Crops Analysis | January 18, 2022
Price action: March corn futures rose 3 1/4 cents to $5.99 1/2, after falling as low as $5.88 1/4 earlier today.
Fundamental analysis: Corn futures erased early losses behind signs of stronger exports and spillover from a rally in wheat. Early today, USDA reported U.S. corn export inspections of 1.204 MMT during the week ended Jan. 13, up from 1.023 MMT the week prior and at the high end of trade expectations. Export strength was underscored by a report China imported 28.4 MMT of U.S. corn during 2021, a 152% increase over 2020. Corn fell overnight after weekend rains in South America brought some relief to dry fields.
Corn’s strength also reflected reports from the White House warning that Russia could invade Ukraine at any moment. Because both Russia and Ukraine have emerged as major wheat suppliers and Ukraine’s has increased corn production, an invasion could roil grain markets. Crude oil’s rally to seven-year highs also supported grain futures.
Technical analysis: March corn closed below 40-day moving average support near $5.92 1/2 late last week but moved back above that level today. Support at the 40-day moving is confirmed by last week’s lows at $5.85 1/4. A close below that level would have bears targeting the Nov. 30 low at $5.62 1/2, then the October low at $5.16 1/4. Bulls couldn’t force a close significantly above March futures’ 10- and 20-day moving averages near the psychologically important $6.00 level. However, a push above that point would seemingly open the door to a test of recent highs at $6.11 1/4 and $6.17 3/4.
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 8 1/2 cents to $13.61 1/4, the contract’s lowest settlement since $13.55 1/2 on Jan. 3. March soybean meal fell $15.50 to $390.10 per ton, the lowest close since Dec. 20, while March soybean oil rose 62 points to 59.08 cents per pound.
Fundamental analysis: Soybean futures ended at the lowest levels in over two weeks and soymeal plunged near one-month lows on expectations weekend rains will aid dryness-stressed crops in South America. Rainfall ranging from 0.16 to 1.34 inch reached much of Rio Grande do Sul, Brazil’s southern-most state over the previous three days, according to World Weather. The rain probably helped parched crops to some extent, but more will be needed after extended heat and dryness. Paraguay and far southern Brazil “will see little to no rain of significance and hot temperatures through Saturday,” World Weather said. “Crop stress will return as moisture from recent rain is lost to evaporation while areas that missed out on rain see further declines in yields.”
Crop Consultant Dr. Michael Cordonnier cut his Brazilian soybean crop estimate again this week, citing irregular rains in Parana and Rio Grande do Sul. Cordonnier lowered his Brazilian soybean estimate 1 MMT, to 134 MMT.
U.S. soybean processors crushed a record monthly volume of soybeans in December and soybean oil stocks swelled to the largest in 20 months, according to a National Oilseed Processors Association (NOPA) report today. NOPA members crushed 186.438 million bu. of soybeans last month, up 3.9% from November and up 1.8% from December 2020. It was the largest-ever monthly crush, topping the previous record of 185.245 million bushels set in October 2020.
USDA reported 1.72 MMT of soybeans inspected for export during the week ended Jan. 13, up from 985,445 MT the previous week and well-above expectations. Also today, USDA reported a sale of 239,486 MT of soybeans for delivery to Mexico during the 2021-22 marketing year. USDA also corrected a daily sale announcement Friday that should have reported 100,422 MT of soybeans for delivery to Mexico during 2021-22. USDA’s previous report incorrectly listed corn.
Technical analysis: Soybean technicals have eroded over the past week after March futures fell under the 10- and 20-day moving averages at $13.86 and $13.64 1/4, respectively. Today marked the March contract’s first close under the 20-day moving average since Dec. 14. Continued weakness sets the market up for a possible test of the Dec. 30 low at $13.34 1/2. Other key chart levels include the 40- and 50-day moving averages at $13.14 3/4 and $13.01, respectively.
March soybean futures fell as low as $13.49 3/4, the contract’s lowest intraday price since $13.42 on Jan. 3.
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 27 1/2 cents to $7.69, near the session high and the highest close in a week. March HRW wheat gained 27 3/4 cents to $7.72 3/4. March spring wheat futures rose 28 3/4 cents to $9.07.
Fundamental analysis: Wheat futures climbed sharply on short covering and bargain-buying following three straight down days. European wheat futures also rose amid signs of stepped-up global demand. Concern Russia may be close to invading Ukraine contributed to strength in wheat, with Reuters reporting the White House believes an invasion may occur soon. In 2014, when Russia annexed Crimea, wheat futures rallied around $1.50.
Earlier today, USDA reported 369,188 MMT of U.S. wheat inspected for export during the week ended Jan. 13, up from 234,356 MT the previous week and at the high end of expectations. China sold all 501,283 MT of state-owned wheat reserves put up for auction last week, at higher prices than the previous auction. Turkey purchased at least 175,000 MT of milling wheat from unspecified origins. Japan sought 72,351 MT of U.S. and Canadian milling wheat in its weekly tender. This week’s
Technical analysis: Winter wheat bulls and bears are on a level near-term technical playing field, thought prices are still in a seven-week-old downtrend and bulls need to muster followthrough buying the next few trading sessions. 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 $7.75 and then at $7.85. First support is seen at $7.60 and then at $7.50.
HRW 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 $7.25. First resistance is seen at $7.75 and then at $7.85. First support is seen at $7.60 and then at $7.50.
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 138 points to 121.08 cents per pound, the highest close for the nearby contract in 10 years. March also posted a contract high at 121.37 cents.
Fundamental analysis: Cotton futures surged despite a rally in the U.S. dollar index and a sell-off in the U.S. stock market, though a crude oil rally to seven-year highs provided background support. Also, ideas inflation will get worse before it gets better are also likely driving some stockpiling of cotton by end-users and buying interest in futures from the speculators.
USDA’s lower than expected U.S. production numbers last week continued to underpin cotton futures, and global export demand remains robust overall. China lowered key interest rates today, a possible harbinger of better demand. While U.S. cotton sales have improved recently, the shipment pace likely needs to pick up soon in order to keep futures prices at elevated levels. USDA weekly export sales report early Friday morning will be closely scrutinized.
Technical analysis: Cotton bulls have a strong near-term technical advantage with prices in a six-week uptrend. The next upside objective for cotton bulls is to close March futures above solid resistance at 125.00 cents. The next downside price objective for cotton bears is to close prices below solid support at 115.00 cents. First resistance is seen at today’s contract high of 121.37 cents, then at 122.50 cents. First support is seen at today’s low of 119.05 cents, then at 117.50 cents.
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.
