Crops Analysis | July 12, 2021
Price action: December corn futures closed up 16 cents at $5.33 today and near the session high. July corn gained 39 1/2 cents at $6.69 1/4.
Fundamental analysis: Solid gains in the wheat futures market after a bullish USDA supply and demand report this morning helped to pull the corn market higher. USDA lowered its old-crop U.S. corn ending stocks estimate by 25 million bu. from last month, which was slightly below trader expectations. The only change to the balance sheet was a 25-million-bu. increase to feed and residual use. USDA raised its 2020-21 on-farm average cash corn price estimate by 5 cents from last month to $4.40. For 2021-22, USDA raised projected ending stocks by 75 million bu. from last month. It increased planted and harvested corn acreage based on the June 30 Acreage Report. USDA did not change the projected yield. USDA lowered its 2021-22 national average on-farm cash corn price forecast by 10 cents from last month to $5.60 per bushel.
The corn market saw a bit of buying interest today as less rain than expected fell in northeastern Iowa, northeastern Illinois and southern Minnesota during the weekend. However, much of the Corn Belt received beneficial rain over the weekend. More rain is likely for the Midwest over the next 10 days, with the exception of the northwest part of the region that has remained dry. World Weather Inc. said today parts of the upper Midwest “will continue moisture-stressed and warmer temperatures along with continued dry weather for the July 19-26 period will bring along a new period of more heightened crop stress.”
USDA’s crop condition update this afternoon will provide insight on how much rains benefitted the crop. The agency is expect to report the U.S. corn crop rated at 65% good to excellent condition versus 64% last week and 69% last year at this time, according to surveys by Reuters and Bloomberg.
What to do: Get current with advised 2020- and 2021-crop sales.
Hedgers: You should be 90% sold in the cash market on 2020-crop. You should also have 30% of expected 2021-crop forward-priced for harvest delivery.
Cash-only marketers: You should be 90% sold on 2020-crop. You should also have 30% of expected 2021-crop forward-priced for harvest delivery.
Soybeans
Price action: July soybean futures, which go off the board on Wednesday, finished 28 1/2 cents higher. The August through March contracts ended 19 1/4 to 25 cents higher. Soymeal futures gained $2.40 to $3.60 through the December contract. Soyoil was up 142 to 258 points through the December contract.
Fundamental analysis: Soybean futures extended gains following USDA’s reports even though there wasn’t much bullish news in the data. USDA left U.S. old- and new-crop ending stocks unchanged, while it raised global carryover for both marketing years.
With the report data out of the way, much of the price direction will come from weather. Northern areas of the Midwest missed out of much of the weekend rainfall, but there are some additional chances for rains in the 10-day forecast. Temps are expected to warm later this week and run above-normal through the remainder of the 10-day window, though oppressive heat is not expected. Since the key weather period for soybeans isn’t until August, the market will continue to pull much of its direction from corn and wheat.
USDA cut its old-crop soybean export forecast by 10 million bu., which lowered the weekly pace needed, despite shipments of just 7.4 million bu. for the week ended July 8. Weekly soybean shipments must now average 9.9 million bu. per week through Aug. 31.
Technical analysis: November soybean futures have turned choppy within a sideways pattern after the price drop from June 7-17. Bulls must fill the July 6 gap from $13.73 1/4 to $13.82 1/2. Above that, resistance is at the July 1 high at $14.23. Support is layered from the 10-day moving average at $13.30 1/2 to the June 17 low at $12.40 1/2.
What to do: Make sure you are current with our latest old- and new-crop sales advice. Hold remaining inventories as gambling stocks.
Hedgers: You should be 90% priced in the cash market on 2020 crop. You should also have 30% of expected 2021-crop forward-priced for harvest delivery.
Cash-only marketers: You should be 90% sold on 2020 crop. You should also have 30% of expected 2021-crop forward-priced for harvest delivery.
Price action: HRS futures led today’s price rally, finishing 31 1/4 to 46 1/2 cents higher through the March contract with the expiring July contract pacing gains. Winter wheat futures closed mostly 20 to 25 cents higher.
