Crops Analysis | November 23, 2021
Price action: December corn futures rose 3 3/4 cents to $5.80 1/2, the contract’s highest settlement since $5.89 on July 1. March corn, now the most-active contract, rose 4 cents to $5.88 1/4.
Fundamental analysis: Corn futures closed near a five-month high as the market climbed in late trade behind spillover support from wheat, which extended a rally to nine-year highs, and crude oil, which jumped over 2.0%. Broader concern over rising inflation continued to lift commodities, while corn futures remained supported by strong demand from domestic ethanol producers. The corn market otherwise had little fresh news with trading tapering off ahead of the Thanksgiving Day holiday Thursday.
The U.S. corn harvest is nearly complete. Late yesterday, USDA reported the U.S. harvest at 95% complete as of Nov. 21, up from 91% a week earlier and slightly under trade expectations for 96%. Growing conditions in South America remain largely favorable, though a drier pattern is expected to develop in some parts of Brazil over the weekend, according to World Weather Inc. Also today, consultant Dr. Michael Cordonnier kept his Brazilian corn crop estimate unchanged at 118 MMT with a neutral bias. For Argentina, Cordonnier kept his production estimates at 53 MMT for corn, with a neutral bias. USDA is also projecting a 118 MMT Brazil crop, with Argentina pegged at 54.5 MMT.
Technical analysis: Corn market bulls have the near-term advantage with prices in a five-week uptrend, but December corn has failed so far to make a sustained push above a longer-term downtrend line drawn from the May and June highs. The next upside price objective for bulls is to close December futures above solid resistance at $6.00. First resistance is seen at last week’s high at $5.89 1/2, then at the November high of $5.93 1/2. Downside objectives include $5.67 1/2, near an uptrend line drawn from the October and November lows, and last week’s low at $5.68.
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: Soybean futures settled slightly lower and near midrange on the day, with the January contract down 1 1/4 cents to $12.73. Soybean meal futures ended low-range, with January futures down $7.60 to $356.10 per ton. Soyoil futures finished high-range with the January contract up 73 points to 60.08 cents per pound, near a three-week high.
Fundamental analysis: Soybeans were pressured by selling in the meal market today, though strength in soyoil pulled futures off their lows into the close. Tomorrow likely bring lighter trade ahead of Thursday’s holiday. While markets are open for an abbreviated session on Friday, tomorrow will mark the final trading day of the week for some. While the expected lighter volume can lead to quiet trade, it also means it wouldn’t take as much to move the market.
South American weather remains generally favorable, though traders will be watching a drier pattern expected to develop in far southern Brazil and parts of northern Argentina. Forecasts signaling below-normal precipitation in these areas through January. As we reported in “First Thing Today,” due to the drier forecast, Crop Consultant Dr. Michael Cordonnier now has a neutral bias toward Brazil’s soybean crop, though he still projects it to be record-large and up 6 MMT (4.3%) from the 2020-21 record.
Technical analysis: January soybeans are consolidating after last week pushing above the downtrend drawn off the June and August highs. Bulls need a close above the Nov. 17 high at $12.89 1/4 to accelerate the uptrend from this month’s low. Falling back into the downtrend would point to a near-term test of support in the $12.00 area or possibly the Nov. 9 low at $11.81 1/4.
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 wheat rose 10 cents to $8.67 1/2 today, after posting a contract high at $8.68 1/4. Nearby December closed at a nine-year high. March HRW wheat rose 17 1/2 cents to $8.84, after hitting a contract at $8.85. March spring wheat futures rose 13 3/4 cents to $10.45 1/2.
Fundamental analysis: Wheat futures continue to be the strong upside leader in the grain futures, gaining further momentum after USDA’s weekly crop ratings late yesterday showed an unexpected deterioration in winter wheat acres. USDA said 44% of the winter wheat crop was in “good” or “excellent” condition as of Nov. 21, down from 46% the previous week. Analysts had expected the rating to hold at 46%. Winter wheat rated “poor” or “very poor” rose to 22% as of Nov. 21 from 20% last week.
When USDA’s weekly crop condition ratings are plugged into the weighted Pro Farmer Crop Condition Index (0 to 500-point scale, with 500 being perfect), the HRW crop declined 3.3 points to 329.6, while the SRW crop fell 9.4 points to 357.8.
Global supply concerns also lifted wheat prices. Recent heavy rains in Australia’s wheat-growing regions likely caused some output and quality reduction. The Australian grain harvest is 25% complete, with good quality of grain coming in so far. However, rain-damaged grain likely will emerge over the next few weeks, and there’s talk more of the Australian wheat crop will be rated as feed quality, which could send more milling-quality wheat business to the U.S. Still, Australia is on track to produce a record 37 MMT of wheat this season, according to IKON. Dry areas of the U.S. western HRW belt won’t get significant relief in the next week, weather forecasters said.
Technical analysis: Winter wheat bulls have a strong near-term advantage, with the market extending a 2 1/2-month uptrend on the daily bar charts. SRW bulls' next upside price objective is closing March futures above solid resistance at $9.00. Bears' next downside objective is closing prices below solid support at $7.75. First resistance is seen at today’s contract high of $8.65 3/4, then at $8.75. First support is seen at today’s low of $8.49 1/2, then at this week’s low of $8.36 3/4.
HRW bulls’ next upside price objective is closing March futures above solid resistance at $9.00. Bears' next downside objective is closing prices below solid technical support at $8.00. First resistance is seen at today’s contract high of $8.81 1/2, then at $8.90. First support is seen at today’s low of $8.62 1/4, then at $8.50.
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 rose 265 points to 120.36 cents per pound, while March futures fell 31 points to 115.66 cents.
Fundamental analysis: Profit taking in March cotton futures was featured among the shorter-term traders today, after prices hit a contract high last week. A strong U.S. dollar may be limiting buying interest in the most-active March cotton futures contract. The U.S. dollar index hit a 16-month high today. A sell off in the U.S. stock indexes early this week that has produced some technical damage may also be keeping the bulls on the sidelines in the futures market. No delivery notices were issued for December cotton futures today, on first-notice day.
Cotton traders are also closely watching the plunging value of the Turkish lira, which fell to a record low against the U.S. dollar today. Turkey is an important U.S. cotton importer – the country was the fourth-largest destination for U.S. cotton last year at 1.287 million bales. Over the past five years, Turkey has annual crop year average imports of 1.577 million bales per year from U.S.
Cotton traders await USDA’s next weekly export sales report Nov. 26, delayed a day for the Thanksgiving holiday. Recent weekly reports indicated high cotton prices may be hurting demand for U.S. cotton, including that from China. Late yesterday, USDA reported the U.S. cotton was 75% harvested as of Nov. 21, compared to 71% for the five-year average at that time.
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.
