Crops Analysis | July 7, 2021
RESENDING: Updated Pro Farmer Crops Analysis for July 7 adds new hedging advisory for cotton.
Price action: The wet and relatively cool conditions sweeping across the Corn Belt this week, along with forecasts for more of the same, maintained downward pressure upon corn futures Wednesday. The expiring July contract slid 3 1/2 cents to $6.52 1/2 a bushel, while new-crop December tumbled 8 3/4 cents to $5.31.
Fundamental analysis: The spring crop market rally was largely driven by worries that the Corn Belt dryness that had prevailed through much of that period would extend into the July pollination period, so having much more favorable conditions dominate the region at this time has exerted a great downward pressure upon prices. Tuesday’s dive was the worst post-Independence Day reaction on record, which some market observers likely expected to translate into severe losses again today. But the sheer size of the breakdown may have caused others to harbor second thoughts about the outlook, especially after the weekly Crop Progress report indicated no change in USDA’s ‘good’ to ‘excellent’ reading (at 64%) from the week prior despite the improved weather that prevailed last week. That may explain the sizeable rebound from early losses and the subsequent mid-range close.
Technical analysis: December corn bounced from solid chart support in the $5.20 area, which now seems rather formidable. A drop below that support would probably trigger a test of the psychologically important $5.00 level. Bulls were not able to force a close back above the extended trendline drawn across the contract’s spring lows, so the latest reading near $5.37 3/4 is initial resistance. The intersection of its 20- and 40-day moving averages around $5.63 looks like solid resistance. Whether bulls will soon be able to push prices up to fill the $5.51 ¼ to $5.73 1/2 chart gap created by Tuesday’s opening plunge seems improbable.
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.
Price action: July soybean futures rose 22 3/4 cents to $13.86 1/2 a bushel and November soybeans rose 22 1/4 cents to $13.27 1/4. August soybean meal futures rose $2.10 to $358.70 per ton and August soyoil rose 66 points to 61.60 cents per pound.
Fundamental analysis: The soybean market diverged from corn in the wake of slightly weaker-than-expected USDA crop ratings and hopes for fresh export business. USDA yesterday reported 59% of the U.S. soybean crop in good-to-excellent condition, down from 60% last week. Analysts expected the rating to hold unchanged. Soybean futures’ recent drop stirred talk that bargain-hunting foreign buyers, possibly China, may emerge, as has been witnessed recently.
Otherwise, the Midwest weather outlook for the first half of July remained largely bearish, with more rain and milder temperatures ahead. World Weather Inc. projects two more weeks of favorable conditions for crops in much of the Midwest “as regular rounds of rain occur during the next 10 days, while a lack of excessive heat will continue for another week.” Some of the driest areas in the northwestern parts of the Midwest may benefit from cooler temperatures and rain, World Weather said, however that region remains at risk. “Warmer temperatures return during the middle to late part of next week stress to crops should quickly rise again,” the forecaster said.
Technical analysis: November soybeans traded within some of the wider daily ranges posted over the past week, briefly falling earlier today to a low of $13.09 1/4, about 2 cents above the 100-day moving average. Among chart levels to watch, November still has an unfilled a gap on the daily chart between Friday’s low of $13.82 1/2 and yesterday’s high of $13.73 ¼. On the downside, the June low of $12.40 ½ should be monitored.
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 3 cents at $6.30 1/2 today and near mid-range. Prices Tuesday hit a three-month low. December HRW wheat closed 1/4 cent today at $5.95 3/4 after hitting another three-month low. September spring wheat futures rose 14 3/4 cents to $8.08.
Fundamental analysis: September and December spring wheat futures helped to limit selling interest in the winter wheat futures markets today. However, the winter wheat contracts could get no traction as corn futures prices continued slumping in the wake of December futures’ 40-cent daily limit drop yesterday. Winter wheat traders will continue to look to the corn market for direction.
Spring wheat futures remain supported by deteriorating USDA crop condition ratings. USDA rated the U.S. spring wheat crop 16% “good” to “excellent,” down from 20% the previous week and about three percentage points worse than expected. Things do not look good going forward, either. Drought will continue in the U.S. Pacific Northwest where no rain is expected and very warm to hot temperatures are likely for another ten days – at least, said World Weather Inc.
Accelerating harvest pressure also weighs on HRW and SRW markets. USDA Tuesday afternoon reported the U.S. winter wheat crop was 45% harvested as of Sunday, up from 33% the previous week but trailing the average of 53% for the previous five years.
Technical analysis: Winter wheat bears have the overall near-term technical advantage. Prices are in choppy, two-month-old downtrends on the daily bar charts. SRW bulls' next upside price objective is closing December prices above solid technical resistance at $6.57—the top of this week’s downside price gap on the daily bar chart. The bears' next downside breakout objective is closing prices below solid technical support at $6.00. First resistance is seen at today’s high of $6.42 1/2 and then at this week’s high of $6.47. First support is seen at this week’s low of $6.25 and then at $6.20.
The HRW bulls’ next upside price objective is closing December prices above solid technical resistance at $6.23 1/2, which is the top of this week’s downside price gap on the daily bar chart. The bears' next downside objective is closing prices below solid technical support at the March low of $5.76. First resistance is seen at today’s high of $6.06 1/2 and then at this week’s high of $6.14. First support is seen at today’s low of $5.90 and then at $5.85.
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.
Advice: We advise cotton hedgers and cash-only marketers to sell the final 10% of 2020-crop to get to 100% priced in the cash market. We also advise all cotton producers sell another 10% of expected 2021-crop for harvest delivery to get to 50% forward-priced.
Price action: December cotton closed up 23 points at 87.63 cents today. Prices closed nearer the session high today. Prices Tuesday hit a more-than-four-month high.
Fundamental analysis: The cotton market bulls this week are showing some impressive resilience, in the face of sharp losses in the grain futures markets and also in the crude oil market. The U.S. stock market continues its bull run with no strong clues to suggest it will peter out anytime soon, and that’s also keeping the cotton market bulls energized, on ideas of stronger demand heading into the fall. The bulls are a bit worried about some stiff chart resistance levels that lie just above precent futures price levels, and which have stalled rallies in recent months.
West Texas recently received rain, and scattered showers are forecast for the region today and Thursday. Meantime, Tropical Storm Elsa was expected to bring more rain to already waterlogged areas in Georgia. However, most of the cotton produced in the southeastern U.S. will be spared from any serious production loss as long as the storm moves as expected, said World Weather Inc.
The weekly crop progress report Tuesday afternoon showed USDA rate 52% of U.S. cotton acreage in “good” or “excellent” condition. USDA said 42% of the crop was squaring and 11% setting pods.
Technical analysis: The cotton bulls have the firm overall near-term technical advantage. Prices are in a 3.5-month-old uptrend on the daily bar chart. The next upside price objective for the cotton bulls is to produce a close in December futures above solid technical resistance at the February high of 89.28 cents. The next downside price objective for the cotton bears is to close prices below solid technical support at the June low of 83.37 cents. First resistance is seen at 87.94 cents and then at this week’s high of 88.89 cents. First support is seen at today’s low of 86.57 cents and then at 85.00 cents.
What to do: Get current with advised 2020- and 2021-crop sales.
Hedgers: NEW ADVICE -- Sell the final 10% of 2020-crop to get to 100% priced in the cash market. Also sell another 10% of expected 2021-crop production to get to 50% forward-priced for harvest delivery.
Cash-only marketers: NEW ADVICE -- Sell the final 10% of 2020-crop to get to 100% priced. Also sell another 10% of expected 2021-crop production to get to 50% forward-priced for harvest delivery.