Crops Analysis | November 12, 2021

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Corn ­

Price action: December corn futures rose 7 3/4 cents to $5.77 1/4, up 4.2% from $5.53 at the end of last week and near a four-month closing high of $5.79 on Nov. 1. Nearby futures have posted gains in three of the past four weeks.

5-day outlook: Corn futures shook off a higher-than-expected USDA crop estimate earlier this week with assistance from stronger soybeans and the wheat market’s rally to multi-year highs. This week’s technically strong close and stepped-up buying from speculative funds sets the market up for further gains next week, with upside targets including December futures’ 2 1/2-month intraday high of $5.86 on Nov. 2. But U.S. ethanol production fell sharply during the week ended Nov. 5, and another weekly decline could dampen buying interest in corn. USDA’s next Crop Progress report Nov. 15 will likely show the corn harvest near completion. The crop was 84% harvested as of Nov. 7.

30-day outlook: Harvest pressure is winding down and market focus is shifting toward exports and South American weather, which has been mostly favorable for early corn and soybean development. Earlier this week, Brazilian crop estimating agency Conab raised its estimate for the country’s corn crop by 399,000 MT from last month to a record 116.7 MMT. Exports continue to lag last year’s pace, which may cap any further rallies. During the week ended Nov. 4, net U.S. corn export sales totaled 1.067 MMT, down 13% from the previous week and down 4% from the average for the previous four weeks, USDA reported today.

90-day outlook: Export and ethanol demand will be key price drivers until USDA’s final Crop Production report Jan. 12. Without a pick-up in exports, corn futures may struggle to stay at elevated levels. Accumulated U.S. corn exports so far in 2021-22 are down 13% compared to the same period in 2020-21, slightly narrowing in recent weeks, though total commitments (exports plus outstanding sales) are off just 4.2%. The 2022 U.S. planting outlook will increasingly come into play. USDA numbers released earlier this week projected plantings falling to 92.0 million acres next year from 93.3 million this year.

What to do: Get current with advised 2021-crop sales.

Hedgers: You should be 50% sold in the cash market on 2021-crop production. You should also have 10% of expected 2022-crop production forward-sold for harvest delivery next year.

Cash-only marketers: You should be 50% sold on 2021-crop production. You should also have 10% of expected 2022-crop production forward-sold for harvest delivery next year.

 

Soybeans

Price action: January soybean futures climbed 22 3/4 cents to $12.44 1/4, up 38 3/4 cents for the week. December soymeal surged $17.60 to $362.10, up $29.40 for the week. December soyoil fell 17 points to 58.97 cents per pound, up 19 points for the week.  

5-day outlook: The soy complex rally proved surprisingly strong after Nov. 9 USDA reports indicated forthcoming supplies will likely prove somewhat smaller than expected. The rise also occurred against a backdrop of a potential record Brazilian crop next year. January soybeans seemed to break out of the downtrend in place since summer, but bulls will probably require more supportive news, particularly on the export front, before they’re likely to sustain the advance beyond the short run. Thus, the industry will be watching for daily and weekly export sales announcements in the days ahead.

30-day outlook: The soybean and grain harvests are winding down, so the industry’s focus will shift heavily toward the demand outlook during late fall. Traders will be looking for daily and weekly export sales announcements, although the latter aren’t likely to come quickly in the wake of the recent price rally. Prospects for the early-2022 Brazilian harvest will also be watched with considerable interest, especially if La Niña conditions in the Central Pacific cause excessive dryness to dominate the southern Brazil-northern Argentina region. Another focus of attention will be the value of the U.S. dollar. The greenback rallied strongly this week, as the latest inflation figures sparked ideas the Federal Reserve may hike interest rates sooner than expected to get inflation under control. A rising dollar could greatly curb U.S. soybean exports since it raises the cost of American beans to foreign customers.

90-day outlook: The pace of U.S. and Brazilian soybean sales and exports will be closely watched through winter 2021-22. Unfortunately, huge Brazilian supplies have a habit of shortening and narrowing the window during which U.S. beans can dominate the global market. And, as mentioned above, a rising dollar, especially again the Brazilian real, can also hurt prospects for U.S. sales. The size of the Brazilian harvest will obviously play a role in this relationship, as will prospects for spring 2022 U.S. bean plantings. Fertilizer costs could also affect next year’s planted acreage, since soaring nitrogen costs could cause a significant shift of acres away from corn and into soybeans.

