Crops Analysis | August 13, 2021
Price action: December corn futures fell 1/4 cent to $5.73 a bushel, the highest closing price since July 2 and up 16 1/2 cents on the week.
5-day outlook: The corn bulls had a good week as prices Thursday hit a nearly six-week high and scored a technically bullish upside “breakout” from a sideways trading range on the daily bar chart, following bullish USDA date released at midday Thursday. Look for some follow-through speculative buying interest early next week, given the now significantly improved near-term technical posture of the corn futures market.
One of the biggest grain market events of the summer occurs for corn and soybeans next week: The annual Pro Farmer Midwest Crop Tour. Throughout the week we will provide members daily updates on what the crop scouts are seeing from the fields across the Corn Belt, with the final results of the tour being released Friday afternoon.
30-day outlook: As the critical growing period for the corn market is well behind and the month of August progresses, don’t be surprised to see corn become a follower of soybeans and wheat. At present, the wheat futures market is on fire and may well lead the grain markets in daily trading action for the next few weeks.
90-day outlook: With a likely still-bountiful U.S. corn crop beginning to be gathered in the coming weeks and the supply situation becoming clearer, focus of corn traders will shift more to global demand. Bulls are a bit concerned that USDA Thursday forecast a 1.3% reduction in estimated 2021-22 corn use, which raises questions regarding sufficient demand to sustain corn futures prices at present elevated levels. China’s recent hefty purchases of U.S. soybeans does give the corn market bulls some comfort, reckoning that growing global economies also means growing global demand for animal feeds.
What to do: Make sure you are current with old- and new-crop sales advice.
Hedgers: You should be 95% sold in the cash market for 2020-crop. You should have 40% of expected 2021-crop production forward-priced for harvest delivery.
Cash-only marketers: You should be 95% sold on 2020-crop. You should have 40% of expected 2021-crop production forward-priced for harvest delivery.
Soybeans
Price action: November soybeans surged 24 cents to $13.65 a bushel, up 2.1% on the week and the highest closing price since $13.77 3/4 on July 29. December soybean meal rose $1.90 to $360.40 a ton and December soyoil rose 170 points to 63.28 cents a pound, a two-week high.
5-day outlook: Soybean futures extended yesterday’s rally after reports of export sales fueled bullish momentum from USDA’s larger-than-expected reduction in its U.S. crop forecast. Early today, USDA announced a sale of 326,000 metric tons (MT) of soybeans to “unknown destinations” and 126,000 MT to China for 2021-22. That marked the seventh consecutive business day USDA announced a soybean export sale. Traders will keep a close eye on export markets in the week ahead, as well as USDA’s next weekly crop condition ratings on Monday. USDA reported 60% of the U.S. soybean was in “good” or “excellent” condition as of Aug. 8, up from 58% a week earlier and stronger than analyst expectations for 57%.
Traders next week will be closely watching the daily results of the annual Pro Farmer Midwest Crop tour, with final results of the tour out Friday afternoon.
30-day outlook: USDA’s Crop Production report yesterday, combined with recent export demand, puts the soybean market on a more bullish bent for the month ahead. USDA estimated U.S. soybean production 4.339 billion bu., about 0.8% below average trade expectations and down 1.5% from USDA’s July projection. USDA estimated the national average soybean yield at 50.0 bu. per acre, 0.8 bu. below the agency’s trendline-based estimate from July. Traders will continue monitor Midwest weather as the crop completes critical development phases this month. Potentially dry conditions during the next two to three weeks could lead to rising stress on crops in the western Corn and Soybean Belt, World Weather Inc. said today.
90-day outlook: Export demand will be one major factor in market direction the next few months, with China of keen interest. Chinese buying over the past few weeks stoked greater optimism over foreign demand, though USDA projects a slight decline in exports in 2021-22 from the previous year. U.S. soybean exports for 2020-21 are running about 31% above last year’s levels. USDA’s next Supply and Demand report Sept. 10 will provide an updated view.
What to do: Make sure you are current with old- and new-crop sales advice.
Hedgers: You should be 95% sold in the cash market for 2020-crop. You should have 40% of expected 2021-crop production forward-priced for harvest delivery.
Cash-only marketers: You should be 95% sold on 2020-crop. You should have 40% of expected 2021-crop production forward-priced for harvest delivery.
Advice: We advise wheat hedgers and cash-only marketers to sell another 10% of 2021-crop to get to 70% priced. Spring wheat producers should adjust sales according to your production prospects. We also advise all wheat producers to sell another 10% of expected 2022-crop production for harvest delivery next year to get to 20% forward-priced.
