Crops Analysis | November 24, 2021
Price action: December corn futures fell 3/4 cent to $5.79 3/4, after rising earlier in the session to $5.89, the highest intraday price since $5.94 1/4 on Aug. 12. Most-active March futures fell 2 3/4 cents to $5.85 1/2.
U.S. markets and government offices are closed tomorrow for Thanksgiving. On Friday, ag markets are open for an abbreviated trading schedule from 8:30 a.m. CT to 12:05 for grains and 12:15 for livestock.
5-day outlook: Corn futures declined in light activity as pre-holiday liquidation pressured grain and soy markets. December corn pushed above a longer-term downtrend line drawn from the May and June highs but failed to close above that level, suggesting stiff resistance and selling interest in the $5.90 to $6.00 region. Exports that continue to lag last year’s pace have limited price upside. USDA’s next weekly export sales report, delayed till Friday due to the Thanksgiving holiday, is expected to show corn sales ranging from 750,000 MT to 1.4 MMT for the week ended Nov. 18. Early today, USDA reported a daily sale of 100,000 MT corn for delivery to Mexico during the 2021-22 marketing year. A week ago, USDA reported net U.S. corn sales for the week ended Nov. 11 totaling 904,600 MT, down 15% from the previous week and down 19% from the average for the previous four weeks.
30-day outlook: Robust demand from U.S. ethanol producers, if sustained, may buoy corn futures through the rest of 2021. Early today, the Energy Information Administration reported weekly ethanol production at an average of 1.079 million barrels per day (bpd) for the week ended Nov. 19, up 19,000 barrels, or 1.8%, from the previous week. Ethanol stocks increased 83,000 barrels to 20.16 million barrels. Average ethanol production over the previous four weeks averaged 1.078 bpd, down slightly from a four-year high earlier in November. With the U.S. harvest nearly complete, trade focus is shifting to exports and South America weather, which has been mostly favorable for early crop development.
90-day outlook: U.S. corn exports, which have shown signs of picking up recently, likely need sustained improvement for futures to hold near and/or push above $6.00. So far in the 2021-22 marketing year, 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. Longer-term, the prospect of high fertilizer prices may prompt U.S. farmers to scale back corn plantings in 2022 and may support deferred futures. Global shortages have already driven fertilizer costs to record highs, which may lead farmers to delay purchases and raise risks for a scramble to secure supplies next spring, Reuters reported. The Texas Arctic Blast in February and Hurricane Ida in August disrupted U.S. fertilizer production. 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 fell 6 1/2 cents to $12.55 1/2. March soybean meal futures fell $4.60 to $357.60 per ton and March soybean oil gained 60 points to 60.26 cents.
5-day outlook: Soybeans saw selling pressure due in part to losses in the wheat and corn futures markets. In the coming days, soybeans will likely continue to look to wheat and corn for direction. The soymeal futures market this week has slumped by over $12 from last Friday’s close. The fading meal market may be sending an ominous signal to the soybean market bulls. Friday’s weekly USDA export sales report (delayed one day by the Thanksgiving holiday) is expected to show U.S. soybean sales of 900,000 to 1.8 million metric tons in the 2021-22 marketing year.
30-day outlook: Growing conditions in South America’s soybean regions remain mostly favorable. If that continues to be the case in the coming weeks, speculation will only increase that Brazil will harvest a record soybean crop in 2022. That’s another bearish fundamental presently hanging over the soybean market and will likely continue to do so in the coming weeks.
90-day outlook: USDA has lowered its U.S. ag export forecast for fiscal year 2022, citing weaker soybean demand from China and lower soybean prices. USDA said U.S. soybean exports are expected to decline by $3.9 billion, to $28.4 billion, while soybean meal exports are forecast down $800 million, to $4.9 billion. Slack Chinese demand for U.S. soybeans in the coming months would likely keep a lid on any significant rallies in soybean futures.
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: SRW wheat futures posted double-digit losses on the day. December SRW wheat dropped 19 1/4 cents to $8.36 3/4 and posted a key bearish reversal after earlier marking a new contract high. HRW futures finished mostly 5 to 7 cents lower, with the December contract down 5 1/2 cents to $8.73 1/4. HRS futures finished fractionally to around a penny lower, with the December contract down 1 1/2 cents to $10.36 3/4.
5-day outlook: Traders took profits out of the long side of the market ahead of Thanksgiving, especially in SRW contracts. That makes price action over the next week key in determining if the market has posted a top or the pre-holiday break was just a correction in the bull market. Given that funds have actively extended their net long wheat positions recently, there’s certainly some risk that an extended price pullback could develop.
30-day outlook: Support for the latest leg up in prices has come from heavy late-season rains in Australia, which are hurting crop quality. The country will have plenty of wheat this year, as the crop is expected to be the second largest ever, but there will be far more feed quality supplies and less milling quality than normal. Traders remain concerned with tight global milling-quality wheat supplies, which could keep the market supported, though rallies led by supply concerns are typically short-lived.
90-day outlook: The U.S. winter wheat crop will enter dormancy in subpar shape, with dryness in the Southern Plains the greatest concern, along with persistent drought in the Pacific Northwest. While the extended forecast offers some hope for relief this winter in white winter wheat country of the PNW, the Southern Plains are likely to see above-normal temps and below-normal precipitation. If that forecast verifies, the HRW crop will need timely rains next spring.
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: Cotton futures edged up despite another significant rise in the value of the U.S. dollar. Expiring December futures posted another contract-high close at 120.38 cents per pound, up 2 points. Most-active March futures rose 12 points to 115.78.
5-day outlook: The cotton industry is looking to USDA’s weekly export sales report for an update on foreign demand. Export numbers have fallen substantially since futures surged to fresh highs in early November, indicating a demand drop-off. Another poor weekly result would likely increase overhead resistance faced by bulls, whereas strong sales and/or shipments figures might open the door to a fresh bullish surge. Next week’s market action will probably be heavily influenced by Friday’s result, since many traders and industry insiders take Black Friday off.
30-day outlook: Aside from the weekly USDA export sales, traders will be looking forward to the December 9 USDA Crop Production and Supply and Demand reports, since, unlike most other crops, USDA analysts may make adjustments to U.S. cotton yield and production totals. Given the mixed changes they’ve made on recent reports, the size and direction of any further shifts they will make in December is very much undetermined. Outside markets could exert increasing influence over cotton prices, especially if one of those is the U.S. dollar. The recent dollar surge seemingly reflects growing industry expectations for U.S. interest rate increases next year as the Fed tries to stuff the inflation genie back into the bottle. Trends in the grains, particularly soybeans, and crude oil could also influence cotton. Obviously, the big wildcard is the strength of Chinese demand.
90-day outlook: Weekly USDA export sales reports will be watched closely through winter, since the strength of Chinese buying will very likely play a major role in price direction. The U.S. ban on Chinese the fiber and fabric made from cotton produced in that country’s Xinjiang province will likely continue boosting their buying of U.S. fiber. Some trader attention will shift to the results of a cotton industry survey concerning spring 2022 plantings, in mid- to late-January. Otherwise, developments in the equity, energy and grain markets could play roles in cotton price developments as spring draws nigh. Significant weather news could also affect prices.
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.
