Crops Analysis | June 10, 2021
Price action: July corn futures closed up 8 1/4 cents at $6.99 today. December futures gained 6 3/4 cents at $6.16 1/2. Prices closed nearer the session lows after hitting a four-week high early on.
Fundamental analysis: The serious weather market in the grains continues to play out. Big-price-range trading days in corn should continue to be the norm for the near term. The latest European forecast model predicts minimal precipitation in the Corn Belt over the next 10 days, World Weather said. The U.S. model shows a bit better rain chances. The bottom line right now is that most of the Corn Belt “will experience a net decline in soil moisture over the next 10 days to possibly two weeks,” said World Weather. The corn market bulls are noting that extended weather forecasts are now reaching out to late June and not showing much promise for substantial rains over the Midwest, and then the month of July begins, which is normally drier and warmer than the month of June, and arguably the most important growing month for the majority of the U.S. corn crop.
USDA in its monthly supply and demand report today cut old-crop corn ending stocks by 150 million bu. from last month. Traders anticipated a 50-million-bu. decline. USDA made no changes to the supply side of the balance sheet. On the demand side, USDA raised food, seed and industrial use by 75 million bu. (to 6.47 billion bu.), with all of that going to corn-for-ethanol use. USDA also raise estimated old-crop corn exports 75 million bushels (to a record 2.85 billion bu.). USDA also lowered its new-crop corn carryover projection by 150 million bu. from last month. Traders expected the 2021-22 ending stocks projection to be cut 84 million bushels. Our corn ending stocks forecasts are 1.065 billion bu. for 2020-21 and 1.375 billion bu. for 2021-22.
Weekly USDA corn export sales came in at the low end of market expectations. Net corn export sales for the week ended June 3 totaled 189,600 MT for 2020-21, down 64% from the previous week and down 39% from the prior four-week average. For 2021-22, net sales were 26,400 MT. Accumulated corn exports to date in the current marketing year, at 52.9 MMT, are still running 75% above the same period a year earlier, according to USDA.
Technical analysis: Trading has been choppy and volatile. Look for more of the same for at least the near-term, amid the weather market. The corn futures bulls have the solid overall near-term technical advantage. The next downside target for the bears is closing July prices below chart support at the June low of $6.52 3/4. The next upside price objective for the bulls is to close July prices above solid chart resistance at the contract high of $7.35 1/4. First resistance is seen at today’s high of $7.17 1/2 and then at $7.25. First support is at today’s low of $6.87 3/4 and then at this week’s low of $6.69 1/2.
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: July soybean futures fell 18 1/2 cents to $15.44, while new-crop November rose 11 1/4 cents to $14.59 1/2. July soymeal fell $4.80 to $381.60, near a six-month low, and July soyoil dropped 113 points to 70.46 cents.
The European forecast model predicts minimal Midwest precipitation for the next 10 days, World Weather said today, while the U.S. model offers better rain chances. In a midday update, World Weather said some models reduced projected rain from Wisconsin to southern Ohio from Saturday to Monday, and trimmed rain chances for the lower Midwest early next week. Much of the Midwest “will experience a net decline in soil moisture over the next 10 days to possibly two weeks,” World Weather said. “Scattered showers and thunderstorms are expected periodically, but resulting rainfall may have a tough time countering evaporation.”
Soybean export sales at 15,700 MT for 2020-21 were within expectations, while sales of 105,000 MT for 2021-22 were near the low-end of the range of expectations. Exports of 278,700 MT were in line with the prior four-week average. For the marketing year to date, accumulated U.S. soybean exports totaled 57.6 MMT, up 60% from the same period a year earlier, according to USDA.
Brazil’s Conab estimated Brazil’s 2020-21 soybean crop at 135.86 MMT, a modest increase from its May forecast. It expects Brazil to export 86.65 MMT of those soybeans. USDA raised its Brazilian soybean crop forecast by 1 MMT to 137 MMT.
