Crops Analysis | November 22, 2021
Price action: Corn futures finished mostly 6 to 7 1/2 cents higher and in the upper end of today’s range. December corn closed 6 cents higher at $5.76 3/4.
Fundamental analysis: Corn futures were supported by the surge in the wheat market today. That allowed corn to work higher despite the U.S. dollar index strengthening to a 16-month high. The fact the market is looking past the rising dollar and the uninspiring export story is a sign traders are willing to deal with that situation later rather than sooner.
USDA’s weekly corn export inspections totaled just 24.3 million bu., which was lower than the normal seasonal tally for this time of year. Inspections are running 18.2% behind year-ago. USDA projects exports will decline 9.2% from 2020-21.
Demand support for corn is coming from the ethanol sector. Basis into ethanol plants remains firm as they are trying to source supplies to maintain their recent strong production pace. Given strong margins, plants would be producing more ethanol if they could source more bushels.
Technical analysis: December corn futures are holding in a short-term consolidation range below this month’s high at $5.86. An upside push would have bulls targeting the August high at $5.94 1/4 and then the psychological $6.00 level. Failure to move to a new high soon could trigger a pullback to support at the last correction low at $5.47 3/4.
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 soybeans rose 11 cents to $12.74 1/4, near the session high. January soybean meal fell 90 cents to $363.70, near the session low. January soyoil rose 129 points to 59.35 cents.
Fundamental analysis: Soybean futures traders started the holiday-shortened trading week on a bullish note, mainly due to spillover support from surging wheat futures markets that hit multi-year highs. Selling interest in soymeal futures is likely to remain limited in the near term on concerns regarding a shortage of the livestock feed additive lysine.
USDA reported 1.684 MMT (61.9 million bu.) of soybeans inspected for export during the week ended Nov. 18, down from 2.362 MMT (86.8 million bu.) the previous week. Export inspections for U.S. soybeans are now on a downward-trending seasonal slope until May.
Weather conditions in South American soybean regions remain mostly favorable for crop development and that is limiting stronger buying interest in soybean futures at present.
USDA’s weekly crop progress report is expected to show soybean harvest at 96% complete as of yesterday, compared to 92% of the crop harvested a week earlier.
Technical analysis: Soybean bears have the overall near-term technical advantage. However, a five-month downtrend on the daily chart has been negated, suggesting a market bottom is in place. The next near-term upside technical objective for bulls is closing January futures above solid resistance at $13.00. The next downside objective for bears would be closing January below solid support at $12.00. First resistance is seen at the November high of $12.89 1/4, then at 13.00. First support is seen at today’s low of $12.60, then at $12.50.
Soymeal bulls have the overall near-term technical advantage, with prices trending up for five weeks. The next upside price objective for bulls is closing in March futures above solid resistance at the July high of $385.50. The next downside price objective for bears is closing March below solid support at $350.00. First resistance comes in at today’s high of $367.50, then at the November high of $371.90. First support is seen at $357.60, then at last week’s low of $350.60.
Soyoil bears have a slight near-term technical advantage, with prices in a four-week downtrend on the daily bar chart. The next upside price objective for bulls is closing March futures above solid technical resistance at 61.00 cents. Bears' next downside objective is closing prices below solid support at the September low of 54.30 cents. First resistance is at last week’s high of 59.96 cents, then at 61.00 cents. First support is seen at today’s low of 57.75 cents, then at the November low of 57.06 cents.
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.
Price action: March SRW futures surged 23 1/4 cents to $8.57 1/2, after posting a contract high at $8.59 1/2. March HRW futures jumped 28 cents to $8.66 1/2, after reaching a contract high at $8.70 1/4. December contracts for HRW and SRW each closed at nine-year highs for nearby contracts. March spring wheat rose 17 1/4 cents to $10.31 3/4.
Fundamental analysis: Winter wheat futures extended last week’s rally amid a shrinking global supply outlook, with heavy rains in Australia stirring concern over potential crop damage. Australian weather “continues to be the greatest concern with frequent rain falling across the production areas stalling the harvest and raising grain quality concerns,” World Weather Inc. said today. “A close watch on weather in that nation is warranted into December. If crop quality is seriously harmed, there will be a further reduction in high quality wheat following similar cuts in Canada, the U.S. and Russia.”
In the U.S., persistent U.S. Plains dryness is stressing the HRW crop ahead of winter dormancy. Little precipitation is expected this week, and “soil moisture will likely continue to be very short from the Texas Panhandle through eastern Colorado and western Kansas,” World Weather said. USDA’s weekly Crop Progress report later today likely will reflect the effects of dryness in several HRW states. The winter wheat crop is expected to be rated 46% “good” or “excellent,” based on a Reuters survey of analysts, unchanged from the previous week.
Russian wheat prices rose for the fifth consecutive week amid strong demand from importers, Reuters reported. Russian wheat with 12.5% protein loading from Black Sea ports for supply in the first half of December was $334 per MT free on board (FOB) at the end of last week, up $6 from the previous week, the IKAR consultancy said.
Also today, USDA reported 177,799 MT (6.5 million bu.) of wheat inspected for export during the week ended Nov. 18, down from 390,708 MT (14.4 million bu.) the previous week and short of trade expectations ranging from 200,000 to 500,000 MT.
Technical analysis: Winter wheat retains a strong bullish posture, with March HRW and SRW contracts in steep uptrends since mid-September. SRW bulls' next upside price objective would be closing March futures above solid resistance at $8.75. Support is seen at last week’s low of $8.19 1/2 and at $8.10. In March HRW futures, chart levels to watch include last week’s low at $8.18 3/4 and the 10-day moving average at $8.32, along with the psychologically important $9.00 level.
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.
Price action: December cotton futures fell 151 points to 117.71 cents per pound, while March cotton fell 46 points to 115.97 cents. The December contract begins delivery tomorrow.
Fundamental analysis: Cotton futures were pressured by continued strength in the U.S. dollar, which reached its strong point against the euro since July 2012. The U.S. dollar index also hit its highest mark since July 2020, as the nomination of Federal Reserve Chair Jerome Powell for a second four-year term by President Joe Biden suggests a less-dovish policy outlook. Dollar strength makes dollar-denominated commodities more expensive for foreign buyers.
Higher cotton prices appear to be crimping demand for U.S. cotton. USDA’s weekly export sales report last week showed weaker buying from China and a general decline in demand for the U.S. fiber. Export demand for U.S. cotton must remain strong to keep prices at elevated levels. Traders await USDA’s weekly Crop Progress report later today. A week ago, USDA reported 65% of the U.S. cotton crop was harvested as of Nov. 14, one percentage point above the average for that date over the past five years.
Technical analysis: Cotton market bulls retain a near-term advantage, with the market in a two-month uptrend, but upward momentum has stalled as prices moved sideways in recent sessions. Support around last week’s low at 113.61 cents in March futures and the November low at 111.45 cents could triggered stepped-up selling and signal a near-term high has been established. Other chart levels to watch include the 20-day moving average at 113.86 cents and the contract high at 118.50 cents.
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.
