Crops Analysis | July 21, 2021
Fundamental analysis: Weather concerns have reemerged as a bullish factor in the corn market, since the latest forecasts suggest the heat and dryness that has just returned to the Corn Belt could continue dominating the region into August. Recent rains and cooler temperatures likely increased fall harvest prospects, but persistent drought conditions could limit the size of the forthcoming crop. The increased threat to the soybean crop, for which August is the critical period, may also be spurring corn buying. In addition, the ag sector may have gotten a boost from a 4% rally in crude oil futures, suggesting higher prices for ethanol, biodiesel and related products. Crude is also the de facto leader of the commodity sector, with many traders and analysts viewing crude gains as inflationary.
Technical analysis: After having retested trendline support drawn across the December contract’s March and May lows, corn prices have moved upward the past two days. The late advance also pushed the December price above pivotal 40-day moving average resistance. This gives bulls the short-term edge and seemingly opens the door to a retest of the extended downtrend line, now around $5.93 1/2, drawn across the contract’s May, June and July highs. A push above that level would have bulls quickly targeting the $6.00 level. Look for solid support at the 40-day moving average around $5.60 and the extended uptrend line near $5.51. A drop below those levels would have bears targeting solid support around recent lows in the $5.14 to $5.18 area.
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: Soybean futures faded from overnight gains on spillover from the soyoil market, which came under pressure after Argentina approved a law to reduce the amount of soyoil blended in its biodiesel. Soymeal also got a boost from spreading activity. Argentina’s new law will lead to an increase in the country’s soyoil exports and pressure international prices, industry officials said earlier this week. Soyoil also bears watching after the Biden administration delayed its annual rulemaking process regarding its biofuel blending mandates under the Renewable Fuel Standard (RFS) for 2021.
Persistent dryness in top U.S. growing states remains a concern as the soybean crop nears pod-setting and fill in August. Warmer temperatures and infrequent rain the next two weeks “will lead to significant drying in much of the Midwest and stress to crops will increase from the eastern Dakotas and northeastern Nebraska into Minnesota and northern Iowa where yield potentials should decline,” World Weather said.
USDA’s weekly export sales report tomorrow is expected to show new-crop soybean sales of 100,000 to 450,000 MT, based on average analyst estimates.
Technical analysis: November rose as high as $13.97 before falling as low as $13.75, still within this week’s range. Technical patterns held firm, with November trading above most major moving averages, including the 40-day near $13.65. Chart levels to watch include Monday’s high of $14.18, and the high so far this month of $14.23, reached July 1. Downside levels to watch include the July 14 low of $13.43 1/4.
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: September SRW futures rose 10 1/4 cents to $7.10 3/4 a bushel, the contract’s sixth consecutive daily gain and highest settlement since $7.22 3/4 on May 12. September HRW rose 8 1/2 cents to $6.68 3/4. September spring wheat fell 18 1/4 cents to $8.97 3/4, its first close below $9 in four sessions.
Fundamental analysis: HRW and SRW futures extended a week-long upswing, supported by spreading activity against corn, easing U.S. harvest pressure and talk of harvest shortfalls in other top wheat producing countries. Spring wheat pulled back from contract highs reached Monday, though severe dryness and heat in the Northern Plains growing region underpinned the market.
“No relief is expected in Canada’s Prairies and the U.S. northern Plains will see a new round of declining crop conditions over the next week to nearly 10 days,” World Weather said in a report today. High levels of crop stress are expected in much of the region during the week ahead, and likely next week as well. Any relief is likely to be temporary due to high evaporation rates, the forecaster said.
Agriculture and Agri-Food Canada (AAFC) raised its all-wheat yield harvest forecast for 2021-22 crop to 31.428 MMT. “Downward pressure on yields is possible as drought persists in most of the Prairies,” AAFC wrote. USDA earlier this month trimmed its Canadian wheat crop forecast by 500,000 MT to 31.50 MMT. Both are well above private crop estimates.
USDA’s Weekly Export Sales Report tomorrow is expected to show sales of 350,000 to 600,000 MT for wheat.
Technical analysis: September SRW wheat rose to $7.10 ¾ overnight after yesterday touching $7.18, the highest intraday price since $7.23 1/2 on May 14. The market is well above major moving averages, with upside levels to watch including the contract high of $7.67 1/2, reached May 7. Spring wheat remains in a steep uptrend, but declines the past two days raise the question of whether at least a short-term top is forming, after September’s $9.44 1/2 contract high hit Monday.
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: Cotton futures seemed to be awaiting developments Wednesday, with the nearby contracts trading in relatively tight ranges. Most-active December futures gained 18 points before settling at 88.59 cents per pound.
Fundamental analysis: Prospects for the fall cotton crop seem quite good at this point, especially after the weekly USDA Crop Progress report boosted the “good” to “excellent” readings as of July 18 by four percentage points to 60%. And yet futures rebounded strongly yesterday from Monday’s energy-led breakdown and sustained gains today. Vigorous export demand has consistently supported the cotton market in recent months, so, despite an historical tendency for weak customer buying in mid-summer, traders seem unwilling to give up on that strength at this juncture. Bulls were likely disappointed by Wednesday’s lack of reaction to the big rebound in crude oil futures, and are surely looking toward tomorrow’s early release of the latest USDA Export Sales report for market direction.
Technical analysis: December cotton apparently found solid support at the contract’s upward trendline drawn across its lows from late March and mid-to-late June. That line is also being reinforced by its 40-day moving average, currently near 85.27. Thus, bulls have the short-term advantage and seem likely to mount a challenge of last week’s highs just under 90 cents.
The weekly continuation chart implies resistance around 91.00 and 92.95, but bulls could be targeting the 95.00 level. A drop below the previously mentioned support at the spring uptrend line would probably have bears targeting the extended downtrend line drawn across its March and May highs, now around 84.25.
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.