What to do: Get current with advised sales and hedge advice.

Hedgers: You should have 60% of 2021-crop sold in the cash market. You also have hedges covering 15% of 2021-crop production in January futures at $12.02 1/4.

Cash-only marketers: You should be 50% priced on 2021-crop production.

 

Wheat

Price action: December soft red winter wheat futures closed up 4 1/2 cents at $8.17, up 50 1/2 cents for the week. December HRW futures gained 5 cents to $8.33, up 54 1/4 cents for the week. December spring wheat fell 3 1/2 cents to $10.50, up 40 1/2 cents for the week.

5-day outlook: Winter wheat futures extended a rally to multi-year highs to close the week, including technically bullish weekly high closes, setting the table for follow-through speculative buying interest next week. However, U.S. wheat export sales remain tepid. USDA reported net weekly wheat sales of 285,900 MT, down 29% both from the previous week and from the prior four-week average. U.S. wheat sales must improve in the coming weeks to support the elevated futures prices. A surging U.S. dollar index recently has not helped the U.S. wheat markets’ competitiveness on the world markets. Spring wheat futures failed to set a new high this week, likely due to USDA’s 4.4% cut to projected 2021-22 U.S. HRS exports and a 12% increase in ending stocks.

30-day outlook: The U.S. hard red winter and hard red spring wheat crops are heading into the winter months in less-than-ideal to downright poor conditions. Little moisture relief is forecast for HRW areas of the U.S. Plains over the next week. If the drier scenarios continue through most of the winter, selling interest will be limited in the U.S. wheat futures markets. Meantime, USDA’s 2022 U.S. acreage and export forecasts lean bearish for the SRW market.

90-day outlook: The prospect of smaller wheat exports from Russia pushed European wheat futures sharply higher recently. Russia’s sliding export tax on wheat shipments will rise to $77.10 per metric ton for the week of Nov. 17-23, up 10.3% from the current rate, the country’s ag ministry said. The wheat export tax has surged 174% since the beginning of June, when Russia’s government launched its formula-based duty.

Inflation concerns have become more paramount this week, what with U.S. consumer prices rising at the fastest pace in almost 30 years. If inflationary pressures continue to build, which is likely, such would likely support continued buying interest in the grain markets, including wheat. Rising inflation invites speculative traders to the long side of physical commodities, and also prompts commercial end-users to want to have more supplies on hand to beat further price rises.

What to do: Make sure you are current with advised sales. Spring wheat producers should adjust sales levels based on expected production levels.

Hedgers: You should be 70% priced in the cash market on 2021-crop. You should also have 20% of expected 2022-crop production forward-priced for harvest delivery next year.

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 next year.

 

Cotton

Price action: December cotton futures fell 85 points to 117.69 cents, up 82 points for the week.

5-day outlook: The cotton market traded sideways this week, a typical “pause” phase in during a strong price uptrend. However, buying interest next week may be squelched by uninspiring weekly USDA export sales for U.S. cotton this week. USDA today reported net U.S. cotton sales of 128,000 running bales (RB) for 2021-22, down 8% from the previous week and down 51% from the prior four-week average. Exports of 87,900 RB were down 38% from the previous week and down 16% from the prior four-week average.

30-day outlook: Cotton futures prices remain supported in part by inflation worries. Earlier this week, the Labor Department reported U.S. consumer prices in October posted the highest year-over-year increase in 31 years. The October U.S. producer price index was also higher than expected. Reports out of Asia indicate hoarding of cotton may be occurring as a way to hedge against rising consumer and producer prices, especially in China.

90-day outlook: The U.S. dollar index this week surged to a 15-month high, which makes U.S. cotton generally more expensive to purchase in non-U.S. currency on the world markets. Continued appreciation of the greenback in the coming months could work to erode export demand for the U.S. fiber. However, global equities that are mostly in bull markets, including the U.S. stock indexes hitting new record highs this week, continue to suggest demand for U.S. cotton will remain strong.

What to do: Get current with advised 2021- and 2022-crop sales and the buyback.

Hedgers: You should be 100% priced in the cash market on 2021-crop production, with 15% re-owned in long March cotton futures at 111.34 cents.  You should also be 30% forward-priced on expected 2022-crop production for harvest delivery next year.

Cash-only marketers: You should be 85% priced on 2021-crop production. You should also be 30% forward-priced on expected 2022-crop production for harvest delivery next year.

 

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