders report showed.
Technical analysis: Corn futures have shifted into a sideways consolidation trade ahead of the Jan. 12 USDA reports, but bulls still hold a near-term advantage. March futures today briefly fell under the 20-day moving average at 5.98 1/4 before finding support. Further support is seen at the 40-day moving average at $5.90 1/2 and at this month’s low of $5.84 3/4. Resistance is seen at last week’s high of $6.11 1/4 and at $6.17 3/4, a 6 1/2-month intraday high reached Dec. 28.
What to do: Get current with advised 2021- and 2022-crop sales.
Hedgers: You should be 70% sold in the cash market on 2021-crop. You should also have 20% of expected 2022-crop forward-priced for harvest delivery.
Cash-only marketers: You should be 70% sold on 2021-crop. You should also have 20% of expected 2022-crop forward-priced for harvest delivery.
Soybeans
Price action: March soybeans fell 25 1/2 cents to $13.84 3/4, nearer the session low. March soybean meal fell $8.70 to $416.30 per ton, while March soybean oil fell 75 points to 58.03 cents per pound.
Fundamental analysis: Soybean futures fell under corrective, profit-taking pressure following the market’s climb to seven-month highs late last week. Forecasts for greater rainfall prospects in dry areas of South America also weighed on the soy complex. Next weekend may bring a shift in the weather pattern in Brazil, with light and mostly inconsequential rain before showers and thunderstorms become better organized beginning Jan. 16, World Weather Inc. said. Rain expected from Jan. 16-19 “is not likely to be heavy in many areas, but at least some relief from dryness should occur and crops that have not been too badly harmed by dryness will respond to the moisture,” the forecaster said.
Still, persistent dryness has taken a toll on South America’s crops. At least three private forecasters last week lowered their production estimates for Argentina and Brazil, and USDA is expected to do the same in its Supply and Demand report Jan. 12. USDA is expected to reduce its projection for Brazil’s soybean crop by about 2.38 MMT to 141.62 MMT, based on a Reuters survey. Argentina’s crop is expected to be cut 1.39 MMT to 48.11 MMT.
Technical analysis: Bulls could argue today’s downside corrections were “healthy,” keeping the existing near-term price uptrends going. Soybean bulls still have a solid near-term advantage, with prices are in a two-month uptrend. The next near-term upside objective for bulls is closing March futures above solid resistance at the June high of $14.45 1/2. The next downside objective for bears is closing prices below solid support at $13.34 1/2. First resistance is seen at $14.00, then at today’s high of $14.09 3/4. First support is seen at Friday’s low of $13.76, then at $13.70.
Soymeal bulls also a strong technical edge, with price in a three-month uptrend. The next upside objective for bulls is to close in March futures above solid resistance at $440.00. The next downside objective for bears is closing prices below solid support at $398.20. First resistance comes in at $425.00, then at today’s high of $428.50. First support is seen at today’s low of $415.10, then at $410.00.
Soyoil bulls have a near-term technical advantage, with the next upside objective closing March futures above solid resistance at 61.44 cents. Bears' next downside objective is closing prices below solid support at 55.00 cents. First resistance is seen at the January high of 59.68 cents, then at 60.00 cents. First support is seen at today’s low of 57.52 cents, then at 57.00 cents.
What to do: Get current with advised 2021- and 2022-crop sales.
Hedgers: You should be 85% priced in the cash market on 2021-crop. You should also have 20% of expected 2022-crop forward-priced for harvest delivery.
Cash-only marketers: You should be 75% priced on 2021-crop. You should also have 20% of expected 2022-crop forward-priced for harvest delivery.
Price action: Winter wheat futures finished mostly 2 to 3 cents higher. March SRW wheat firmed 3 1/2 cents to $7.62, while March HRW futures rose 3 1/4 cents to $7.78 1/4. Spring wheat futures dropped mostly 3 to 9 cents, with the March contract down 9 cents to $9.14 1/4.
Fundamental analysis: Winter wheat futures were supported by corrective buying as traders covered some short positions and unwound long corn/short wheat spreads. More corrective trade is possible ahead of USDA’s barrage of reports Jan. 12. Spring wheat futures continued dropping as traders liquidated more long positions. As of Jan. 4, managed money accounts were net long 12,333 HRS futures contracts. While they held a bigger net long in HRW contracts, drought in the Southern Plains gives them more of a reason to be long in that market.
Weekly export inspections provided another reminder of paltry demand for U.S. wheat. For the week ended Jan. 6, wheat inspections totaled 233,159 MT (8.6 million bu.), up slightly from the previous week. To hit USDA’s export forecast of 840 million bu. for 2021-22, the weekly pace needs to average 16.1 million bu. the remainder of the marketing year. That seems unlikely, which is why we anticipate USDA will further cut its export forecast in its Jan. 12 Supply and Demand report.
Technical analysis: Last Friday’s low at $7.35 1/2 is March SRW futures is near-term support. A drop below that level would point the contract toward a likely test of the $7.00 mark. Near-term resistance is the 10-day moving average around $7.67 1/2, with additional resistance in the $7.80 area.
March HRS wheat is heavily oversold at 23.8% on the Relative Strength Index, suggesting a pause or technical corrections is overdue. But bulls must defend support at last Friday’s low of $9.05 3/4 to avoid another leg down on the daily chart. Violation of last Friday’s low and the $9.00 level would point to a test of support in the $8.90 to $8.70 area.
What to do: Get current with advised hedges. Wait on a price rebound to extend wheat sales.
Hedgers: You have hedges covering 20% of 2021-crop in short March SRW wheat futures at $7.57. You should also be 70% priced in the cash market on 2021-crop. You should have 20% of expected 2022-crop production forward-priced for harvest delivery.
Cash-only marketers: You should be 70% priced on 2021-crop. You should also have 20% of expected 2022-crop production forward-priced for harvest delivery.
Price action: March cotton futures rose 10 points to 115.22 cents per pound, while deferred contracts gained 19 to 76 points.
Fundamental analysis: Cotton futures firmed modestly in subdued, sideways trade ahead of USDA’s Crop Production and Supply and Demand reports Jan. 12. The market shrugged off a stronger U.S. dollar and weakness in U.S. stocks, while drops in grain and crude oil futures also had limited impact on cotton prices today. USDA is expected to slightly lower its estimate for the 2021-22 U.S. cotton crop to 18.24 million bales, down from 18.28 million in a December forecast, based on a Bloomberg survey of analysts. U.S. exports may be reduced to 15.39 million bales from 15.5 million.
Technical analysis: Market futures bulls hold a near-term technical advantage with cotton prices in a four-week uptrend. Upside objectives for bulls include closing in March futures above resistance at this month’s intraday high of 117.68 cents and above the November high of 118.50 cents. Downside objectives include closing March below solid support at 110.00 cents. Support is also seen at the 10- and 50-day moving averages at 114.11 cents and 111.51 cents, respectively. Large speculators increased their net long position in cotton futures and options by 5,452 contracts during the week ended Jan. 4 to 80,277 contracts, the biggest since the week ended Nov. 23, according to a CFTC report.
What to do: Get current with advised 2021- and 2022-crop sales.
Hedgers: You should be 100% priced 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% priced on 2021-crop. You should also have 40% of expected 2022-crop production forward-sold for harvest delivery.
