Crops Analysis | July 8, 2021
Price action: July corn futures closed 14 1/2 cents lower at $6.38 and December futures fell 7 1/4 cents to $5.23 3/4.
Fundamental analysis: December corn posted its lowest settlement since late May on expectations rainfall and milder temperatures across the Midwest will boost crop development into pollination. Two more weeks of favorable conditions are expected for much of the Midwest, World Weather Inc. said today. “Regular rounds of rain will occur through late next week, while a lack of excessive heat will continue for another week with some of the driest areas in the west-central and northwestern Corn Belt seeing improvements.”
Still, certain parts of the Midwest are suffering. The U.S. Drought Monitor for the week ended July 6 showed drought worsened in western and northern areas of the Midwest, despite recent moisture.
USDA’s weekly export sales report tomorrow is expected to show 2020-21 corn sales of -100,000 metric tons (MT) to 350,000 MT. Sales for 2021-22 are expected to range from 100,000 to 600,000 MT.
In USDA’s Supply and Demand Report on July 12, projected ending corn stocks for 2020-21 are expected to be lowered to 1.088 billion bu., based on the average analyst estimate. Last month, USDA pegged old-crop ending stocks at 1.107 billion bushels. For 2021-22, USDA is expected to raise its ending stocks projection to 1.402 billion bu. from 1.357 billion bu. last month as it incorporates higher acreage from the June 30 Acreage Report.
Technical analysis: Corn market technical patterns have weakened considerably this week. December corn’s close at $5.23 3/4puts the contract down nearly 10% on the week and was the contract’s first settlement under the 100-day moving average since mid-August 2020. Downside levels to watch include the June low of $5.14 1/4 and the May low at $5.00 1/4.
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: November soybeans closed down 7 3/4 cents at $13.19 1/2 a bushel and nearer the session low. December soybean meal closed down $2.40 at $362.50 and nearer the session low. December soybean oil futures lost 51 points at 59.18 cents.
Fundamental analysis: Bearish Corn Belt weather patterns remain on the front burner of the soybean and corn markets. Said World Weather Inc. today: “Weather in the heart of the U.S. Midwest will still be very good with sufficient moisture to carry on normal crop development without rain for two weeks. However, rain is expected periodically through the next ten days and that will preserve the subsoil moisture for crop use in the drier days of late July and August. Crop conditions are rated extremely well in the east while crops are most stressed in the northwest. “While August is arguably the most important month for soybean plant development for most of the U.S. crop, the renewed weather market window for soybeans may begin to close in the next couple weeks, what with extended weather forecasts at that time reaching into August and if there is not threatening weather in them.
USDA Thursday morning reported a daily sale of 122,200 MT of soymeal to Mexico for 2021-22. Friday morning’s USDA weekly export sales report (delayed by one day due to the holiday Monday) is expected to show U.S. soybean sales reductions of 100,000 MT to up 275,000 MT in the current marketing year, and sales of 200,000 to 500,000 in the 2021-22 marketing year.
The soybean meal bears have the overall near-term technical advantage. The next upside price objective for the meal bulls is to produce a close in December futures above solid technical resistance at last week’s high of $392.70. 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 Wednesday’s high of $371.60 and then at $375.00. First support is seen at today’s low of $360.60 and then at $355.00.
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 slid 3 3/4 cents to $6.26 3/4 a bushel. The expiring July HRW wheat climbed 9 1/4 cents at $5.90 1/4, while December HRW gained 3 1/2 cents to $5.99 1/4. September spring wheat futures slipped 3 cents to $8.05.
Fundamental analysis: The prospect of rain and cooler temps over much of the Corn Belt kept the corn market sliding Thursday, which in turn tended to weigh upon wheat prices as well. Talk that some of that moisture might fall upon the Northern Plains appeared to depress spring wheat quotes, since that region is suffering badly from drought. One has to wonder if traders viewed the wet forecast as potentially hampering the ongoing winter wheat harvest, since SRW wheat declined modestly, less than corn, and the expiring July HRW contract posted an impressive gain in leading the deferred contracts moderately higher. The fact that the industry analysts are now anticipating a substantial reduction in U.S. wheat carry-out for the 2021-22 crop year when the USDA releases its latest Supply/Demand (WASDE) report July 12, with forecasts averaging 711 million bushels versus USDA’s June projection of 770 million, may also be providing background support for wheat values.
Technical analysis: Tuesday’s low at $6.25 is providing solid support on the December SRW chart, but a close below that level would probably signal a forthcoming test of the psychologically important $6.00 level. Last Friday’s low at $6.57 (and the top of Tuesday’s chart gap) looks like tough resistance, with secondary resistance layered up to the $7.00 level.
The December HRW chart looks similar, with support at $5.91 1/2 being loosely backed by the March 31 low of $5.76. Initial resistance is at the chart gap of $6.23 1/2, with formidable resistance at the July 1 high of $6.77 1/4. The September HRS contract failed at 10-day moving average resistance around $8.19 today but is trading above 20-day MA support near $7.94 3/4. Expect stronger support at the 40-day MA near $7.68 1/4, with tougher resistance represented by the top of Tuesday’s chart gap at $8.26 1/2.
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.
Cotton
Price action: Cotton futures finished 75 to 77 points lower through the March contract. That was near midrange for the day.
Fundamental analysis: Cotton futures were influenced by pressure from outside markets. Grain markets generally trended lower today, while the stock market was hit by concerns the Covid-19 Delta variant could derail (or at least slow) the economic recovery. Weakness in the U.S. dollar index helped limit seller interest in cotton today.
Fundamentally, West Texas weather remains generally favorable. After recent rains, a period of beneficial drier weather is expected during the next 10 days, according to World Weather Inc. Improved rainfall in West Texas over the past month may prompt USDA to raise its harvested acreage figure in the July 12 Supply & Demand Report, which it previously adjusted down to “reflect unfavorable moisture conditions.” Preparations ahead of next Monday’s report should limit traders’ willingness to actively add new positions ahead of the weekend.
USDA’s export sales data for the week ended July 1, which was delayed one day due to Monday’s holiday, may give the market a little direction tomorrow. But with the old-crop marketing year winding down, the export data typically isn’t too market-moving.
Technical analysis: The short-term technical picture is neutral, though bulls maintain the upper hand from a broader perspective. December cotton futures continue to hold within Tuesday’s range that produced a high at 88.89 cents, which is near-term resistance. Above that lies resistance at the contract high of 89.28 cents, scored in February. Near-term support extends from today’s low at 86.30 cents to the June 17 low at 83.37 cents.
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 50% of expected 2021-crop forward-priced for harvest delivery.
Cash-only marketers: You should be 100% priced on 2020-crop. You should also have 50% of expected 2021-crop forward-priced for harvest delivery.