Price action: USDA’s big cut to its global wheat carryout for 2021-22 sent wheat futures to fresh highs Friday morning, but the various contracts set back significantly as the markets closed for the week. December SRW futures gained 9 1/2 cents to $7.74 1/4, up 41 cents on the week. Earlier today, September SRW reached the highest price for a nearby contract since February 2013. December HRW wheat gained 4 1/4 cents to $7.55, a 37 1/2-cent surge on the week. December HRS futures climbed 10 1/2 cents to reach $9.29 ½, up 28 1/4 cents for the week.
5-day outlook: Traders will likely be digesting the results of the monthly USDA Supply and Demand report during the days ahead, especially its sharp cut to projected global carry-out for the 2021-22 crop year. Recent downgrades to estimated Russian production should prove particularly supportive. However, with bearish seasonal patterns tending to dominate the corn and soy complexes during the second half outlook for corn and soybeans, weakness in those markets might also weigh upon wheat prices. Harvest pressure on prices has probably ended for now.
30-day outlook: Although the USDA made big cuts to its 2021 winter wheat production figures on the monthly Supply and Demand Report on Aug. 12, traders were rather surprised that a larger cut wasn’t made to USDA’s other spring wheat harvest estimate. That may offer underlying support for HRS values. Conversely, spillover pressure from seasonal slippage in corn and soybeans could work against bullish interests. Still, with harvest estimates for all three major crops having been revised downward and prices reacting well to those developments, the wheat markets may have to rally significantly in order to “bid for acreage” as winter wheat plantings get underway.
90-day outlook: As indicated above, wheat futures will be implicitly bidding for acreage as winter wheat plantings get started in the coming weeks. Trader focus will then shift toward Midwest growing conditions during the fall months. Having Northern Plains dryness spread south into the Southern Plains and the Panhandle region could give wheat prices another boost, whereas persistent rains could do the opposite. The industry will also shift its focus to demand conditions, especially with the Russian/Black Sea situation seeming set to tighten considerably.
Technical analysis:
What to do: Make sure you are current with advised sales. Spring wheat producers should adjust sales levels based on your expected production levels.
Hedgers: NEW ADVICE -- Sell another 10% of 2021-crop to get to 70% priced. Also sell another 10% of expected 2022-crop production for harvest delivery next year to get to 20% forward-priced.
Cash-only marketers: NEW ADVICE -- Sell another 10% of 2021-crop to get to 70% priced. Also sell another 10% of expected 2022-crop for harvest delivery next year to get to 20% forward-priced.
Price action: December cotton futures rose 100 points to 94.32 cents per pound, up 262 points on the week. Nearby cotton futures reached the highest level in over three years.
5-day outlook: The strong gains in cotton futures to end the week, including the technically bullish weekly high close on Friday, set the table for some follow-through speculative buying early next week. However, the cotton futures market is now at price levels that history dating back to 1972 shows market rallies stall out.
Traders next week will be eyeing tropical depression Fred, which is presently expected to impact portions of the southeastern states next week by bringing some heavy rain and local flooding. Early indications suggest the storm’s winds should not be strong enough to pose a serious threat to most crops. Landfall is most likely near the central Florida Panhandle early Monday with that region to the northern Florida Peninsula and Georgia to southern Virginia seeing the greatest rain, said World Weather Inc. today.
30-day outlook: The key outside markets—crude oil and the U.S. dollar index mostly worked in favor of the cotton market bulls this week, which added to trader buying interest in the fiber. However, if the USDX begins to rebound and/or crude oil prices start to sputter again, such could work to limit the upside or even put in a major market top in cotton futures. Keep a particularly close eye on these two outside markets in the coming weeks.
90-day outlook: The cotton market is currently overlooking the worrisome spread of the newer Delta variant of the Covid virus. However, if the surge in the virus continues into the fall, during the busier consumer shopping season, and businesses begin to become negatively impacted again by new restrictions, the cotton market will likely suffer. An early indicator of such a scenario would be stock markets becoming wobbly and starting to see sustained selling pressure. But as long as the global equity markets remain in rally modes, cotton market bulls should continue to benefit from better demand in the coming months.
What to do: Get current with advised 2020- and 2021-crop sales.
Hedgers: You should be 75% forward-priced on expected 2021-crop production for harvest delivery.
Cash-only marketers: You should be 75% forward-priced on expected 2021-crop production for harvest delivery.
