Crops Analysis | July 15, 2021
Price action: December corn futures closed down 2 1/2 cents at $5.56 1/4 today. Prices closed near mid-range today and saw some chart consolidation after recent gains.
Fundamental analysis: Corn traders are asking themselves if the recent corrective bounce in futures prices has run its course, after futures rallied around 40 cents from the July low. Today’s price action may be just a corrective pause in the rebound. Friday’s price action will be more important for corn futures. A close nearer the weekly high would suggest the bulls still have power to push prices farther north.
After recent beneficial rains in the Corn Belt, weather in the region is becoming a bit less critical, although some dry spots remain. An active weather pattern in the Midwest the past couple weeks has replenished soil moisture ahead of pollination. However, some eastern and southern areas of the Corn Belt are excessively wet, while far northern and far western areas still need rain. Heat and dryness are expected in the northern and western Corn Belt over the next 10 days. Conditions will be favorable elsewhere in the Corn Belt. The National Weather Service’s 30- and 90-day forecasts call for heat to linger through August. Precipitation maps for next month are dry for the far western Corn Belt, wet for the far eastern Belt and inconclusive in between.
Weekly ethanol data released late Wednesday was strong considering the reporting period included the July 4 holiday. EIA data shows ethanol production slowed just 26,000 barrels per day to 1.04 million bpd the week ending July 9, with ethanol stocks sliding 15,000 barrels to 21.13 million barrels.
The U.S. reported corn export sales of 138,800 MT for 2020-21 and 133,122 MT for 2021-22 the week ending July 8. The relatively light sales were in line with expectations.
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: November soybeans closed down 3 1/4 cents at $13.80 a bushel today. Prices closed nearer the session low today. December soybean meal closed down $7.00 at $363.80 today and near the session low. December bean oil closed up 74 points at 64.49 cents today, near midrange and hitting a four-week high.
Fundamental analysis: Soybean traders continue to weigh the more bearish near-term weather picture for the U.S. soybean crop, which has seen beneficial rains the past two weeks, against the longer-term outlooks that are calling for warmer and drier conditions in the Midwest in late-July/early-August. Any hot and dry weather in August, during the key development stage of most of the U.S. soybean crop, could dent yield potential. The National Weather Service’s forecast for August gives elevated odds for warm weather across northern and western areas of the Midwest, with equal chances for normal, above-normal and below-normal temperatures for the rest of the Midwest. Conditions are most likely to be dry across the western half of the Dakotas and Nebraska in August. Wet weather is favored for the far eastern Corn Belt.
Weekly U.S. soybean export sales of 21,700 MT for 2020-21 and 290,800 MT 2021-22 were in line with market expectations.
The U.S. soybean crushing pace fell to a two-year low in June, while soybean oil stocks fell to the lowest level in eight months, said the National Oilseed Processors Association (NOPA) on Thursday. NOPA members crushed 152.410 million bu. of soybeans in June—down 7% from the 163.521 million bu. crushed in May and down 9% from 167.263 million bu. crushed in June of 2020. It was also the smallest monthly crush since June 2019, when processors crushed 148.843 million bushels. NOPA said U.S. soy oil supplies fell to 1.537 billion lbs., the lowest since last October and down 8% from the end of May, when stocks were 1.671 billion pounds. U.S. soymeal exports in June totaled 714,729 MT compared to 714,377 tons in May and 835,403 tons in June of 2020.
Technical analysis: The soybean bulls have the firm overall near-term technical advantage. The next near-term technical objective for the soybean bulls is to close November prices above solid resistance at the July high of $14.23. The next price objective for the bears is to close prices below solid technical support at $13.00. First resistance is at today’s high of $13.89 1/2 and then at $14.00. First support is seen at $13.60 and then at $13.50.
However, meal bears have the overall near-term technical advantage. Prices are in a two-month-old downtrend on the daily bar chart. The next 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.
