Crops Analysis | January 20, 2022
Price action: Old-crop corn futures finished fractionally mixed today, with the March contract up 1/2 cent to $6.11. New-crop December futures dropped 2 1/2 cents to $5.62 1/4.
Fundamental analysis: Today’ corn futures performance was disappointing for market bulls considering gains of 30-plus cents in soybeans. Bulls failed to muster any sustained followthrough buying interest from yesterday’s gains, despite the strong pull from the soy complex, though that did help limit seller interest.
Much of the fundamental focus in the corn market remains on South American weather, though traders have been much more responsive in the soybean market, which is typical. Recent rains improved soil moisture in Argentina, but not crop condition ratings. Meanwhile, the extreme heat that moved out of Argentina has pushed into southern Brazil. That’s hurting first crop corn prospects in that area, though three-quarters of Brazil’s total production will come from the safrinha crop that will be planted after soybeans are harvested. Extended weather forecasts suggest conditions may improve for safrinha corn that’s primarily produced in central and south-central Brazil.
Due to Monday’s federal holiday for Martin Luther King Jr. Day, export sales data for the week ended Jan. 13 will be released tomorrow. Pre-report estimates appear to be relatively safe at 500,000 MT to 1 MMT for 2021-22, which would be up from 457,675 MT the previous week.
Technical analysis: March corn futures posted an inside day up and remain near the top of the recent sideways-to-higher price range. Key near-term resistance is at the December high at $6.17 3/4. Bulls must clear that level to build new upside momentum. Near-term support is layered from $6.00 1/2 to $5.91, with the short- and intermediate-term moving averages all residing in the range. More critical support is the Jan. 3 low at $5.84 3/4, which held on two tests last week.
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 soared 34 1/2 cents to $14.25 3/4, the contract’s highest closing price since $14.33 on June 10, while November soybeans rose 15 3/4 cents to $13.20 1/4 after posting a contract high at $13.25. March soybean meal rose $2.50 to $400.80. March soybean oil jumped 212 points to 62.88 cents, a three-month closing high.
Fundamental analysis: Soybean futures extended yesterday’s rally and closed at a seven-month high on technical strength, concern over dryness in South America and export optimism. Soyoil futures surged in the wake of a record close in Malaysian palm oil prices. Hot, dry conditions persisted from northern Argentina through Paraguay and neighboring areas of southern Brazil, with highs of 100 to 108 degrees Fahrenheit from northwestern Rio Grande do Sul through all of Paraguay. Little rain of significance is expected in Paraguay and far southern Brazil through Saturday, World Weather Inc. said. “Crop stress will increase as moisture from recent rain is lost to evaporation while areas that missed out on rain see further declines in yields,” the forecaster said.
China’s soybean imports in December from the U.S. almost doubled compared to November as more cargoes arrived after delays due to Hurricane Ida. China imported 6.09 MMT U.S. soybeans in December, up 68% from 3.63 MMT in November and up 4.0% from December 2020, according to customs data. USDA tomorrow is expected to report weekly net U.S. soybean export sales ranging from 600,000 MT to 1.2 MMT for the 2021-22 marketing year and net sales of 100,000 to 300,000 MT for 2022-23.
Technical analysis: The soybean bulls have a solid near-term technical advantage and gained more power today, with prices in a 10-week uptrend. The next near-term upside objective for bulls is closing March futures above solid resistance at the contract high of $14.45 1/2. The next downside price objective for bears is closing prices below solid support at this week’s low of $13.49 3/4. First resistance is seen at today’s high of $14.29 1/2, then at $13.49 3/4. First support is seen at $14.00, then at today’s low of $13.87 1/2.
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 fell 6 1/4 cents to $7.90 1/4, after earlier rising to a three-week high at $8.02 3/4. March HRW wheat fell 3 1/2 cents to $7.96 1/2. March spring wheat rose 5 cents to $9.44 3/4, the highest close since $9.48 1/4 Jan. 5.
Fundamental analysis: Winter wheat futures saw a corrective, profit-taking setback following sharp gains the previous two days. Prices continued to find support from concerns over a potential Russia invasion of Ukraine and implications for global wheat trade, as both countries are major wheat exporters. Sub-zero temperatures in the U.S. Plains, including Nebraska and northern Kansas, are not expected to cause significant damage to the winter wheat crop, forecasters said. Temperatures “fell low enough to raise a concern over crop conditions, especially since there was no snow on the ground,” World Weather said today. However, any damage “should have been light because of previous bouts of cool weather should have had the crop sufficiently hardened.”
Persistent Plains dryness remains a longer-term concern, but for the short-term is having little impact on futures. The amount of winter wheat considered in drought conditions dropped one percentage point to 68%, according to this week’s U.S. Drought Monitor. USDA said 27% of the winter wheat was considered in moderate drought, 22% severe drought, 17% extreme drought, and 2% of the winter wheat area was considered in exceptional drought. In the previous week, USDA reported 29% of the winter area is in moderate drought, 22% in severe drought, 16% in extreme drought and 2% in exceptional drought.
Tomorrow’s weekly USDA export sales report is expected to show net U.S. wheat sales ranging from 175,000 to 400,000 MT for the week ended Jan. 13.
Technical analysis: Winter wheat technicals strengthened as prices rallied the past two days, suggesting the market established near-term lows during the first week of January. March SRW futures closed back below the 50-day moving average, currently at $7.95, after briefly pushing above a downtrend line drawn from the contract high of $8.74 3/4 posted Nov. 24. Upside objectives for SRW bulls include closing March futures above solid resistance at $8.00. Further resistance is seen at today’s high of $8.02 3/4. Bears' downside objectives include closing March below solid support at the October low of $7.25 3/4. Support is seen at the 20-day and 100-day moving averages at $7.74 and $7.70 1/4, respectively.
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 fell 108 points to 122.87 cents per pound and closed nearer the session low.
Fundamental analysis: Cotton futures fell for the first session in four amid corrective pressure and profit taking following the rally to 10-year highs yesterday. A two-week slide in the U.S. stock market dampened buyers’ enthusiasm in the cotton market, mitigated to some extent by crude oil’s rally to seven-year highs.
Traders await tomorrow’s weekly USDA export sales report amid concern over U.S. shipments of cotton already on the books to export customers. However, many believe all the cotton sold will be moved through the pipeline. In last week’s report, USDA listed net U.S. cotton sales for the week ended Jan. 6 at 401,000 running bales (RB) for 2021-22, up 85% from the average for the previous four weeks. Exports of 167,600 RB were up 60% from the previous week and up 27% from the prior four-week average.
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.
