Ahead of the Open | June 8, 2021
Corn: 3 to 10 cents higher.
Soybeans: 8 to 12 cents higher.
Wheat: 6 to 12 cents higher.
Grain and soybean futures are expected to extend a weather-driven rally amid dry Midwest conditions and weaker-than-expected USDA crop ratings. In its weekly crop progress report released yesterday afternoon, USDA rated 72% of the U.S. corn crop “good” to “excellent,” down four percentage points from the previous week. Analysts expected a drop of only about two percentage points.
USDA’s initial soybean condition ratings had 67% of the crop “good” to “excellent,” three points below what traders expected and five points lower than last year at this point. USDA rated 6% of the crop “poor” to “very poor.”
The latest weather outlooks convey little rainfall relief for dry fields across much of the Corn Belt this week. Some weather models reduced projected rainfall from southern Iowa through far eastern Missouri Friday and Saturday, according to World Weather Inc. Those areas, previously expected to receive 0.75 inch to as much as 3 inches of rain, now are seen receiving none to 0.35 inch. However, rain prospects for next week increased for Ohio, Indiana and eastern Missouri through eastern Oklahoma.
Recent rains across some of central and southern Brazil were too late to help a portion of the safrinha corn crop that was hurt by prolonged drought and areas of Parana suffered frost damage, according to South American Consultant Dr. Michael Cordonnier, who cut his Brazilian corn crop estimate by 3 MMT to 92 MMT. That still puts him on the top side of many private crop estimates, now in the 88 MMT to 91 MMT range.
Key production areas in Australia have received plentiful rains the past couple months and the extended outlook is favorable. The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) raised its official forecast for the 2021-22 Aussie wheat crop by 2.8 MMT to 27.8 MMT. That would still be down from the record crop of 33.3 MMT in 2020-21.
Argentine customs workers at ports will carry out a planned seven-hour strike today in an attempt to increase Covid vaccinations. The short strike won’t have a major impact on Argentine exports, but customs workers are needed to do inspections and sign paperwork on shipments, so there will be a temporary slowdown. The SOEA oilseeds workers union says it could strike on Wednesday if the number of vaccinations to workers at the country’s ports don’t increase.
This year’s U.S. crops are off to an “average” type of start, Cordonnier wrote, noting that the USDA showed 11 states posting a decline in corn conditions. When USDA's weekly condition ratings are plugged into the weighted Pro Farmer Crop Condition Index (CCI; 0 to 500-point scale, with 500 representing perfect), the corn crop dropped 6.2 points to 381.8 points. The CCI rating was still 4.7 points above the five-year average for the first week of June.
Corn futures’ initial rally yesterday faded by the close, though part of an overnight gap in December corn futures remains open and is near-term support is seen from $5.97 1/2 to $5.92 3/4. Additional support is the 5-day moving average at $5.82 and the 10-day average at $5.58 3/4. Near-term resistance extends from yesterday’s high at $6.18 1/4 to the contract high at $6.38.
Soybean plantings reached 90% nationally as of June 6, according to USDA, 11 points ahead of the five-year average, and soybean emergence rose 14 points to 76%, 17 points ahead of the five-year average. But like corn, conditions have slipped. USDA’s initial soybean crop ratings equated to a CCI reading of 366.8, which is 7.4 points below last year and 5.5 points under the five-year average for this date.
On soybean charts, bullish traders will eye the November contract high of $14.80 reached yesterday. July futures yesterday rallied to $16.23 1/2, a three-week high, but slumped as low as $15.58 1/2. For bullish traders, near-term upside technical objectives include closing July futures above solid resistance at $16.00. Support starts at last week’s low around $15.37 1/4.
Ratings for spring wheat continue to sag. When USDA’s weekly crop condition ratings are plugged into our weighted CCI, the spring wheat crop plunged 14.7 points to just 309.4 points. That’s 64.7 points below the five-year average for the first week of June. Some areas of the Northern Plains may receive “meaningful” rains Tuesday through Friday that’s expected to provide at least temporary soil moisture improvement, World Weather said today.
In SRW wheat, bulls have the slight overall near-term technical advantage, with the May low of $6.39 1/2 potentially a near-term bottom. SRW bulls' next upside price objective is closing July prices above solid technical resistance at $7.25. The bears' next downside breakout objective is closing prices below solid technical support at $6.39 1/2. First resistance is seen at today’s high of $7.04 and then at $7.15. First support is seen at $6.75 and then at $6.69 1/4.
Wholesale beef prices fell 38 cents for Choice boxes and $2.56 for Select yesterday after declining last Friday, USDA reports showed. Two days of declines after the major price surge are not a major warning sign, but it could indicate the bulk of near-term restaurant and retailer buying is completed for now. Still, downside may be limited by the discount futures hold to the cash cattle market. Last week’s average cash cattle price was $119.92, a gain of 28 cents. On cash markets, active trade isn’t likely before the middle to later portion of the week.
Futures are expected to remain supported by soaring wholesale pork prices. The average national direct cash hog price firmed $1.01 on Monday, while the pork cutout value rose $1.44. The cutout value is nearing the all-time high of $137.56 reached in July 2014. Despite the $4 to $7-plus premiums summer-month hog futures hold to the cash index, the downside will be limited to corrective selling until cash fundamentals show signs of a seasonal top in prices.