Crops Analysis | November 19, 2021

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Corn ­

Price action: December corn futures fell 2 1/4 cents to $5.70 3/4 a bushel, down 1.1% from $5.77 1/4 at the end of last week and the lowest closing price since Nov. 11. The lead contract is still up from $5.68 1/4 at the end of October.

5-day outlook: Futures closed at the lowest price in over a week amid corrective selling following a climb to two-week highs earlier in the week. The U.S. harvest is largely complete and traders are looking to exports and other markets for near-term direction. Strong demand from domestic ethanol producers and signs of a pick-up in exports should support futures next week, but the market will need to see fresh overseas business to remain at elevated prices or extend a five-week rally. USDA’s weekly Crop Progress report Nov. 22 will likely show the corn harvest close to finished. As of Nov. 14, the crop was 91% harvested. U.S. markets are closed Nov.25 for the Thanksgiving Day holiday.

30-day outlook: SRW wheat futures hit a nine-year high earlier this week and soybean futures reached a seven-week high, and further strength in those markets may spill over into corn. Additionally, traders will closely follow South America’s weather, which so far has been mostly favorable for early-season corn and soybean crop development in Argentina and Brazil. USDA already projects Brazil’s 2022 harvest at a record 118 MMT, up 27% from this year’s drought-damaged crop. Traders will check USDA’s next monthly Supply and Demand report for changes to South American crop estimates.

90-day outlook: Futures likely will require a sustained acceleration in exports to hold near or move above the $6.00 level. During the week ended Nov. 11, net U.S. corn export sales totaling 904,600 MT were down 15% from the previous week and down 19% from the average for the previous four weeks. However, exports, at 1.168 MMT were up 46% from the four-week average and a marketing-year high. Total corn export commitments (exports plus outstanding sales) for 2021-22 are running 6% under year-ago levels but are 47% ahead of the five-year average. USDA releases its final Crop Production report on Jan. 12.

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 slipped 2 cents to $12.63 1/4 per bushel, up from $12.44 1/4 at the end of last week. December soymeal climbed $1.40 to $371.80 per ton. December soyoil futures tumbled 101 points to 58.16 cents per pound.

5-day outlook: Concerns about a lysine shortage continued to boost soymeal futures , which supported soybeans while undercutting soyoil as crush spreads adjusted. The recent soybean price surge broke the downtrend in place since late spring. The surprising downward revision to USDA’s 2021 national yield and production totals triggered the late advance, which was also given a big boost by Nov. 17 news of a sizeable bean sale to China. If Chinese buyers are convinced the market has bottomed, they might return as aggressive buyers. Although the lysine shortage doesn’t seem to be as severe as originally thought, any development that forces the hog industry to boost meal use could give meal and bean prices a significant boost.

30-day outlook: Export demand and meal use will influence price direction in the month ahead. Chinese buying, as is often the case, could prove pivotal to the short-term outlook. Early winter is a prime window for sales to China, since Brazil’s harvest won’t start for some time. Crude oil futures fell to seven-week lows, which may burden soyoil and possibly soybeans as well. Conversely, palm oil prices set a fresh record today before setting back. This implies considerable background support. Current U.S. dollar strength is handicapping bullish ag market efforts.

90-day outlook: The looming South American harvest will become an increasingly large obstacle to U.S. soybean strength in the new year, curbing the flow of U.S. beans to overseas customers, especially China. Traders will also increasingly focus on spring 2022 U.S. soybean plantings, since greatly elevated fertilizer prices tend to boost domestic soybean seedings. Developments in the livestock industry, particularly prices signaling herd expansion or contraction could also influence beans through the meal market, while energy markets and trends in global vegetable oils will affect soyoil. A sustained U.S. dollar rally and/or shifting inflationary pressures have the potential to move the soy complex as well.

What to do: Get current with advised sales.

Hedgers: You should be 75% sold on 2021-crop in the cash market. You should also have 10% of expected 2022-crop sold for harvest delivery next year.

Cash-only marketers: You should be 60% sold on 2021-crop. You should also have 10% of expected 2022-crop sold for harvest delivery next year.

 

Wheat

Price action: March soft red winter wheat futures on Friday rose 3 1/2 cents to $8.34 1/4, up 5 3/4 cents on the week. March HRW wheat rose 8 cents to $8.38 1/2, up 3 cents this week. March spring wheat futures fell 5 1/4 cents to $10.14 1/2, down 32 1/4 cents for the week.

5-day outlook: It was a good week for the winter wheat futures market bulls, as SRW and HRW hit new contract and multi-year highs and ended higher on the week. Look for more follow-through buying interest to surface early next week, based upon bullish technicals and an overall bullish global supply and demand balance sheet. Large speculators are close to even in SRW futures and options  and have room to build long positions, which could see SRW futures assume upside leadership.

30-day outlook: Traders will focus on weather conditions in major wheat-producing countries, and the main trouble spots are in the U.S. The Northern Plains remain dry and the wheat crop there is not well established. HRW areas of the Southern Plains have elevated odds of above-normal temperatures and below-normal precipitation from December through February, according to the National Weather Service’s latest 90-day outlook. Meantime, World Weather Inc. today said winter grains have been turning dormant or semi-dormant as seasonal cooling occurs in the Northern Hemisphere. Much of the western Commonwealth of Independent States and a large portion of Europe are cold enough for winter crops to be dormant. Other areas in Europe generally see favorable planting and establishment conditions. In China, winter crop prospects are generally also favorable.

90-day outlook: This week there were signs of improved U.S. wheat exports. USDA reported net weekly U.S. wheat sales at 399,100 MMT, up 40% from the previous week and up 21% from the average for the previous four weeks. U.S. hard red spring wheat exports lag last year’s levels by 25%. Better U.S. sales and shipments numbers need to continue in the coming months for U.S. wheat futures prices to remain elevated. An appreciating U.S. dollar on the foreign exchange market is one factor that has been keeping U.S. wheat export sales lukewarm.

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 rose 163 points to 119.22 cents. March cotton rose 129 points to 116.43 cents, up 135 points on the week.

5-day outlook: Cotton futures finished the week strong, despite sharp declines in Nymex crude oil and further strength in the U.S. dollar index, which neared a 16-month high. That sets the table for some followthrough buying interest in cotton futures early next week.

30-day outlook: Record highs in U.S. stock indexes this week may have U.S. consumers in upbeat holiday-shopping moods, which is bullish for cotton. If the U.S. and global stock markets can remain at lofty levels the cotton market should be able to continue to trade near present lofty price levels. However, rising Covid-19 cases in Asia, Europe and even parts of the U.S. are a worrisome element that could crimp businesses and consumer demand, if businesses are forced to lock down again. Austria and parts of Germany and China have been forced to lock down their businesses just recently.

90-day outlook: Soaring inflation has prompted cotton end-users to stock up more to beat expected future price increases. That appears to be keeping a floor under cotton prices. However, higher cotton prices have started to impact export demand for U.S. cotton. USDA’s weekly export sales report yesterday showed weaker buying from China and a general decline in demand for the U.S. fiber. U.S. sales of cotton abroad will have to be robust to keep prices at such elevated levels.

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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