Crops Analysis | January 14, 2022
Price action: March corn futures rose 8 3/4 cents to $5.96 1/4, down 10 1/2 cents for the week. The contract earlier matched a low for the week at $5.85 1/4.
5-day outlook: Corn futures bounced back from earlier weakness to end near today’s high, boosted by corrective buying and bargain-hunting following Thursday’s declines. Futures direction next week will partly hinge on South America weather and on soybeans, which fell over 40 cents this week even after USDA’s updated estimates for Argentine and Brazilian crop production were lower than expected. The corn market’s technical posture eroded over the past two weeks and a March futures push under the January low at $5.84 3/4 could trigger fund liquidation and possible test of mid-December lows around $5.82.
30-day outlook: Continued heat and dryness in South America and additional cuts to Argentina and Brazil crop estimates could buoy corn futures in coming weeks, but the U.S. market also needs to see export improvement to remain at elevated levels, and recent result have disappointed. Net U.S. corn sales for the week ended Jan. 6 totaled 457,700 MT, down 59% from the average for the previous four weeks. Total export commitments (outstanding sales plus exports) are running 8.6% under year-ago. Also this week, USDA lowered its forecast for 2021-22 corn exports by 25 million bu., to 2.5 billion bushels.
90-day outlook: Strong demand from domestic ethanol producers, if it continues, should help underpin corn prices over the winter, and continued strength in crude oil may also add support. Persistent increases in input prices could add support as well, since those may limit spring corn plantings. The spring U.S. planting season will increasingly come into focus, as well as second-crop safrinha plantings in Brazil. Traders will closely monitor March and April weather.
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 fell 7 1/2 cents to 13.69 3/4, down 40 1/2 cents on the week and the contract’s lowest settlement since $13.55 1/2 on Jan. 3. March soymeal fell $3.30 to $405.60 per ton, down $19.40 on the week, and March soyoil fell 20 points to 58.46 cents per pound, down 32 points on the week.
5-day outlook: Soybean futures posted a brief rally yesterday after USDA lowered its South American crop forecasts more than expected but came under pressure today from improved rainfall prospects next week in southern Brazil, where conditions have been particularly dry. Weekend weather in South America and the extent of expected rain next week will be one key to market direction. Showers and thunderstorms will increase in far southern Brazil Jan. 16-18 and southern, central, and eastern Rio Grande do Sul will receive 0.75 to 1.75 inch of rain, with as much as 1.50 to 2.50 inches in a few localities, World Weather said today.
30-day outlook: South American weather during the late growing season and early harvest results will be closely watched. Several private analysts cut their forecasts for South America’s crops during the past two weeks, and additional reductions may help boost soybean futures, though price action this week suggested smaller South American production is largely factored into prices. Stronger export demand is required to maintain soybeans at elevated levels, and recent business has been somewhat lackluster. USDA this week reported net U.S. soybean sales of 735,600 MT for the week ended Jan. 6, up 92% from the previous week but down 1% from the four-week average. Total export commitments (exports plus outstanding sales) of 42.4 MMT so far in 2021-22 are down 23% from the same period in 2020-21.
90-day outlook: Brazil’s soybean shipments should get rolling in February, and even with a shorter crop, the country may still dominate the global export market through spring. Trade focus will eventually shift toward the spring U.S. planting season and widespread expectations for higher soybean acres at the expense of corn, reflecting in part soaring prices for nitrogen fertilizer for the latter crop. Both new-crop corn and soybean futures remain elevated, but December corn, with a gain of 2.2% since the end of last year, has outpaced November soybeans, which is up 1.8%. December corn also ended this week near a contract high of $5.65 set in November.
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 futures fell 5 1/4 cents to $7.41 1/2, down 17 cents on the week and the lowest close since Oct. 14. March HRW futures tumbled 14 3/4 cents to $7.45, down 30 cents on the week and also the lowest closing price since Oct. 14. March spring wheat sank 17 1/4 cents to $8.78 1/4, down 45 cents on the week.
5-day outlook: Wheat futures extended declines in the wake of bearish USDA winter wheat seedings estimates. Spring wheat led declines, likely due to the U.S. grain’s uncompetitive standing on international markets. The logistics of shipping North American wheat to numerous customers so much closer to primary sources in the Black Sea region and EU simply work poorly for expensive U.S. grain. News that Russia slightly reduced its tariff rate on exported wheat didn’t help the U.S. market. Traders will continue watching export data closely in the days ahead.
30-day outlook: Wheat export news will be one key to futures direction, and any improvements could help stabilize prices. Look for the winter wheat outlook to come into focus in early February, when various states will update their ratings of wheat crop conditions. Dryness continues to grip the Plains, leading to concern over the potential for high acreage abandonment. Northern Plains conditions potentially affecting spring wheat plantings may also be a price factor.
90-day outlook: Although export market developments will remain a major factor in the wheat sector through winter and spring, the market’s focus will shift more and more toward spring-summer harvest prospects for the domestic SRW and HRW crops. Weekly Crop Progress reports will become of increasing interest. Shifts in corn and soybean futures, as well as the broader markets such as those for crude oil, equities and the value of the dollar could also affect prices.
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 closed the day Friday up 286 points at 119.70 cents, hitting a new contract high and a fresh two-month high, basis nearby futures. For the week, March cotton rose 458 points.
5-day outlook: This week’s strong gains in cotton futures set the table for solid follow-through buying interest after traders return from a three-day holiday weekend. Markets are closed Monday for the Martin Luther King holiday. While cotton futures prices are certainly into “thin air” from a historical perspective, traders are wondering who is going to have the nerve to step in on the short side of such a strong bull market run that got even stronger this week.
30-day outlook: Prices late this week rallied after USDA on Wednesday lowered the 2021 U.S. cotton crop by a larger-than-expected 660,000 bales. An upbeat weekly USDA export sales report showing net sales of 401,000 running bales (RB) for 2021-22 were up noticeably from the previous week and up 85% from the average for the previous four weeks. Lower-than-expected U.S. production and rising demand for the U.S. fiber paint a bullish scenario that is likely going to remain in place for at least the next few weeks.
90-day outlook: Cotton futures traders in the coming weeks and months will continue to monitor the key outside markets on a daily basis. Recently, higher crude oil prices and a weakening U.S. dollar index have been bullish influences on the cotton market, as has a resilient U.S. stock market. The stock market and crude oil prices are at very lofty levels and many are wondering when those markets will start to break down. When such occurs, whether it’s next week, next month or later this year, it’s very likely the cotton futures bulls will be running for cover—also likely spelling the end of the second-largest bull market run in cotton futures trading history.
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.
