Crops Analysis | July 22, 2021
Fundamental analysis: Corn futures were caught in a wave of broad-based selling across the grain and soy complex today. Funds were active sellers on the day, taking profits out of recently added long positions and lightening their long exposure. Forecasts continue to call for hot, dry conditions over the next week, which will increase crop stress in the driest areas of the northwestern Corn Belt. Forecast models indicate cooler, wetter weather will be seen in the second week of the outlook. World Weather Inc. says, “Confidence is high that cooling will take place in August, but the changes to wet and cool weather today are overdone.” Some of the rain chances were decreased in the noon model run.
Weekly corn export sales data was disappointing with a net sales reduction of 88,500 MT for 2020-21 and net sales of just 47,700 MT for 2021-22. There were net reductions of 159,971 MT to China for the current marketing year. This marked the fourth straight week of net reductions for old-crop corn sales to China totaling 306,200 MT during that span. Reported old-crop sales not shipped are becoming razor thin to reach the USDA 2020-21 export forecast, with net cancels this week not helping the cause. It’s looking more likely USDA will have to lower its old-crop export forecast.
Technical analysis: December corn futures continue to chop within a narrowing broad pattern marked by the May contract high at $6.38 and the May low at $5.00 1/4. Near-term resistance is the top of the July 6 gap at $5.73 1/2, which is 1/2 cent above Wednesday’s high. Filling that gap would have bulls targeting the July 1 high at $6.11 1/4, which needs to be cleared to break the monthly pattern of lower highs since May. The 5-, 10-, 20-, 40-, 50- and 100-day moving averages in a range from $5.61 to $5.35 are near-term support.
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: The soy complex fell under general profit-taking pressure that originated overnight and was further burdened by lackluster weekly export sales and some forecasts indicating greater rain prospects for dry parts of the Midwest.
Starting tomorrow, “there will be regular rounds of showers and thunderstorms in the northern and eastern Midwest that should not bring soaking rain to many areas,” World Weather said in a report today. “The driest areas in the northwest will see showers on occasion and some crops should benefit from the moisture, while the rain should be erratic enough that many areas do not receive enough rain to have much of an impact on crops.” Still, hotter temperatures are expected through at least month-end, and the soybean crop is nearing critical reproductive phases.
USDA today reported net soybean sales for the week ended July 15 of 62,000 MT for 2020-21, down 22% from the prior four-week average. For 2021-22, net sales totaled 176,300 MT. Both figures were in line with expectations. Sales of soymeal and soyoil were light. For the current marketing year to date, accumulated soybean exports of 58.9 MMT are running 53% ahead of sales at the same point a year earlier.
Technical analysis: November soybeans overnight pushed below the 40-day moving average around $13.65 and fell as low as low as $13.42 1/4, the lowest intraday price since $13.27 on July 12; downside chart levels to watch include the 100-day moving average around $13.25. November is also on track for its second lower weekly close in the past three weeks, after ending last week at $13.91 3/4.
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 fell 18 1/2 cents to $6.92 1/4 a bushel, just a 1/4 cent below last week’s close. September HRW fell 15 cents to $6.53 3/4. September spring wheat rose 6 1/4 cents to $9.04, after earlier falling as low as $8.71.
Fundamental analysis: HRW and SRW futures fell for the first time in seven sessions amid profit-taking pressure following recent sharp gains. Spring wheat fell sharply early in the day but bounced back strong, as heat and dryness in the Northern Plains and Canadian Prairies continue to shrink the crop’s harvest prospects.
Crop conditions “have continued to deteriorate across the majority of southern and east-central Alberta through much of Saskatchewan and in a few areas in Manitoba over the past week,” World Weather Inc. said in a report today. “The dryness has caused many crops to develop ahead of normal with reduced yields. Quality has also deteriorated in many areas… [and] production cuts have already occurred in many areas and more declines are expected as the dry weather prevails.”
USDA’s weekly export sales report today was within trade expectations for wheat. For the week ended July 15, net weekly wheat sales of 473,200 MT for 2021-22 were up 11% from the previous week and 44% from the prior four-week average. For the marketing year so far, accumulated exports of all U.S. wheat types totaled 2.384 MMT, down from 3.325 MMT for the same period a year earlier.
Technical analysis: September SRW futures fell as low as $6.81 3/4, a low for the week and the lowest intraday price since $6.70 3/4 on July 16, but the contract remains above most key moving averages. Downside chart levels to watch include the 40-day and 100-day moving averages, both around $6.66.
September spring wheat futures extended a pullback from the $9.44 1/2 contract high reached Monday, but found buying interest around today’s low, $8.71, which is a few cents above the 14-day moving average. The uptrend since April appears to remain intact.
What to do: Make sure you are current with advised sales. Spring wheat producers should adjust sales levels based on your expected production levels.
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 finished well off session highs but in the upper end of today’s range with gains of 103 to 118 points through the March contract.
Fundamental analysis: Cotton futures strengthened today in the face of broad-based selling in the grain and soy markets and not much positive news from other outside markets. For a market that was heavily influenced by outside market pressure on Monday, that’s a sign traders have returned to a more fundamental focus.
Initial support came from expectations China will release import quotas, opening the door for more Chinese purchases. Weekly cotton export sales were also strong, especially for new-crop at 251,900 bales. China was the buyer of 13,162 bales for 2020-21 and 13,860 bales for 2021-22. China also was the destination for 22,200 bales of U.S. cotton shipments for the week.
Technical analysis: December cotton futures pushed to a new contract high at 90.59 cents but the contract didn’t even post its highest close, finishing under last Friday’s ending point. Still, the technical picture is bullish. Today’s contract high is initial resistance, followed by 91.00 cents and this year’s high of 92.95 cents on the continuation chart. Monday’s low at 86.35 cents is key near-term support as taking out that level would also violate the 5-, 10-, 20- and 40-day moving averages.
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.
