Crops Analysis | January 6, 2022
Price action: March corn futures rose 1 1/2 cents to $6.03 3/4, after falling as low as $5.96 earlier in the session. The lead contract is up from $5.93 1/4 at the end of last week.
The increasing likelihood of smaller South American crops overshadowed weaker than expected export numbers. Early today, USDA reported net U.S. corn sales of 256,100 MT for the week ended Dec. 30, down 80% from the previous week and down 81% from the average for the previous four weeks. Sales were expected to range between 500,000 MT and 1.2 MMT.
Technical analysis: Market bulls hold a near-term advantage even with March futures testing trendline support around today’s lows. Prices remain in an uptrend stretching nearly four months. Upside objectives for bulls include closing March futures above resistance at the December high of $6.17 3/4. For bears, downside objectives include closing March futures below support at this week’s low of $5.84 3/4. Other chart levels to watch include the 40-day moving average at $5.89 1/4.
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 soybeans fell 7 1/2 cents to $13.87 1/4. March soybean meal fell $2.40 to $411.00 per ton. March soybean oil fell 54 points to 58.90 cents per pound.
Fundamental analysis: Profit-taking pressure hit the soy complex in the wake of recent gains and disappointing weekly USDA export numbers also weighed on the market. Net U.S. soybean sales were a marketing-year low at 382,700 MT, down 27% from the previous week and down 63% from the average for the previous four weeks, USDA reported. Also today, USDA reported a sale of 102,000 MT of U.S. soybeans for delivery to Mexico during the 2021-22 marketing year.
Expanding concern over dry weather in South America continues to underpin prices. Brazil-based consultancy AgRural lowered its estimate for the country’s soybean by 11.3 MMT, to 133.4 MMT, citing heat and drought in southern Brazil. Brazil’s soybean yield is expected to be the lowest since 2015-16. Brazil’s Rio Grande do Sul is expected to harvest 15.5 MMT of soybeans this summer, 24% less than initially expected, the state’s Federation of Agricultural Cooperatives said. This week’s rain helped the crop somewhat, but losses are still likely. Parana Agriculture Department also said 7.9 MMT of its soybean crop will not be harvested, reducing its production projection to 13 MMT.
Technical analysis: Soybean futures bulls hold a solid near-term technical advantage, with prices in a seven-week 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 and then at $14.15. First support is seen at today’s low of $13.70 and then at $13.55 1/2.
Soymeal bulls also have a solid near-term advantage, with prices in a 2 1/2-month uptrend. The next upside objective for bulls is closing March futures above solid resistance at $430.00. The next downside objective for bears is closing prices below solid support at $390.00. First resistance comes in at today’s high of $413.50, then at the contract high of $416.50. First support is seen at today’s low of $405.40, then at this week's low of $401.20.
Soyoil bulls hold a near-term advantage. The next upside objective is closing March prices 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 this week’s high of 59.68 cents, then at 60.00 cents. First support is seen at yesterday’s low of 58.20 cents, then at 57.50 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 posted sharp losses but finished well off session lows. March SRW futures dropped 14 3/4 cents to $7.46 and March HRW wheat fell 18 1/2 cents to $7.68 1/2. Spring wheat futures finished near session lows, with the March contract down 24 1/2 cents to $9.23 3/4.
Fundamental analysis: Wheat futures proved again today the market will struggle on days when corn and soybeans aren’t pulling it higher. While corn firmed into the close and soybeans rallied well off their session lows to relatively mild losses, that was only enough to pare the sharp losses in wheat. The upside in wheat is almost solely tied to the corn and soybean markets.
Fundamental pressure on wheat continued to come from paltry export demand. Weekly export sales were a marketing-year low 48,600 MT and exports totaled only 210,900 MT. Total wheat export commitments (exports plus outstanding sales) are 23.4% behind year-ago and 18.5% behind the five-year average. With U.S. prices uncompetitive on the global market, the clear message to traders is that prices need to get cheaper to improve export demand.
Drought remains a problem for the U.S. HRW crop, the latest weekly Drought Monitor update showed. But it’s difficult to entice buyer interest on crop concerns during winter. That could change once the crop greens up next spring, but for now, it’s not a major market factor.
Technical analysis: Bears have the strong upper hand and are gaining technical momentum. March SRW wheat closed below the December low at $7.51 on the daily chart and violated the key $7.50 mark on the continuation chart. Next support bulls must try to defend is the 200-day moving average at $7.30 3/4. Old support at $7.51 is now initial resistance, followed by the 5-day average at $7.61.
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 156 points to 114.72 cents and nearer the session low.
Fundamental analysis: Cotton futures fell under profit-taking pressure following recent gains that lifted prices back near last year’s highs. Pressure also stemmed from greater risk aversion in the general marketplace following hawkish comments from Federal Reserve officials during the central bank’s recent policy-setting meeting.
Weekly export sales were disappointing for the cotton bulls. USDA reported net U.S. cotton sales of 143,200 running bales (RB) for 2021-22, down 26% from the previous week and down 48% from the prior four-week average. Increases were primarily for China (47,000 RB) and Pakistan (20,800 RB). Net sales of 44,000 RB for 2022-23 were primarily for Pakistan (40,500 RB).
Exports of 104,900 RB were down 35% from the previous week and down 22% from the prior four-week average. The destinations were primarily to China (38,300 RB) and Vietnam (15,900 RB). The holiday season may have crimped cotton exports and sales during the latest reporting week.
Technical analysis: Cotton futures bulls still have the solid overall near-term technical advantage. Prices are in a four-week-old uptrend on the daily bar chart. The next upside price objective for the cotton bulls is to produce a close in March futures above solid technical resistance at the November high of 118.50 cents. The next downside price objective for the cotton bears is to close prices below solid technical support at 110.00 cents. First resistance is seen at this week’s high of 117.68 cents and then at 118.50 cents. First support is seen at 114.00 cents and then at this week’s low of 112.76 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.
