Crops Analysis | July 2, 2021
Price action: July futures today fell 22 1/2 cents to $6.97 1/4, up 9.5% from $6.36 1/2 at the close of last week. December fell 9 1/4 cents to $5.79 3/4, up almost 12% from $5.19 1/4 at the end of last week.
5-day outlook: Midwest weather will remain the primary driver in coming weeks as the U.S. corn crop nears its critical pollination stage. USDA’s unexpectedly low corn acreage estimate stokes concern over dry soils in the northwest Corn Belt and tightening the supply outlook for 2022. The eastern Corn Belt will see two more weeks of favorable conditions for crop development, World Weather Inc. said in a report today. But in the western Corn Belt where conditions are already dry, rain “will be too light and too infrequent to prevent continued drying and rising levels of crop stress, while rising temperatures into next week will accelerate increases in crop stress,” World Weather said. USDA’s next weekly crop progress report July 6 will offer indications whether recent Midwest rains benefitted corn.
30-day outlook: Midwest weather during July will be key to the corn market’s direction. Below-normal rainfall and above-normal temperatures are expected in the upper half of the Midwest for the next month, based on an updated National Weather Service outlook released earlier this week. The U.S. Drought Monitor for the week ended June 29 showed an easing of drought conditions from the Iowa/Missouri border through Wisconsin and Michigan. But nearly 86% of Iowa is still affected by abnormal dryness or drought.
USDA, in a separate report this week, estimated June 1 corn stocks 4.112 billion bu., down 18% from year-ago. That means USDA will likely lower its old-crop corn ending stocks estimate, currently 1.107 billion bu., in its July 12 Supply & Demand Report. Projected 2021-22 ending stocks, at 1.36 billion bu., may also be trimmed in light of USDA’s lower-than expected corn acreage.
90-day outlook: Late-summer weather will continue to be a major driven in the market, along with ethanol and export demand. Our Midwest Crop Tour will provide a first-hand look at crops the third week of August. Robust exports, particularly to China, have helped push corn prices higher. U.S. corn export sales for the market year to date total 57.4 million metric tons, 69% above the same period the previous year. USDA’s attaché in Beijing expects China to import 28 MMT of corn in 2020-21, which is 2 MMT higher than USDA’s official estimate. The post expects China’s corn imports to ease to 20 MMT in 2021-22.
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: July soybeans closed up 5 cents at $14.51 3/4 today and November futures were up 3 1/2 cents at $13.99. On the week, November futures gained $1.29 1/4. December soybean meal futures fell $0.40 today at $388.30 and for the week rose $33.40. December soybean oil prices today rose 79 points at 62.28 cents and for the week rose 504 points.
5-day outlook: The weather market in soybeans returned this week to revive the bulls. Friday’s Corn Belt weather forecasts were not as bullish but certainly not bearish, and thus the pause in upside price action Friday. World Weather Inc. Friday said net drying is expected in the western Corn Belt in the coming days, despite scattered showers and thunderstorms. Temperatures will be warm this weekend and briefly cooler next week and then warm again during the second week of the forecast. “Dryness will remain serious across much of the northern Plains with some expansion into Nebraska over time. A good mix of rain and sunshine is expected in the eastern Midwest. Temperatures will be seasonable during much of the two-week forecast period.”
Especially impressive this week was the rebound in the soybean meal futures market, which implies that market may no longer be a drag on soybean prices in the near term.
30-day outlook: This week’s USDA updated planted U.S. soybean acres report leave little room for error for the 2021 soybean crop, especially considering tight 2020-21 carryover supplies. Any weather problems for the U.S. soybean crop in the coming weeks will keep the soybean, meal and bean oil markets extra “goosey.” The key development month for soybeans is during August. The National Weather Service’s updated 30-day forecast maps issued June 30 favors warm conditions for all but southern areas of the Corn Belt and dry conditions across the western Corn Belt and into Wisconsin.
90-day outlook: USDA’s FAS today reported that in the first quarter of 2021, U.S. soybean exports reached the second-highest value ever at $7.7 billion, nearly double the same period last year. The growth was driven by record first-quarter exports amid higher prices. USDA said building off record first- quarter export volumes, 2021 is “poised to be an excellent year for U.S. soybeans. Aided by sustained high prices and growing trade with major markets outside of China, such as Egypt and Mexico, export values are likely to remain strong throughout the year.”
