Crops Analysis | January 7, 2021

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Corn ­

Price action: Corn futures rebounded from overnight losses, with the March contract rising 3 cents to $6.06 3/4, up 13 1/2 cents for the week.

5-day outlook: Corn futures rose along with soybeans as drought curbs crop prospects in southern Brazil and northern Argentina. USDA’s announcement of a 176,784 MT sale of corn to Mexico also added support. The market likely will consolidate early next week ahead of USDA’s Crop Production, quarterly Grain Stocks and Supply and Demand reports. Any surprises could spark significant futures reactions. The industry will then shift focus to weekly USDA export sales the following day. Any big changes in the South American weather situation could also affect prices.

30-day outlook: Corn seems likely to continue “bidding for acres” against soybeans during the coming weeks, especially if the South American harvest outlook doesn’t improve. In more normal circumstances, corn would seemingly enjoy an advantage on that front, but greatly elevated costs of inputs, particularly for fertilizer and herbicides, seemingly favor soybeans at this juncture. The USDA Jan. 12 reports could also set the stage for subsequent trading, especially if it reveals any surprising aspects in the supply and demand forces in play during the past quarter. The relative prices of new crop corn and soybean futures will become particularly important during February, since the averages for that month set the target prices for crop insurance on the forthcoming crop.

90-day outlook: Although corn demand and usage will continue to exert great influence over prices as winter passes, the industry’s attention will increasingly shift to spring U.S. plantings, as well as second-crop safrinha plantings in Brazil. Late first-quarter and second-quarter weather will be closely watched as the crops are planted and grow. Weekly Crop Progress reports from the USDA will become the subject of increasing attention.

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: Soybeans rallied more than 20 cents in most contracts, with March up 23 cents to $14.10 1/4, the contract’s highest closing price since June 11. For the week, March beans shot 71 cents higher. March meal surged $14 to $425.00 and rose $25.90 for the week. March soyoil dropped 12 points to 58.78 cents but firmed 225 points for the week.

5-day outlook: Major reductions to Brazilian soybean crop estimates got traders’ attention this week. But much of those production losses and price response is now likely factored into the market. Argentina may move to the forefront for traders’ attention as hot and dry conditions are expected to increase crop stress in the country over the next couple weeks. USDA’s barrage of crop reports on Jan. 12 could also provide some market-moving data for the soybean market. Given the recent price surge and elevated prices, make sure your old- and new-crop sales are at tolerable risk levels in case of a surprise — bullish or bearish.

30-day outlook: Brazilian soybean exports will ramp up by February. But the more Brazil’s production is clipped, the fewer supplies it will have to export. Brazil will dominate the global export market through spring, but there could be an opportunity for the U.S. to regain some of the export business the country “stole” during the first half of 2021-22.

90-day outlook: As spring draws closer, more attention will shift toward the U.S. planting season. U.S. soybean acres will increase this year, but price action into spring could determine how much. While soybean prices have surged recently, the new-crop soybean:corn price ratio at 2.37 still favors corn. We don’t anticipate there will be major acreage shifts in the central Corn Belt, but the fringes of the region and areas outside the Corn Belt could be an active battle for acres between corn, soybeans, cotton and regional minor crops.

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.

 

Wheat

Price action: March SRW futures rose 12 1/2 cents to $7.58 1/2 after falling near a three-month low at $7.35 1/2 earlier in the session but was still down 12 1/4 cents for the week. March HRW futures rose 6 1/2 cents to $7.75, still down 26 1/2 cents for the week. March spring wheat slipped 1/2 cent to $9.23 1/4, the lowest close since Oct. 5, and was down 58 3/4 cents for the week.

5-day outlook: Wheat futures recovered from early losses as soybeans lifted other grain markets, likely prompting funds to cover some shorts ahead of the weekend. Continued strength in corn and soybeans may help prop up wheat to some extent. But wheat markets have taken severe technical damage in recent weeks and will likely remain under pressure from poor exports and the lack of competitiveness of U.S. supplies on global markets. USDA’s Winter Wheat Seedings Report Jan. 12 is expected to show all U.S. winter wheat plantings at 34.3 million acres, up from 33.6 million in 2021, based on a Bloomberg survey.

30-day outlook: Weak exports likely will hang over wheat futures through at least winter. USDA yesterday reported weekly export sales at a marketing-year low 48,600 MT and exports totaled only 210,900 MT. Total wheat export commitments (exports plus outstanding sales) are 23% behind year-ago and almost 19% behind the five-year average. U.S. wheat must get cheaper to entice greater foreign buying.

90-day outlook: HRW areas of the U.S. Plains continue to be gripped by drought, as the latest weekly Drought Monitor update showed. Individual state crop conditions ratings earlier this week showed major deterioration of the HRW wheat crop during December. The “good” to “excellent” ratings for HRW wheat fell 29 points in Kansas (to 33%), 28 points in Oklahoma (20%), 13 points in Colorado (25%) and 25 points in Nebraska (39%) during December. That isn’t a major market factor at present, but that could change as spring nears and the crop greens up.

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.

 

Cotton

Price action: March cotton futures rose 40 points to 115.12 cents per pound, up 252 points, or 2.2%, for the week and the fifth consecutive weekly gain.

5-day outlook: Today’s rebound from yesterday’s declines illustrated the cotton market’s underlying strength even in the face of disappointing weekly USDA export sales. Focus next week will to a large extent shift to USDA’s next Crop Production and Supply and Demand reports Jan. 12. Traders will watch for any revisions to USDA’s estimate to the 2021 U.S. cotton crop, along with exports and ending stocks projections. USDA is expected to slightly lower its estimate for the 2021-22 U.S. cotton crop to 18.24 million bales, down from 18.28 million in a December forecast, based on a Bloomberg survey of analysts. U.S. exports may be reduced to 15.39 million bales from 15.5 million.

30-day outlook: Exports and the U.S. economy will be key price drivers in the month ahead. U.S. cotton shipments to export customers have lagged far behind seasonal norms, as illustrated by analysts’ expectations for a reduced export outlook. Old-crop cotton export sales appear sufficient to reach USDA’s 2021-22 forecast, but shipments are lagging. USDA yesterday reported net U.S. cotton sales of 143,200 running bales (RB) for the week ended Dec. 30, down 48% from the average for the previous four weeks. Exports of 104,900 RB were down 22% from the prior four-week average. Shipments likely need to improve for cotton futures to remain near multi-year highs.

90-day outlook: U.S. job growth was disappointing in December, but the unemployment rate fell to 3.9%, near a 50-year low reached in February 2020. Barring a severe turn for the worse with Covid, the U.S. economy appears poised for more growth in early 2022, which should support commodity prices. In the cotton market, longer-term focus will shift to this year’s acreage outlook. We expect U.S. cotton plantings to increase, though it may face a battle with soybeans and corn for acres in the South.

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.

 

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