Crops Analysis | July 23, 2021

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Corn ­

Price action: December corn futures closed down 18 1/4 cents at $5.43 today, nearer the session low, and for the week fell 9 cents.

5-day outlook: The corn market bulls faded badly to end the trading week, including a technically bearish weekly low close on Friday that suggests there will be some follow-through selling pressure early next week.

Weather in the U.S. Midwest will still be on the front burner of the corn futures market next week. World Weather Inc. at midday Friday said, “Aggressive drying was noted and crop development may have started to slow in the driest areas of the northwestern Corn and Soybean Belt. Most other locations still had some soil moisture to support new growth. The main concern going forward in the western Corn and Soybean Belt will be an extended period of warmer than normal weather.” Daytime highs will often surge well above 90 degrees with heat indices climbing above 100 degrees. That’s right during pollination for some of the corn crop. Next week’s debate will be whether generally good growing conditions for the majority of the Corn Belt will be superseded by the very dry and hot conditions in the northwest Corn Belt. Monday afternoon’s weekly USDA crop progress report will be a highlight of the week.

30-day outlook: Historical seasonality in the corn futures market suggests late-summer price declines. The August 12 USDA Crop Production report will be a major data point for the month of August.

At its latest auction, China’s state stockpiler sold just 8,207 MT of imported GMO corn, representing 4% of the total offered. China launched these auctions in June to ease food inflation, but after a slow start demand has faltered amid slowing feed demand. Weekly U.S. corn export sales data was disappointing Thursday, 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. To keep corn prices elevated the U.S. export demand picture needs to improve in the coming weeks, including more sales to China.

90-day outlook: Earlier this week the grain markets were impacted negatively by a steep drop in crude oil prices and a surge in the U.S. dollar index to a 3.5-month high. These two key “outside markets” could again have exert significant price influence on grain futures in the coming weeks, especially if the USDX continues to appreciate and crude oil prices again begin to falter. As summer winds down and fall begins, trader focus will shift more to the demand side of the ledger, after spending most of the summer concerned about the supply side.

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

Price action: Soybean futures finished 10 to 15 1/4 cents lower through the January contract. Meal futures dropped around $10. Soyoil futures firmed 66 to 127 points through the December contract. For the week, November soybeans dropped 40 cents to $13.51 3/4.

5-day outlook: Traders responded to forecast models calling for heavier rains across much of the Corn Belt late next week into the following week by pressing the market sharply lower. Whether those rains remain in the outlook will determine price direction next week. Technically, November soybeans remain well within the broad June high and low, so prices can move a lot in either direction without a breakout.

30-day outlook: Weather means more to soybean yield potential and to traders once the calendar flips to August. “Ridge building in the western United States late in the first week of August is likely to verify, which will set the stage for a cool bias to temperatures during mid- and especially late August in the heart of the Midwest as well as the Southeast,” according to World Weather Inc. Cooler temps would limit stress on the crop, but rains will be needed, especially in the dry northern and western areas of the region.

90-day outlook: Export demand for U.S. soybeans has faded. For old-crop sales, that’s typical as global buyers focus on Brazilian shipments. But new-crop sales normally start to pick up by midsummer. As of July 15, there were just shy of 9.9 MMT of new-crop soybean sales on the books, 5% behind year-ago. China had 4.1 MMT of soybean purchases on the books versus 6.1 MMT mid-July last year. Chinese soybean imports are expected to slow the second half of the year given a collapse in hog sector profitability and a big jump in wheat and rice use in feed rations.

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.

 

Wheat

Price action: Wheat futures continued the downtrend begun Wednesday when spring wheat futures seemed to peak. September SRW wheat futures ended at $6.84 per bushel, down 8 1/4 cents from yesterday and 8 1/2 cents below last Friday’s close. September HRW futures lost 7 3/4 cents, settling at $6.46, a weekly decline of 5 1/2 cents. September HRS futures settled at $8.83 1/2, which marked daily and weekly losses of 21 1/2 cents and 33 3/4 cents, respectively.

5-day outlook: This week’s second-half setback strongly suggests the industry believes it has now ‘priced in’ the negative effects of the ongoing drought over the Northern U.S. Plains and southern areas of the Canadian Prairies. In the absence of further bad news from the drought, HRS futures seem likely to continue struggling. It also seems likely to be the leader for winter wheat futures. Traders will again focus upon the weekly USDA Crop Progress report released Monday afternoon, as well as the weekly Export Sales report to be published early Thursday morning.

30-day outlook: Recent readings on the condition of the spring wheat crop have been the worst since 1988. It will be very interesting to see if they eventually fall to levels comparable to the lows at just 4% ‘good’ to ‘excellent,’ although this week’s late market action suggests those may exert little positive influence upon prices. The winter wheat harvest will almost surely be close to wrapping up by late August, so the harvest pressure exerted upon cash and futures prices should greatly diminish by that point. The corn market will likely influence wheat prices in the coming weeks as well. Favorable corn conditions and resulting pressure upon that market would presumably weigh upon wheat values as well.

90-day outlook: Both the winter and spring wheat harvests will almost surely have been completed mid-October, especially with the drought having withered so many spring wheat acres to this point. The strength of export demand will likely have become a dominant factor at that point, although significant moves in corn prices will probably affect wheat prices as well. Traders will also start focusing upon winter wheat plantings across the Northern Hemisphere in order to get an early feel for next year’s supply. Of particularl concern will be recent talk of La Nina returning to the central Pacific Ocean and what that might mean for regional and global harvest prospects.

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.

 

Cotton

Price action: December cotton futures closed the day down 20 points at 89.66 cents and for the week lost 27 points.

5-day outlook: Not a bad week for the cotton market bulls as the market rebounded smartly from early-week pressure. December futures scored a contract high Thursday, but still were not able to close above the key 90-cent level. Bulls will have the upper hand early next week, but the market could also see some routine profit-taking pressure. Cotton traders will also be looking to the grain futures markets for some direction. Any bigger moves in grain futures prices will very likely impact cotton futures.

30-day outlook: The cotton market saw buying interest this week from expectations China will release import quotas, opening the door for potentially more Chinese purchases of U.S. cotton. And weekly U.S. cotton export sales were solid this week. China was the buyer of 13,162 bales for 2020-21 and 13,860 bales for 2021-22. The demand outlook in the coming weeks looks good for the fiber.

Texas crops will benefit from drier and warm-biased weather over the next two weeks, said World Weather Inc.  U.S. Delta and southeastern states will experience a good mix of weather during the next two weeks, supporting normal crop development. Weather patterns and extended forecasts presently favor the cotton market bears.

90-day outlook: The cotton futures market early this week got socked when crude oil prices fell by more than $5.00 a barrel. Cotton will continue to be susceptible to outside markets like crude oil, the value of the U.S. dollar on the foreign exchange market and how global stock markets fare. Any higher volatility in any of those outside markets will impact cotton futures, and not likely in a bullish fashion.

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.

 

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