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: Traders actively balanced their holdings Friday ahead of the long-holiday weekend, with long-liquidation clearly outpacing short-covering as most grain markets followed corn lower. September SRW wheat ended the week 22 cents higher (at $6.52 3/4) above the week-prior level. September HRW wheat ended Friday at $6.19 1/4, up 10 1/4 cents from last Friday, while September HRS futures settled 28 3/4 cents higher on the week at $8.36 3/4.
5-day outlook: The ongoing winter wheat harvest continues exerting downward pressure upon prices as supplies are rebuilt, although the worsening drought in the northwest Corn Belt is still tending to push spring wheat prices upward. Thus, traders will focus closely upon next Tuesday’s release of the weekly USDA Crop Progress report, for both spring wheat conditions and winter-wheat harvest progress, then shift to the weekly Export Sales report next Friday. Shifts in corn prices will very likely exert considerable influence over wheat values as well.
30-day outlook: July weather is expected to remain hot and dry over much of the Northern Plains, which suggests persistent upward pressure on HRS wheat values. On the other hand, summer dryness would likely accelerate the winter wheat harvest. As is often the case, the influence the weather exerts over corn prices in July will likely tend to pull wheat values in the same direction. Sustained anecdotal reports indicating a divergence between wheat harvest totals and the USDA forecast may also affect prices.
90-day outlook: The wheat markets will transition away from a weather market over the next three months as the both the winter and spring wheat harvests will almost surely be completed by October 1. Indeed, some winter wheat planting for next year may have begun in northern states by that time. U.S. wheat will probably continue struggling to compete in the global market against cheaper, better positioned grain in the Black Sea region. The U.S. disadvantage is also worsened by the fact that the currencies of those competing nations (e.g. Russia, Ukraine) often lose value versus the dollar, thereby rendering their crops that much cheaper. The performance of the corn market over the next three months will also affect wheat prices significantly.
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: With the July cotton contract set to expire next Thursday (7/8) and October generally attracting little interest, the cotton industry is focused upon December futures at this point. That contract ended Friday at 86.97 cents/pound, up 1.07 from Thursday. The closing quote represented a 0.20-cent loss from last Friday.
5-day outlook: Forecasts for plentiful rain over the main Texas cotton-growing area through the first half of July sent cotton futures tumbling this week, despite a significant USDA cut to its planted acreage estimate. Traders will be watching weather developments and crop progress results to see if those forecasts prove accurate. They’ll also focus upon the latest Export Sales data in order to judge the strength of export demand. History suggests seasonal weakness in the weekly totals, so bulls may have a tough time generating fresh upward momentum.
30-day outlook: The cotton industry will likely keep its attention focused upon U.S. cotton growing conditions, particularly in Texas and Georgia. Weekly export sales and shipments will also garner considerable attention. They’ll also look at the next WASDE report on July 12, since USDA analysts may adjust their estimates for domestic production, usage and exports for the current and upcoming crop years. Shifts in the broader economy, particularly in influential markets such as corn, crude oil, the value of the dollar and the equity markets, will also play roles in cotton pricing.
90-day outlook: As one would expect, the industry will keep a close eye upon weather developments over the next 90 days as participants try to get a good handle on the size of the U.S. harvest and the resulting national fiber supply. Still, final numbers on the size of the domestic crop won’t come until later in the year, or even in early 2022 due to the extended harvest season often experienced in Texas. Traders will also focus keenly upon U.S. cotton exports and sales, since so much of our crop is shipped overseas. Shifts in the value of the dollar have the potential to greatly affect those figures, so the industry will watch the greenback and geopolitical events as well.
What to do: Get current with advised 2020 and 2021 crop sales; be ready to advance new-crop sales.
Hedgers: You should be 90% sold in the cash market on 2020-crop. You should have 40% of expected 2021-crop forward-priced for harvest delivery.
Cash-only marketers: You should be 90% sold on 2020-crop. You should have 40% of expected 2021-crop forward-priced for harvest delivery.
