Crops Analysis | July 19, 2021
Fundamental analysis: The corn futures market lost altitude as the trading session wore on Monday, pressured by bearish “outside market” forces. A massive sell off in crude oil futures that saw Nymex crude drop over $5.00 a barrel, U.S. stock indexes sell off sharply, and a firmer U.S. dollar index all worked against the grain market bulls today.
Losses in corn were limited by ongoing concerns over dry conditions in parts of the Midwest, particularly the northwestern corner. Hot and dry weather for much of the Corn Belt in the coming days comes right as much of the corn crop is in its critical pollination stage. World Weather Inc. said today that good soil moisture along with mild temperatures during the weekend across much of the Midwest led to highly favorable conditions for crop development outside of the driest areas of the northwest. However, a warmer and drier weather pattern will occur during the next two weeks across the Midwest and stress crops in the northwest Corn Belt.
The U.S. inspected nearly 1.001 MMT of corn for export the week ending July 15, which was in line with last week’s tally and with expectations.
Traders will closely examine this afternoon’s USDA’s weekly crop progress reports. The U.S. corn crop is expected to be rated at 66% good to excellent condition compared to 65% last week and 69% a year ago at this time.
Technical analysis: Prices closed nearer the session low today after hitting a two-week high early on. The corn futures bulls have the overall near-term technical advantage. Prices are in the middle of a choppy trading range. The next downside target for the bears is closing December prices below chart support at the May low of $5.00 1/4. The next upside price objective for the bulls is to close December prices above solid chart resistance at $5.73 1/2, which is the top of a big downside price gap on the daily bar chart created in early July. First resistance is seen at today’s high of $5.67 1/2 and then at $5.73 1/2. First support is at today’s low of $5.44 1/2 and then at $5.36 3/4.
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
Fundamental analysis: Soybeans were unable to hold overnight gains as outside market pressure mounted through daytime trade. Crude oil futures plunged today, triggering a domino of selling across the commodity sector that spilled over to soyoil and soybeans. A sharp selloff in the U.S. stock market added to the negative tone across risk-based assets.
Fundamentally, soybean traders must decide whether to trade the extreme heat and building crop stress in the northwestern Midwest or the generally favorable conditions in other areas of the Midwest, Mid-South and Delta. But even in some of the better areas, producers report soybeans aren’t faring the best given saturated soils from recent heavy rains.
Soybean export inspections were again light at just 5.3 million bu. for the week ended July 15. That pushes the weekly average needed to hit USDA’s forecast to 10.4 million bu., a level that hasn’t been reached for weeks. There are enough old-crop soybean sales on the books to get to USDA’s export forecast that was lowered by 10 million bu. last week, but the weekly pace of shipments suggests another cut to exports may be needed.
Technical analysis: After gapping higher overnight, November soybean futures finished with a bearish reversal. The technical picture is still neutral/bullish as the contract only closed below the five-day moving average today, with all the rest of the short-, intermediate and long-term averages still intact from $13.72 to $11.97 3/4. But today’s price action could signal a short-term top, especially if there’s active followthrough selling on Tuesday. Near-term resistance extends from today’s high at $14.18 to the contract high at $14.80.
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.
Fundamental analysis: Wheat futures were pulled well off their intra-day highs by heavy selling in the soybean and soyoil markets and bearish outside market influences. While the finish was disappointing for market bulls, it could have been a lot worse given the outside market pressures.
HRS futures surged to their highest level on the continuation chart since November 2012 overnight amid spring wheat crop concerns in the U.S. and Canada. Forecasts call for limited rainfall chances and extreme heat across the Northern Plains and Canadian Prairies for at least the next 10 days. That will take another bite out of the already beleaguered spring wheat crop. As a result, crop forecasts continue to drop. But there is risk prices could peak even as crop estimates continue to fall if outside market pressure builds and drives speculators out of long positions. It’s not uncommon for markets to top before all of the production losses are realized in years like this.
Wheat export inspections improved to 18 million bu. in the week ended July 15, though that was still below 18.8 million bu. for the same week last year. With U.S. wheat priced above most competitors, demand must come from traditional buyers.
Technical analysis: Today’s contract high at $9.44 1/2 is initial resistance for September HRS futures since the contract closed 20 3/4 cents below that level. Additional resistance on the continuation chart extends from $9.66 1/4 to $10.35, the peak in 2012. Above that, bulls would target the 2011 high at $11.20. The 5-day moving average at $8.93 3/4 is initial support, 30 cents below today’s high – for perspective on how the market has surged. The contract is overbought at 73.7% on the 14-day Relative Strength Index, signaling a time or price correction is due. But this spring, when the market was overbought, it reached 83.9% before correcting and then it took two weeks to fully erase the overbought status.
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: October cotton futures closed the day down 359 points at 87.11 cents and December cotton lost 322 points at 86.71 cents. Prices closed nearer their daily lows.
Fundamental analysis: The cotton futures market was hit hard today by bearish outside forces, as crude oil prices plunged over 7%. The U.S. stock market also slumped, helping keep cotton market bulls on the sidelines. If crude oil prices have indeed peaked, that’s a negative for the entire raw commodity sector, including cotton. Watch the crude market closely this week, as strong follow-through selling in oil yet this week would send a signal to the big commodity market speculators that the commodity sector, overall, may have topped out.
The cotton market bulls can argue today’s price action was mostly profit taking after prices hit a contract high last week. However, the cotton market bulls do not want to see follow-through selling pressure this week, which would likely produce near-term technical damage to then suggest a market top is in place.
Weather-wise, the U.S. Delta crop areas need drier and warmer weather to induce better crop development, said World Weather today. U.S. southeastern states will see a good mix of weather as will Texas crop areas. The far western U.S. will continue highly dependent upon irrigation for normal development.
Technical analysis: The cotton bulls have the firm overall near-term advantage. Prices are still in a 3 1/2-month-old uptrend on the daily bar chart. However, good follow-through selling pressure tomorrow or Wednesday would hurt the bulls and begin to suggest a market top might be in place. The next upside price objective for the cotton bulls is to produce a close in December futures above solid technical resistance at the contract high of 89.97 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 seen at 88.00 cents and then at 89.00 cents. First support is seen at today’s low of 86.35 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 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.
