Crops Analysis | January 11, 2022
Price action: Corn futures traded mixed as traders evened up positions before tomorrow’s USDA reports. March futures edged up 1 1/4 cents to $6.01.
Fundamental analysis: Prices rose on shrinking crop prospects in South America. Crop consultant Dr. Michael Cordonnier cut his Brazilian corn production forecast 1 MMT to 112 MMT, while Brazil’s USDA counterpart, Conab, revised its estimate down by 4.3 MMT, to 112.9 MMT. Forecasts for continued short-term hot, dry conditions also supported prices.
Traders otherwise appeared reluctant to take large positions ahead of the release of several USDA reports at 11 a.m. CT tomorrow. USDA is expected hike its final estimate for the 2021 U.S. corn crop by about 7 million bu., to 15.069 billion bu., based on a Reuters survey of analysts. Tomorrow’s reports also include Dec. 1 U.S. grain stocks and monthly Supply and Demand balance sheet updates. The corn stocks data has a history of surprising the industry, so a sharp futures reaction can’t be ruled out.
Technical analysis: The uptrend in place since late summer has given the bulls the general technical advantage, although weakness since Christmas has seemingly balanced the short-term outlook. Look for light, sideways trading until the USDA releases its reports. March corn has support near its 10- and 20-day moving averages around $6.00 1/2 and $5.99, respectively, with backing from the 40-day moving average around $5.91. A drop below that level would have bears targeting the December low at $5.62 1/2. Conversely, the market hasn’t been able to challenge last week’s high at $6.11 1/4, much less the Dec. 28 high at $6.17 3/4. A push above those levels would have traders targeting the contract’s June high at $6.33, then the May contract high at $6.40 1/2.
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 soybean futures rose 1 3/4 cents to $13.86 1/2, near the middle of today’s range, after falling as low as $13.72 1/2 earlier in the session. March soybean meal fell $3.20 to $413.10 per ton, while March soybean oil rose 84 points to 58.87 cents per pound.
Fundamental analysis: Soybean futures rose modestly ahead of USDA reports tomorrow that are expected to include reduced production estimates for South America, reflecting extended heat and dryness in key crop-growing regions. USDA, in its monthly Supply and Demand update, is expected to reduce its projection for Brazil’s soybean crop by about 2.38 MMT, to 141.62 MMT, based on the Reuters survey. Argentina’s crop is expected to be cut 1.39 MMT, to 48.11 MMT. In a separate report, USDA is expected to increase its estimate for the 2021 U.S. soybean crop by about 8 million bu., to a record 4.433 billion bu. and raise its average U.S. yield estimate by 0.1 bu., to 51.3 bu. per acre.
The expected USDA cuts would follow downsized forecasts from several private analysts in recent weeks, including Pro Farmer consultant Cordonnier, who lowered his Brazilian soybean crop estimate by 3 MMT, to 135 MMT and reduced his Argentine soybean crop estimate by 2 MMT, to 43 MMT. Conab cut its Brazil soybean crop projection to 140.5 MMT, down 2.3 MMT from its December forecast.
Improved rain prospects next week may provide some relief to crops in southern Brazil, World Weather said today. Rain expected Jan. 16-20 “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 and yield potentials may increase,” World Weather said.
USDA early today reported a daily sale of 100,000 MT of soybeans for delivery to Mexico during the 2021-22 marketing year.
Technical analysis: Bulls retain an upper hand in soybean futures with prices in a strong uptrend over the past month, though upside momentum has slowed slightly this week. March soybeans today fell as low as $13.72 1/2, just under the 10-day moving average around $13.75 1/4, before rebounding. A push above resistance is last week’s high at $14.15 may have bulls targeting the contract high of $14.45 1/2, reached June 7. Support is seen at the 20-day moving average of $13.43 1/2 and last week’s low of $13.42.
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: March SRW wheat rose 8 1/4 cents to $7.70 1/4. March HRW wheat rose 13 1/2 cents to $7.91 3/4. March spring wheat rose 14 cents to $9.28 1/4.
Fundamental analysis: Wheat futures climbed as traders evened positions ahead of USDA’s Winter Wheat seedings and Supply and Demand reports tomorrow. USDA is expected to estimate all U.S. winter wheat plantings at 34.255 million acres, up from 33.648 million in 2021 and the highest acreage since 2016. Selling interest in wheat markets was also limited by rallying crude oil, U.S. dollar index weakness and strength in U.S. stocks. The U.S. Plains are expected to remain dry the next 10 days, World Weather said today. A colder-than-normal temperature bias will return to the northern Plains and upper Midwest later this week and next.
Technical analysis: Winter wheat bulls and bears are on a level near-term technical playing field. SRW bulls' next upside objective is closing March futures above solid resistance at $8.00. Bears' next downside objective is closing prices below solid support at the October low of $7.25 3/4. First resistance is seen at $7.80, then at $7.90. First support is seen at today’s low of $7.58 ¼, then at this week’s low of $7.48.
HRW bulls' next upside objective is closing March futures above solid resistance at $8.30. Bears' next downside objective is closing prices below solid support at $7.50. First resistance is seen at $8.00, then at $8.10. First support is seen at today’s low of $7.75 ¾, then at $7.69.
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 rose 80 points to 116.02 cents per pound, near the middle of today’s range.
Fundamental analysis: Cotton futures were supported by upbeat market sentiment reflected in the U.S. stock market’s renewed strength. Federal Reserve Chairman Jerome Powell’s testimony before a Senate banking committee indicated optimism over U.S. economic prospects, and he did not sound any more hawkish than what the marketplace has heard from the Fed recently. Bullish outside markets for cotton included a sharp rise in crude oil prices to a two-month high above $81.00 a barrel. Declines in the U.S. dollar index also added support.
Traders are awaiting tomorrow’s USDA Crop Production and Supply and Demand reports. The agency is expected to slightly lower its estimate for 2021-22 U.S. cotton production to 18.24 million bales, down from 18.28 million in its December report. U.S. exports may be reduced to 15.39 million bales from 15.5 million. Cotton traders will also scrutinize USDA’s India supply and demand figures for indications on worldwide demand possibly depleting the country’s stockpiles.
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.