Fundamental analysis: HRS futures reacted sharply to USDA’s much lower-than-expected spring wheat crop estimate. Other spring wheat production came in 114.4 million bu. below the average pre-report trade estimate and is 241 million bu. below the 2020 other spring wheat crop. USDA puts harvested wheat acres at 11.215 million, down 845,000 from last year and the national average other spring wheat yield at 30.7 bu. per acre, well below last year’s 48.6 bu. per acre. Durum wheat production is 18.8 million bu. below the average pre-report trade estimate and is down 31.6 million bu. from last year. That pulled the all-wheat crop estimate of 1.746 billion bu. 101 million bu. lower than expected, despite a bigger-than-anticipated increase to the winter wheat crop estimate.
Traders will now base additional crop adjustments off weather and crop condition ratings moving forward. World Weather Inc. expects little relief from dry conditions in the Northern Plains, though temps are expected to turn hotter.
Weekly wheat export inspections reminded traders of the light demand for U.S. supplies. While shipments of 15.6 million bu. were up from the previous week, they were down from 24.2 million bu. during the same week last year. USDA cut its 2021-22 wheat export forecast by 25 million bu. from last month and exports are now projected to drop 11.8%.
Technical analysis: September HRS futures filled the July 6 gap at $8.26 1/2, leaving the contract high at $8.59 3/4 as the lone remaining resistance on the daily chart. Above that, bulls would target this year’s high at $8.69 on the continuation chart, followed by the psychological $9.00 mark. Last week’s low at $7.78 3/4 is key near-term support.
What to do: Make sure you are current with advised sales. Spring wheat producers should adjust sales levels based on your expected production levels given your moisture situation.
Hedgers: You should have 60% of 2021-crop sold in the cash market. You should also have 10% of expected 2022-crop production sold for harvest delivery next year.
Cash-only marketers: You should have 60% of 2021-crop sold. You should also have 10% of expected 2022-crop production sold for harvest delivery next year.
Price action: December cotton closed up 45 points at 88.16 cents today and nearer the session high.
Fundamental analysis: The cotton market got a lift today from solid gains in the grain futures markets. USDA in its monthly supply and demand report made no changes to the supply or demand side of its old-crop cotton balance sheet. It lowered the national average on-farm cash price forecast by a half-cent to 66.5 cents. For 2021-22, USDA raised projected ending stocks by 400,000 bales from last month. It increased total supplies by 800,000 bales on a rise in harvested acres that more than offset a 33-lb. cut to the projected yield, which was the largest ever from June to July. On the demand side, it raised projected exports 400,000 bales. USDA left its new-crop national average on-farm cash price forecast at 75 cents. USDA reduced abandonment by 1.19 million acres from the June — a record month-to-month reduction. More lower-yielding southwestern U.S. cotton likely gets harvested, lowering yield. But overall, today’s report suggests more cotton acres harvested and a bigger crop this year.
Weather patterns are seen favorably mixed for West Texas, the Blacklands, Delta and southeastern states, said World Weather Inc. today. “A few areas in the northern Delta may be a little too wet in the coming week, but drier weather in Texas Coastal Bend and South Texas will be welcome. The recent heat wave in California and Arizona has brought on a new wave of crop stress that must end soon to reduce crop stress.”
Technical analysis: Cotton bulls have the firm overall near-term technical advantage. Prices are in a 3.5-month-old uptrend on the daily bar chart. The next upside price objective for the cotton bulls is to produce a close in December futures above solid technical resistance at the February high of 89.28 cents. The next downside price objective for the cotton bears is to close prices below solid technical support at the June low of 83.37 cents. First resistance is at today’s high of 88.29 cents and then at the July high of 88.89 cents. First support is seen at today’s low of 87.17 cents and then at 86.00 cents.
What to do: Get current with advised 2020- and 2021-crop sales.
Hedgers: You should be 100% priced in the cash market on 2020-crop. You should also have 50% of expected 2021-crop forward-priced for harvest delivery.
Cash-only marketers: You should be 100% priced on 2020-crop. You should also have 50% of expected 2021-crop forward-priced for harvest delivery.
