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A 'dud' of a January report. Now what?

Getty/iStockphoto Grain bin
With little new fundamental news, the focus remains on historically tight stocks.

Traditionally one of the most volatile USDA reports of the year in terms of futures price volatility, the Jan. 12, 2022 USDA report was considered “a dud.” Information released was largely in line with pre-report expectations, which kept prices in check throughout the trading day.

Overall, U.S. ending stocks for corn, soybeans, and other grains and oilseeds remain historically tight, which should keep prices supported in early 2022. However, without a big dose of new demand, the production information released will likely keep grain futures range bound for weeks until final information is known about the size of South American production.

Let’s take a closer look at corn and soybeans after today’s report:

Corn

Regarding old crop, the USDA did reduce the 2020-21 ending stocks ever so slightly to 1.235 billion bushels down from 1.236 in December. For the 2021-22 crop year, the USDA raised 2021-22 harvested acres to 85.4, up from 85.1 million acres while leaving yield unchanged at 177 bushels per acre. The result was an increase in production to 15.115 billion bushels, up from 15.062 bil bu in December.

Demand was adjusted as well. Corn use for ethanol was increased to 5.325 billion bushels, up from 5.25. Offsetting this demand increase was a demand reduction in the export category. Exports are now pegged at 2.425 billion bushels, down from 2.5 bil bu.

The ending result is that U.S. ending stocks for 2021-22 are up slightly at 1.54 billion bushels, up from 1.493 in the December report. Ending stocks of 1.54 billion bushels will likely keep the corn price well supported, but likely is not enough of a reason for prices to blast above the $6.17-3/4 resistance level on the March 2022 charts.

Therefore, unless the weather in South America continues to be a furnace blast of heat with no rain, the path of least resistance for corn futures prices, for now, is likely sideways to slightly lower.

March 2022 corn has resistance at $6.17-3/4 with support at $5.88 (the 50 day moving average) and below there at $5.65 (the 100 day moving average).

Soybeans

Regarding old crop, the USDA slightly increased the 2020-21 ending stocks to 257 million bushels up from 256 in December. For the 2021-22 crop year, the USDA lowered 2021-22 harvested acres to 86.3, down from 86.4 million acres while increasing yield to 51.4 bushels per acre (up from 51.2). The result was an increase in production to 4.435 billion bushels, up from 4.425 bil bu in December.

There was no change to the demand categories on this report. The result was an increase in ending stocks, now pegged at 350 million bushels, up from 340 million bushels in December.

The USDA did acknowledge the challenging growing conditions in South America by reducing production for both Argentina and Brazil.

Similar to corn, the soybean news overall is supportive for the big picture, but not necessarily friendly enough to justify prices to rally higher than the recent March futures high of $14.15.

Unless the heat continues to scorch the Argentina crop, or production issues surface in Brazil, soybean futures may trade sideways to lower for the short term.

Looking at seasonal charts and seasonal chart patterns, there is a very strong 5-year price pattern, and 15-year price pattern that suggests the March soybean futures achieve a price peak around Jan. 19. Prices then have a strong tendency to slide lower until month end.

March soybeans have overhead resistance on daily charts at $14.15 with support at $13.75 and below there at $13.50.

Without fresh bullish news from the USDA on the recent report, trade will focus on South American weather and export demand in the coming weeks.

Reach Naomi Blohm: 800-334-9779, Twitter: @naomiblohm, and [email protected].

Disclaimer: The data contained herein is believed to be drawn from reliable sources but cannot be guaranteed. Individuals acting on this information are responsible for their own actions. Commodity trading may not be suitable for all recipients of this report. Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. No representation is being made that scenario planning, strategy or discipline will guarantee success or profits. Any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to Total Farm Marketing. Total Farm Marketing and TFM refer to Stewart-Peterson Group Inc., Stewart-Peterson Inc., and SP Risk Services LLC. Stewart-Peterson Group Inc. is registered with the Commodity Futures Trading Commission (CFTC) as an introducing broker and is a member of National Futures Association. SP Risk Services, LLC is an insurance agency and an equal opportunity provider. Stewart-Peterson Inc. is a publishing company. A customer may have relationships with all three companies. SP Risk Services LLC and Stewart-Peterson Inc. are wholly owned by Stewart-Peterson Group Inc. unless otherwise noted, services referenced are services of Stewart-Peterson Group Inc. Presented for solicitation.

The opinions of the author are not necessarily those of Farm Futures or Farm Progress. 

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