Crops Analysis | July 20, 2021
Fundamental analysis: Corn futures rebounded from Monday’s disappointing finish on support from hot and mostly dry weather forecasts. While sunshine and seasonal temps should aid crops in areas that received recent rains, the hot, dry conditions will increase crop stress in northwestern areas of the region where crops are already suffering from drought. USDA’s crop condition ratings Monday afternoon showed 65% of the crop rated “good” to “excellent,” unchanged from the previous week, though traders expected a one-point increase. And the portion of crop rated “poor” to “very poor” increased a point to 9%. Traders must now weight the good versus the poor areas as they start to formulate yield and production prospects with 56% of the crop silking as of Sunday.
Given the great divide between the so-called “haves” and have-nots” crop wise this year, price volatility is likely to remain high. That suggests wild price swings will continue until traders have a better indication of yields and production. But that may not come until USDA’s initial estimate in August – or later. That suggests prices will continue to ebb and flow with updated weather forecasts. And as yesterday proved, outside markets and investor risk appetite can also move markets on any given day.
Technical analysis: December corn futures posted their highest close today since July 2, ahead of the Independence Day holiday weekend. The chart gap coming out of the holiday weekend remains open to $5.73 1/2. Filling that gap would have bulls targeting the July 1 high at $6.11 1/4, which must be cleared to break the pattern of lower highs since May. Near-term support extends from Monday’s low at $5.44 1/2 to the 100-day moving average near $5.33.
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: It was a “turnaround Tuesday” for the soybean complex futures today, following Monday’s selling pressure. The rebound in the Nymex crude oil futures market today did assuage the bean market bulls who got a bit spooked when crude prices dropped over $5.00 on Monday. Grain traders should still keep a closer eye on crude oil this week, as any strong follow-through selling from Monday’s steep losses could spook the raw commodity sector bulls, including those in the ag markets.
Weather patterns in the U.S. Corn Belt still lean bullish. World Weather Inc. said today net drying is expected in the western U.S. Corn Belt during much of the coming 10 days to two weeks. Totally dry weather is not expected, but temperatures will be warm enough to evaporate most of the precipitation shortly after it falls. Periodic showers and thunderstorms will occur in the U.S. eastern Midwest during the period. August is arguably the most critical growing month for most of the U.S. soybean crop.
USDA Monday afternoon rated 60% of the U.S. soybean crop good-to-excellent as of Sunday, up from 59% the previous week and consistent with analysts’ expectations.
Soybean meal bears also have the overall near-term technical advantage. Prices are in a nine-week-old downtrend on the daily bar chart. 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. First resistance comes in at today’s high of $371.90 and then at this week’s high of $375.00. First support is seen at today’s low of $363.10 and then at $360.00.
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 up 2 1/2 cents at $7.08 3/4 today. Prices hit a nine-week high today and closed nearer the session low. December HRW wheat closed up 8 1/4 cents today at $6.71 1/4. Prices closed nearer the session low today. Spring wheat futures reversed to the downside, with the December contract settling 6 1/2 cents lower at $9.04 1/2.
Fundamental analysis: Gains in wheat futures were limited today after spring wheat futures moved well down from the overnight highs. September spring wheat rose as high as $9.43 1/2 overnight, just under the contract high reached Monday.
Spring wheat crop conditions continue to deteriorate amid extreme drought in the Northern Plains. USDA reported just 11% of the U.S. spring wheat crop in good-to-excellent condition as of Sunday, down from 16% the previous week. USDA rated 63% of the crop “poor” or “very poor,” up from 55% a week earlier. World Weather Inc. today said high levels of crop stress are expected in much of the Northern Plains through at least the first week of the outlook and likely in the second week as well. High temperatures Monday afternoon were in the 90s to 107 degrees in eastern Montana.
The winter harvest is winding down. Winter wheat harvest advanced 14 percentage points over the past week to 73% complete, one percentage point below the five-year average and in-line with year-ago, according to USDA. Kansas producers have collected 96% of their crop, in-line with the average.
Technical analysis: Winter wheat bulls have the near-term technical advantage. SRW bulls' next upside price objective is closing December prices above solid technical resistance at the May high of $7.70 1/2. The bears' next downside breakout objective is closing prices below solid technical support at $6.50. First resistance is seen at $7.20 and then at today’s high of $7.26 3/4. First support is seen at $7.00 and then at $6.90.
HRW bulls have gained the slight overall near-term technical advantage. The HRW bulls’ next upside price objective is closing December prices above solid technical resistance at the May high of $7.51 1/4. The bears' next downside objective is closing prices below solid technical support at $6.30. First resistance is seen at today’s high of $6.85 and then at $7.00. First support is seen at this week’s low of $6.60 1/4 and then at $6.50.
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 rose 176 points to 88.87 cents and December cotton rose 180 points to 88.51 cents. December futures have climbed 8% over the past two months.
Fundamental analysis: Cotton futures bounced back from yesterday’s selloff as both crude oil and U.S. stocks gained ground. Weather concerns in key U.S. crop regions also helped cotton futures sustain a longer-term uptrend that began in April 2020. U.S. Delta crop areas need drier and warmer weather to induce better crop development, World Weather Inc. said in a report today, while the Southeast and Texas are expected to experience “a good mix of weather.”
Weekly crop ratings indicated improvement in the cotton harvest’s prospects. USDA yesterday reported 60% of the U.S. cotton crop in “good” or “excellent” condition as of July 18, up from 56% the previous week. About 69% of the crop was squaring, up from 55% the previous week but below the 73% average for the previous five years, while 23% of the crop was setting bolls.
Technical analysis: Cotton bulls retain a firm near-term advantage, with December futures near the contract high at 89.97 cents reached last Friday. Upside objectives include closing December futures above the contract high and, beyond that, 91.66 cents. For market bears, downside price objectives include the June low of 83.37 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.