Technical analysis: July soybean futures fell to a new low for the week at $15.37 1/4, matching the low from June 1. That support lines up with the 40-day moving average at about $15.37. Despite today’s gain, November futures remained within this week’s range. Bulls have their sights set on Monday’s contract high of $14.80.
What to do: Make sure you are caught up with advised sales.
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: July SRW wheat settled 1 1/2 cents higher at $6.83 3/4 while July HRW futures gained 4 1/2 to $6.40 1/4, whereas July HRS advanced 10 3/4 cents to $7.75 1/2.
Fundamental analysis: The threat of Northern Plains drought remains a big factor in supporting wheat futures prices, although the USDA’s Supply and Demand wheat carryout essentially matched expectations. As one would expect with harvest looming, the winter wheat markets continue struggling to sustain gains. Nearby winter wheat futures likely gathered support from the corn market today, but the drop suffered by July soybeans reduced buying enthusiasm.
USDA boosted its domestic all-wheat production forecast 26 million bushels to 1.898 billion bushels, but cut its U.S. wheat carryout forecast by 20 million bushels, to 852 million in today’s WASDE. The reduction reflected a commensurate rise in old-crop exports to 985 million bushels. Ultimately, the onset of the spring-summer winter wheat harvest indicates increasingly available supplies at this time of year, although the danger of drought in spring wheat areas could cut prospective yields significantly and lend price support. Developments in the corn market, and to some extent soybeans, also exert considerable influence over wheat values.
Technical analysis: Wednesday’s strong July HRS rebound from 40-day moving average support around $7.35 may have marked a short-term low and represented the start of a larger recovery from the preceding decline. The fact that it filled the June 1 chart gap also seems to bode well for short-term price prospects. Look for tough resistance near the $8.00 level, especially with that being backed by recent highs the $8.02-$8.03 area. Resistance on the July SRW chart extends from the 40-day moving average around $6.97 1/2 to Monday’s high at $7.04. January and February highs near $6.70 likely represent solid support. Trendline support is near $6.50. The 40-day moving average, now at $6.57, on the July HRW chart has recently marked tough resistance. That’s backed by selling at the $6.67 February top. Trendline support around $6.01 is reinforced by psychological support at $6.00.
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.
Price action: July cotton settled 74 points higher at 87.36 cents and while December rose 87 points to 88.21 cents. The cotton market ended near session highs.
Fundamental analysis: Cotton futures found support from USDA’s Supply & Demand Report, which featured lower carryover forecasts for both the 2020-21 and 2021-22 marketing years. USDA cut its old-crop ending stocks forecast to 3.15 million bales, which would be the lowest since 2016-17 and down 4.1 million bales (56.6%) from last year. Ending stocks are projected to tighten to just 2.9 million bales in the new-crop marketing year. Our cotton ending stocks forecasts are even tighter at 3.05 million bales for 2020-21 and 2.7 million bales for 2021-22.
With such a tight carryover situation, there will be a more intense focus on weather throughout the growing season. Key production areas are either too dry or too wet at the moment. But focus will also be on demand, as higher prices will be needed to slow use, especially export demand, if there are summer weather threats. USDA’s current outlook is already projecting exports will fall nearly 10% in 2021-22, which is an aggressive cut.
Globally, USDA also trimmed its ending stocks forecasts for both the old- and new-crop marketing years.
Technical analysis: December cotton futures pushed to a new high for the recovery from the May low. The lone remaining target for bulls on the daily price chart is contract high at 89.28 cents. The April high at 87.43 cents is initial support. The rising five-day moving average, which was near 86.54 cents today, has attracted buyers on the move up from the May lows and will be additional support.
What to do: Get current with advised 2020 and 2021 crop sales; be ready to advance new-crop sales.
Hedgers: You should be 90% sold in the cash market on 2020-crop. You should have 40% of expected 2021-crop forward-priced for harvest delivery.
Cash-only marketers: You should be 90% sold on 2020-crop. You should have 40% of expected 2021-crop forward-priced for harvest delivery.
