Charts of the Day – January 28, 2022
Afternoon Market Commentary – January 28, 2022
by: Chris Betz
|Old Crop (futures month, change, settle price)||CH2||10’6||636’0||SF2||21’6||1470’0||WH2||9’2||786’2|
|New Crop (futures month, change, settle price)||CZ2||2’6||569’4||SX2||13’4||1351’4||WN2||8’4||782’0|
Technical Thoughts – January 27, 2022
By: Ken Lake
March corn is just plodding along seemingly on a mission to test the old contract high, 640. Moving average indicators have moved into a more bullish stance. Continue to target 640 to advance sales.
The weekly corn chart below will give you a hint as to where values will refocus if we get a daily close over 640. On such a close upside potential expands roughly $1.30 per bushel for spot corn. Failure in the 650 range would be damaging. Bullish crosses on the weekly chart are circled below.
March soybeans have traded to within ¼ cent of out 1445 target as of this writing. Like corn, a close above this number, the old contract high, expands upside potential for this contract. Failure here would be damaging.
Upside potential for spot soybeans on a daily close above 1445 are displayed on the weekly chart below. I will redraw the daily chart and offer specific targets after we get that close but for now this will give you an idea as to how the upside area expands.
March wheat reversed its recent gains on the daily chart but stabilized around its 50-day moving average, 792 and displayed support at 783. The contract is starting to display a pension for a more sideways move at this point.
The weekly chart displays how wheat actually is in a strong trend upward and somewhat oversold which holds hope for that trend to continue. Note how wheat has traded around its 10 and 20-week moving average since last July. I will continue to recommend wheat sales if we get extensions higher like we witnessed in the last two weeks but the longer-term trend can’t be ignored. Crop conditions in the Southwest will be the key to values going forward. Watch closely for those condition reports that will be sprinkled along the way as the crop comes out of dormancy.
Fertilizer Update – January 17, 2022
By: John Ezinga
This month we will go over the nitrogen price action at NOLA and couple grain charts I think you will find useful to put things into perspective. Also, I have included the latest breakeven charts with current price economics.
You can also find this article I wrote over the weekend about how monetary and fiscal policy might be repeating history with a few quirks (some major ones) and how it will effect farmers going forward. It is a bit long and deep but I wanted to get thoughts down on the big picture and then I will try to go into more detail on subtopics later. I bombed English in school so please bear with the grammatical dysfunction.
Last week I saw a signal from the annual game of chicken between the corn grower and nitrogen producer.
The nitrogen producers BLINKED!
The NOLA urea market crashed nearly 200 dollars from the high posted in early December as buyers dried up. NOLA urea went from 820 to 620 in the nearby market. I believe we have 3 seasons of nitrogen purchasing in the market today. 1/3 of the business is normally done October-December, 1/3 of business is normally done January-March and 1/3 is done at time of use.
We are seeing a reduction in forward buying of 2/3 of the normal October-March business. There are two primary reasons for the delay in purchasing nitrogen. 1.) Prices are off the charts so a portion of farmers have basically told their input salesman to go “pack sand” and therefore taking the risk of buying in season. 2.) There is a portion of farmers who truly will adjust acres and are using that indecision as a reason for postponing the purchase.
If you take the delayed purchasing of urea in US market and a lack luster world demand you find REAL softness in the current market. Fertilizer traders on the river have been bulled up for the past three months stating that world urea prices are 100 dollars over US values and we will have to come up to encourage imports. I respectfully disagree, I think US prices are cheaper and will remain cheaper for three reasons. 1.) we have increased North American capacity in nearly a straight line up for the past 7-10 years now with enough capacity to meet demand at home and beyond. 2.)We have cheap gas so there is a serious incentive for North American producers to compete for the local market business regardless of the tariff situation. 3.)Imports will flow to the US as we are the deepest and most liquid market. Sure you are getting paid with inflated US dollars at a discount to world values but at least you are getting paid and we can absorb big volumes in the river system with high liquidity….I call it the SAMS CLUB effect.
With the delayed purchasing decision you could see prices spike as planting begins and tons are bid up. HAVE A PLAN!!
As you can see below, corn prices have stayed up and urea prices have corrected lower causing the relationship to move in your favor. Will we get back to the yellow? I doubt it for pre-plant but expect we will by the time side dress season hits.
As you know from previous updates the 28% market will lag the urea market as the concentration of producers allow them more price control. However, urea at today’s levels will make some growers think twice about liquid($1.07/#) vs dry($0.79/#) for a difference of $56 bucks an acre at 200# actual……..ouch!!.
28% should drop to match urea in season as no N producer wants to miss a pound of business. FYI…the cost to produce a ton of urea today is sub $180 ton, the incentive is clear!!
Below the 28 ratio chart is a bit “sticky” at the higher prices. There has been decent sales volume on the liquid to date and the producers are content with current pricing. Also remember that liquid UAN has the tariff protection as an added security layer for North American producers. I believe congress is taking some heat from farm groups to drop the tariff protection as inflated food prices are not in anyone’s best interest. Ag policy is a big ship…takes a while to correct course. I still expect a price correction in mid spring to the side dress timeframe….maybe sooner if farmers and retailers stop buying forward units.
Not much of anything is happening in this market. Winter fill prices were set in the 750-775 range. I don’t think we will see any price changes till after spring.
There are imports still coming inland but the supply chain was nearly empty so it will take a while for prices to come under pressure.
Map price was the first to receive tariff protection and pricing has been stuck at the highs since around August. Current price range is 850-950.
I think we will see a reduction of phosphate rates applied to the 2022 crop, which will surprise phosphate producers and will be the catalyst for lower prices next summer/fall.
I wanted to add a section on Pell Gyp. We handle a product call Sul4R-Plus. It is 17%S and 21%C. With current high prices of inputs a lot of guys are talking about cutting rates on P and K and “mine” some banked minerals that were built up when prices were more reasonable. If you decide to do that I think you should make sure your PH is perfect and don’t skimp on Sulfur!! With AMS prices at its highest point in years Sul4R-plus is an excellent alternative to AMS and is priced competitively with some clear agronomic benefits.
Ken Lake adds commentary to the charts below. I think when you look at the input ratio charts above and then look at the corn price charts below it should really reinforce the fact that as you purchase fertilizer you should seriously consider locking in the corn price on a portion of production to cover the expense. If you buy inputs without selling outputs you stand the risk of the spread working aggressively against you.
Current economics of various yields given 2022 forward contracting opportunity.
Everyone has a different structure but this can help you establish marketing programs for your farm. If you want the full excel file where you can adjust too your own numbers shoot me a message and I will forward it on.
We appreciate your past business and look forward to earning it every year.
A lot of talk in our industry about supply issues. I agree there will be some problems here and there but for the most part I expect inputs to be available. The price may not be desirable so keep optionality in your plans this spring.