Crops Analysis | July 16, 2021

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Corn ­

Price action: Corn futures faded into the close to finish 4 1/4 to 8 1/4 cents lower through the July 2022 contract. December corn dropped 4 1/4 cents today to $5.52, though that was up 35 cents for the week.

5-day outlook: Weather will be the focal point next week as heat is expected to build, especially in the northwestern Corn Belt, where extreme temps are likely. Despite warmer temps, conditions are expected to remain favorable across much of the rest of the major corn-growing areas. Traders must decide if the building stress in the northwestern Corn Belt is enough to push prices higher or if there are enough good areas to press the market lower. Weather markets are typically volatile, so we expect another big price move next week – we’re just not certain in which direction the market will move.

30-day outlook: July is generally regarded as the most critical weather month for the corn crop, but August is also crucial as the crop fills. If forecasts calling for hot temps the final two weeks of July materialize, timely rains will be needed next month. Given the tight supply outlook for the 2021-22 marketing year, a lot rides on how this year’s crop produces. That will put an increased focus on the Pro Farmer Crop Tour Aug. 16-19.

90-day outlook: Export demand has been pushed to the back burner for now as Chinese purchases have slowed and with so much focus on this year’s crop. But given Brazil’s shrinking safrinha crop, a lot of corn originally earmarked for exports is being redirected to the domestic market. USDA slashed its 2020-21 Brazil corn export forecast by 5 million metric tons (MMT). In turn, it raised U.S. 2021-22 corn exports by 50 million bu. (1.27 MMT) to 2.5 billion bushels. Our forecast is 100 million bu. higher at 2.6 billion bushels. While that would be down from an estimated 2.85 billion bu. in 2020-21, that’s a lot of export demand given the tight supply situation.

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 soybean futures closed the day up 11 3/4 cents at $13.91 3/4 today, nearer the session low. Still, prices Friday closed at a technically bullish weekly high close. For the week, November beans gained 62 1/2 cents. December soybean meal futures ended Friday by closing up $2.40 at $366.20 and for the week rose $7.30. December soybean oil futures rose 73 points today to close at 65.22 cents, hitting a five-week high and closing at a bullish weekly high close today. For the week, December bean oil rose 428 points.

5-day outlook: The bulls closed out this week strong, which suggests followthrough buying interest early next week, especially from the funds as the near-term technical postures for soybeans, meal and bean oil improved this week.

Mid-July finds a weather market returning to soybean futures, and weather will be the main focus next week. The northwest Corn Belt largely missed out on this week’s rains over the Midwest. Some areas of the eastern and southern Corn Belt are too wet. World Weather Inc. Friday said the northwestern Corn Belt crop areas will see an expansion of dryness over the next two weeks. “The region will not be completely dry, but the infrequent precipitation is not likely to counter evaporation well,” said World Weather. Lower and eastern portions of the U.S. Midwest are not likely to see any threatening dryness or heat in the coming 10 days.

30-day outlook: August is arguably the most important growing month for the majority of the U.S. soybean crop. That means the soybean crop has to reckon with six more weeks of weather patterns that have flip-flopped so far this summer. Look for exaggerated daily price volatility in soybean futures and the product futures for the next several weeks.

Soybean bulls have been disappointed at recent weekly USDA export sales numbers, compared to what was seen in the spring. With soybean prices rising again, it could be that end-users may once again be looking to stock up more in the coming weeks, reckoning that prices will only climb higher.

90-day outlook: Given tight U.S. soybean carryover projections for both 2020-21 and 2021-22, a dip from expectations in U.S. production this year would mean elevated prices for some time to come.

Soybean futures are also benefiting from renewed bean oil strength, as indicated by the August oil contract trading only slightly below its recent highs. Crude oil prices above $70.00 a barrel are helping to support world vegoil prices. Watch the crude oil market closely, as any breakdown in crude values in the coming weeks could be an early warning of the same for soybean oil futures and maybe the entire soybean complex.

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.

 

Wheat

Price action: December soft red winter wheat futures closed the day Friday up 21 cents at $6.99 3/4, hitting a five-week high and closing at a technically bullish weekly high close. For the week, December SRW gained a solid 76 cents. December hard red winter wheat futures ended the day up 11 1/4 cents at $6.62 and also closed at a bullish weekly high close. On the week, December HRW gained 57 cents. December spring wheat futures advanced 24 1/2 cents to $9.05 1/2 Friday, which marked a 98 1/4 weekly surge.

5-day outlook: Typically in the middle of summer the wheat futures market is a follower of corn and soybeans, as that’s when those two markets can see weather produce big price movements on a regular basis. While such has been the case the first half of the summer, it could well be that the second half of the summer sees wheat playing the lead role in grain market price action. The spring wheat crop continues to get scorched with nearby futures prices this week moving well above $9.00. Spring wheat will continue to lead the wheat flavors.

World Weather Inc. on Friday said another ten days of heat and dryness in Canada’s central and southern Prairies will lead to more crop production losses and some failings. No relief is expected in the last days of July or first days of August either. World Weather, Inc. believes the next 30 days will offer very little change to these areas. Extreme heat is expected in the northwestern U.S. Plains and southwestern and central parts of Canada’s Prairies, including highs of 110 degrees possible in Montana and 108 in southwestern Saskatchewan next week. If that forecast does not change come Monday morning, sellers in the wheat futures will likely be scarce.

30-day outlook: With the U.S. winter wheat harvest moving well past 50% complete this week, traders are shifting their focus to demand strength. Bulls were pleased with this week’s 424,700 MT export sales for 2021-22, which topped recent levels by 46%. USDA announced Friday morning China bought 134,000 MT of U.S. SRW wheat for 2021-22 delivery. China’s grain buyers are known to be savvy. It could be that the Chinese and other countries will be better buyers of U.S. wheat in the coming several weeks, suspecting prices will climb still higher.

90-day outlook: The projected return of extreme heat and dryness to the Northern Plains, along with talk that USDA has seriously overstated the projected Canadian harvest, sent HRS futures to their highest levels since 2012 this week. Conditions seem likely to fall near the disastrous 1988 levels during August. That suggests HRS and possibly winter wheat futures prices remaining elevated well into the fall.

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.

 

Cotton

Price action: Cotton futures ended high-range with gains of 57 to 88 points through the May contract. December cotton posted the highest close today in the lifetime of the contract at 89.93 cents, up 212 points for the week.

5-day outlook: Bulls have momentum on their side, which could lead to followthrough buying early next week, especially if the grain and soy markets continue to strengthen. But historically, cotton futures haven’t spent much time above 90.00 cents, so there’s risk current price levels could choke off buying. Cotton crop ratings are above normal and the Texas crop has improved amid beneficial weather, so there aren’t crop concerns to push prices higher.

30-day outlook: Reflecting the improved crop conditions over the past month, USDA raised harvested area by 870,000 acres and cut the national average yield by 33 lbs., as more low-yielding West Texas acres are expected to be harvested. There are four recent years (2014, 2015, 2016 and 2019) with condition ratings of plus or minus three points from the current 56% “good” to “excellent” rating and the yield averaged 825 lbs. in those years. That seems like a more reasonable yield than the 814 lbs. USDA projected this month. USDA’s first survey-based crop estimate will come Aug. 12.

90-day outlook: USDA projects cotton exports will fall by 1.6 million bales (9.8%) in the new-crop marketing year. Two factors will primarily determine export demand – the global recovery from the pandemic and China’s appetite for U.S. cotton. If either falter, it will be difficult for the cotton market to sustain current price levels.

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.

 

 

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