Bean oil bulls have the solid overall near-term technical advantage. Prices are in a four-week-old uptrend on the daily bar chart. 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: Despite concurrent weakness in both corn and soybean futures, September SRW wheat futures surged 17 3/4 cents to $6.72 Thursday, while September HRW advanced 12 1/4 to $6.40 1/4 and the September HRS contract leapt 21 ¼ cents to $8.94.
Fundamental analysis: Forecasts for a return of extremely hot, dry weather to the Northern Plains through the balance of July played a major role in powering the wheat markets higher today. As one would expect, the HRS contracts led the way higher. Given the widespread problems the U.S. and Canadian spring wheat crops have already been experiencing, this is bad news for the late summer-fall harvest outlook.
This morning’s USDA Export Sales report indicated 2021/22 sales of U.S. wheat jumped to 424,700 metric tons during the week ended July 8. That topped the week prior figure by 46% and the average for the previous four weeks by 44%. The shipments figure at 365,900 MT fell slightly below the total for late June, but topped the four-week average by 4%.
Industry estimates from around the world indicated a 2 million metric ton drop in the forecast Russian harvest was more than offset by projected increases in the EU (+1.9 MMT) and Argentine (+500,000 MT) crops. However, given the dominance of grain from the Black Sea region on the international market, the news seemed supportive of the price outlook. From a purely pragmatic standpoint, the concerted wheat market advance in the face of corn and soybean weakness seems to bode well for bullish prospects.
Technical analysis: Thursday’s rally carried the nearby September HRS contract to its highest levels since January 2013. This certainly seems justified since current crop conditions are at their worst since the disastrous summer of 1988. The market probably faces significant psychological resistance around the $9.00 level, while the weekly continuation chart suggests another band of resistance around $9.50. Solid support is likely to emerge at recent highs around $8.59, with backing from the 10-day moving average near $8.38. The big gains posted by September SRW wheat futures in three of this week’s four sessions have pushed it well above short-to-intermediate term moving averages, with the 40-day MA around $6.63 1/2 seeming set to act as initial support. Look for additional support around $6.40. The extended downtrend lines drawn across the contract’s May and early-July highs imply the first line of resistance near $6.75. Psychological resistance is likely to emerge as it approaches $7.00. The September HRW chart looks similar, with the 40-day moving average likely reinforcing today’s low at $6.23 1/2 as initial support. Expect additional support around $6.10, then $6.00. Initial resistance marked by the recent downtrend seems likely at $6.49; it’s likely to be backed by selling around recent highs in the $6.60 area.
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 down 76 points at 89.05 cents today. Prices closed nearer the session low today and hit another contract high early on.
Fundamental analysis: The cotton market bulls were dented a bit today by disappointing weekly export sales. U.S. cotton net sales of 34,500 running bales (RB) for 2020-21 were down 34% from the previous week and 51% from the prior four-week average. China took 3,500 RB. For 2021-22, net sales of 116,400 RB saw China take 4,900 RB. Exports of 185,900 RB were down 37% from the previous week and 31% from the prior four-week average. Exports were 22,100 RB to China.
The cotton futures market’s rally this week is impressive. However, we believe the U.S. crop is likely to get larger. You’ll find more on this in this week’s Pro Farmer newsletter.
World Weather Inc. said today that last week’s rain in South Texas and the Coastal Bend bolstered soil moisture for long-term cotton crop development. Soil moisture elsewhere in Texas and southwestern Oklahoma is rated mostly good for this time of year. “Weather in the next two weeks will be favorably mixed to support most crop needs, although some net drying is expected which may raise the need for greater rain eventually.”
Technical analysis: The cotton bulls have the solid 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 92.00 cents. The next downside price objective for the cotton bears is to close prices below solid technical support at 86.00 cents. First resistance is at today’s contract high of 89.95 cents and then at 91.00 cents. First support is at Tuesday’s low of 88.35 cents and then at this week’s low of 87.17 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 60% of expected 2021-crop forward-priced for harvest delivery.
Cash-only marketers: You should be 100% priced on 2020-crop. You should also have 60% of expected 2021-crop forward-priced for harvest delivery.
