Crops Analysis | July 13, 2021
Price action: Corn futures settled 6 to 8 1/4 cents higher through the July 2022 contract. The soon-to-expire July contract finished more than 70 cents off its intra-day high. New-crop contracts finished in the upper end of today’s range but 5 to 6 cents off session highs.
Fundamental analysis: There were some fireworks in July corn futures, which expire on Wednesday, as there was an apparent short squeeze on at least one trader that needed to get out of a short position. More fireworks ahead of tomorrow’s expiration can’t be ruled out, but the fact futures fell so far from their intra-day high suggests the squeeze play is likely over. The sharp intra-day price movement in the July contract had nothing to do with fundamentals.
Price action was much more subdued in deferred corn futures. But price action so far this week suggests the sharp price break coming out of the July 4 weekend was overdone. How far the corrective recovery extends likely depends on funds, who were net buyers the first two days this week after having trimmed their net long position to the smallest since last fall.
Weather remains generally favorable for about two-thirds to three-quarters of the Corn Belt. The concerns are in northern and northwestern areas of the region, where crop stress is likely to build as warmer, drier air moves in over the next two weeks.
Technical analysis: December corn futures have reestablished the 100-day moving average around $5.28 3/4 as support after closing below that level late last week for the first time since crossing above it last August. Additional near-term support extends from last Friday’s low at $5.07 to the May low at $5.00 1/4. The 20- and 10-day moving averages at $5.48 1/2 and $5.49, respectively, are initial resistance. But more critical resistance is the July 6 gap from $5.52 1/4 to $5.73 1/2. The 40- and 50-day averages fall within that wide gap area.
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.
Price action: November soybeans closed up 1 1/2 cents at $13.51 3/4 a bushel today. December soybean meal closed down $2.50 at $360.00. December bean oil closed up 112 points at 63.48 cents today and closed at a four-week high close.
Fundamental analysis: Solid gains in soybean oil futures today worked to support the soybean futures market, but more weakness in the soybean meal futures market limited beans’ upside. Weather in the Corn Belt remains overall bearish for soybeans for the near term, but the critical growing month of August is still two weeks out. World Weather Inc. today said unsettled weather will continue in the U.S. Midwest for the coming five days, adding more rainfall to areas that have already been receiving some rain periodically. Warmer temperatures will impact much of the Midwest next week and to end the month. Warmer weather in the western Corn Belt and upper Midwest will slowly decrease soil moisture and raise stress in the driest areas. The greatest crop stress in the western Corn Belt is expected in the last ten days of July at which time soil moisture will be quickly depleted and concern over production will begin to rise. Western Corn Belt and upper Midwest crop stress will peak the last days of July and in early August, said World Weather.
USDA’s weekly crop progress report Monday afternoon kept unchanged the agency’s 59% good to excellent rating for the U.S. soybean crop for the week ending July 11, which was disappointing given expectations for a one-point rise. Notably, major soybean-producing state Illinois saw its G/E rating drop 7 points, mainly due to too much moisture recently. The Pro Farmer Crop Condition Index held steady for soybeans at 351.9 points, which is 7.8 points under the five-year average.
Soybean bulls today were encouraged by news China imported 10.72 MMT of soybeans during June, an 11.6% jump from May and just 3.9% shy of last June’s record imports. Last month’s imports were the third-highest monthly figure on record.
Technical analysis: The soybean bulls have the overall near-term technical advantage. The next near-term upside technical objective for the soybean bulls is closing November prices above solid resistance at $13.82 1/2, which is the top of last week’s downside price gap on the daily bar chart. The next downside price objective for the bears is closing prices below solid technical support at the June low of $12.40 1/2. Meal futures bears have the overall near-term technical advantage. The next upside price objective for the meal bulls is to produce a close in December futures above solid technical resistance at the July high of $392.70. The next downside price objective for the bears is closing prices below solid technical support at the June low of $347.00. The bean oil bulls have the solid overall near-term technical advantage. The next upside price objective for the bean oil bulls is pushing and closing December prices above solid technical resistance at the contract high of 67.04 cents. Bean oil bears' next downside technical price objective is pushing and closing prices below solid technical support at the July low of 58.03 cents.
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: December SRW wheat closed down 4 1/2 cents at $6.42 3/4 today. December HRW wheat closed down 3 1/4 cents today at $6.22 1/2. Prices closed near mid-ranges today. Spring wheat futures rose 4 1/2 cents to $8.61 3/4.
Fundamental analysis: More gains in spring wheat futures today helped to limit the downside in winter wheat futures, including big gains in July spring wheat that may be due to a “short squeeze” amid declining open interest in that soon-to-expire contract. Trader focus remains on the severe deterioration of the U.S. spring wheat crop. Said World Weather Inc. today: “Canada’s Prairies, North Dakota, parts of Montana and northern Minnesota are facing ten days of very stressful conditions. Little to no rain and warm to eventually hot temperature are expected. Crop stress is already at serious levels and the lack of rain and continued very warm to hot temperatures will accelerate crop yield losses for spring wheat.”
USDA Monday afternoon rated 16% of the U.S. spring wheat crop good to excellent as of July 11, steady with the week prior and in line with market expectations. But the amount of spring wheat rated “poor” or “very poor” rose five percentage points to 55%. Winter wheat harvest advanced 14 percentage points over the past week to 59% complete, which is six percentage points behind the five-year average harvest pace.
Monday’s USDA WASDE initial spring wheat and durum wheat production estimates came in well short of market expectations at 345 million bu. and 37 million bu., respectively. USDA’s U.S. all-wheat production was pegged 101 million bu. short of market expectations. Yet, winter wheat futures could get no additional upside traction today after posting good gains Monday.
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: Cotton futures settled 12 to 30 points higher through the May contract. Cotton futures ended above the opening level and high-range for a third straight day.
Fundamental analysis: Cotton futures were supported by strength in the corn, soybean and crude oil markets, though a firmer U.S. dollar index limited buyer interest. The mixed signals from outside markets kept cotton futures hemmed in a relatively tight trading range.
USDA raised its “good” to “excellent” rating for the U.S. cotton crop by four points to 56% in Monday afternoon’s report. On the weighted Pro Farmer Crop Condition Index (CCI; 0 to 500 point scale, with 500 being perfect), the cotton crop improved 3.6 point and is now 19.4 points above the five-year average for this date at 366.4 points. Cotton conditions have been trending higher since the first rating of the season in late May.
Weather is generally regarded as favorable for cotton development. Temps are expected to warm in the Southwest after recent rains improved conditions in West Texas. The U.S. Delta and Southeast are expected to see a good mix of rains and sunshine over the next two weeks. USDA’s 870,000-acre increase to harvested acreage in the Supply & Demand Report reflects the improved crop and weather conditions, especially in West Texas.
Technical analysis: Bulls hold the upper hand technically, with the December contract rising toward resistance at last week’s high of 88.89 cents. Above that, contract-high resistance is at 89.28 cents. Near-term support extends from the 10-day moving average at 87.16 cents to the June 30 reaction low at 84.68 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.
