Crops Analysis | July 27, 2021
Price action: Corn futures were unable to hold onto earlier gains and finished low-range with fractional to penny losses through the July 2022 contract. December futures fell 1/2 cent to $5.46 1/4 a bushel.
Fundamental analysis: Corn futures were supported overnight and through much of the morning by the one-point downtick in USDA’s crop condition ratings Monday afternoon and hot, dry forecasts. But buyer interest faded late, resulting in a disappointing finish for bulls. Recent price action suggests bulls are going to need a sharp decline in crop ratings and/or another catalyst to recharge buyer interest.
The demand side of the market isn’t encouraging fresh buying. While ethanol production numbers signal USDA’s forecast is too low on that category, it has likely overstated old-crop exports. And while new-crop sales are running well ahead of year-ago and the five-year average, foreign buying has slowed, especially sales to China for the 2021-22 marketing year. Export demand likely needs to signal prices have gotten cheap enough for active buying to return to futures, though this isn’t the right time of year for export demand to grab traders’ attention. If there’s a strong pickup in foreign demand it will signal 1) prices are considered a value or 2) global end-users fear the crop is smaller than currently expected.
Technical analysis: December corn futures continue to hold well within the broad range outlined by the May contract high at $6.38 and that month’s low at $5.00 1/4. While there have been major swings up and down the past two months, the contract can’t sustain trade above or below the $5.50 level for long. The short- and intermediate-term moving averages are clustered in a range from $5.52 to $5.61 1/2 to form near-term resistance, followed by last week’s high at $5.73. The 100-day moving average around $5.37 is initial support, followed by Monday’s spike low at $5.32 1/4 and the June low at $5.07.
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: November soybeans closed up 1 3/4 cents at $13.59 1/2 a bushel today. Prices closed nearer the session low. December soybean meal closed up $6.10 at $361.20 today and near mid-range. December soybean oil futures closed down 116 points at 62.91 cents.
Fundamental analysis: Soybean futures bulls did not get much traction today after USDA Monday afternoon surprisingly dropped its crop condition ratings by 2 percentage points, or by ongoing concerns about dry and hot conditions in parts of the Corn Belt as the soybean crop approaches its critical development period in August. USDA rated 58% of U.S. soybeans “good” to “excellent” as of Sunday, down from 60% a week earlier and 72% for the same period a year earlier.
World Weather Inc. today reported the U.S. northern Plains and northwestern Corn Belt will continue a dry bias during much of the coming ten days to two weeks, with a few showers and thunderstorms. Very warm to hot temperatures will occur in the northern U.S. Plains through Wednesday and impact a part of the western Corn Belt and central U.S. Plains Wednesday into Thursday as well.
It would not be surprising to see soybean futures take a leadership role in the grain markets the next month, as the corn crop moves out of its key pollination phase seen in mid- to late-July and as much of the damage to the spring wheat crop has been factored into that market.
Soybean meal bears have the overall near-term technical advantage. Prices are in a 2.5-month-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 $383.50. 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 $363.60 and then at $368.00. First support is seen at today’s low of $355.90 and then at this week’s low of $348.70.
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 down 2 1/2 cents at $6.84 1/4 today. Prices closed nearer the session low. December HRW wheat closed up 2 1/4 cents today at $6.52 3/4 and also nearer the session low. Spring wheat futures edged up 3/4 cent to $8.68 at their settlement.
Fundamental analysis: Spring wheat futures have been leading strength in the wheat complex recently but came off the daily highs as today’s trading session progressed. USDA’s spring wheat crop condition ratings fell to the lowest level since the 1988 drought. Spring wheat was rated 9% “good” to “excellent,” down two points from one week-ago, with 66% of the crop now rated “poor” to “very poor,” up from 63% a week ago, USDA said Monday. USDA also reported the U.S. winter wheat crop was 84% harvested as of Sunday, up from 73% a week earlier and slightly above analyst expectations. Buying interest in winter wheat was limited today as the U.S. harvest progresses, adding supply to the market and seeing commercial hedge pressure.
World Weather Inc. today reported restricted rains will fall in Canada’s Prairies, although some rain is expected periodically in central and northern Alberta that will support crops. The U.S. northern Plains will maintain a dry bias during much of the coming ten days to two weeks, despite a few showers and thunderstorms. Very warm to hot temperatures will occur in the northern U.S. Plains through Wednesday.
The Wheat Quality Council HRS wheat tour runs Tuesday through Thursday of this week. Traders will want to see more “boots-on-the-ground” reports coming out of that tour.
The HRW bulls’ next upside price objective is closing December prices above solid technical resistance at the July high of $6.85. The bears' next downside objective is closing prices below solid technical support at $6.20. First resistance is seen at today’s high of $6.66 and then at $6.75. First support is seen at this week’s low of $6.42 3/4 and then at $6.30.
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 settled 45 to 65 points higher through the July 2022 contract, with most-active December rising 63 points to 90.23 cents per pound, a new closing high for the contract.
Fundamental analysis: Cotton futures were supported by strength in grain and soybean markets and weakness in the U.S. dollar, which mitigated bearish the impact from improvement in USDA’s cotton crop ratings. The U.S. dollar index fell to the lowest level in nearly two weeks, bolstering beliefs cotton will be more affordable for foreign buyers. USDA’s weekly crop progress report yesterday showed 61% of the crop rated either “good” or “excellent” as of July 25, up slightly from 60% a week ago and 49% a year ago. About 37% of the crop was setting bolls, up from 23% the previous week but slightly behind the five-year average of 42% for that date.
Traders continue to monitor excess heat and rain in West Texas amid concern over potential harm to the crop, though conditions other cotton growing areas appear unthreatening. “U.S. crop weather conditions are expected to be mostly good over the coming 10 days,” World Weather Inc. said in a report today. “Improving crop and field conditions will occur in the Delta and Texas while little change occurs elsewhere.” Warmer temperatures could improve crop development.
Technical analysis: December cotton earlier today reached 90.50 cents, near the contract high of 90.59 cents hit on July 22. Stochastics and the relative strength index are neutral to bullish, signaling sideways to higher prices near-term. If December renews the rally off May's low, resistance begins at 91.00 cents. Closes below the July 19 low of 86.35 cents would signal a short-term top has been posted. Based on nearby futures, cotton prices have nearly doubled from levels in April 2020, when the current rally began.
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.
