Crops Analysis | June 15, 2021
Price action: New-crop futures fell sharply, with the December contract settling 7 1/2 cents lower at $5.73 3/4 a bushel, the contract’s lowest close since $5.66 1/2 on June 3. July futures rose 8 1/4 cents to $6.67 1/2.
Fundamental analysis: Futures fell for the third consecutive session, sending new-crop contracts near two-week lows, on expectations rain and cooler temperatures forecast for much of the Midwest next week will relieve dryness-stressed corn and soybean acres. The central U.S. will experience another few days of high temperatures, but that will be followed by milder weather for most of the U.S. Plains and Midwest this weekend and next week, according to World Weather Inc. “Another round of rain advertised for June 23-25 will be important in maintaining improvements in soil moisture that result from rain this weekend, with some beneficial rain likely in the driest areas from the eastern Dakotas into northern Wisconsin,” the weather watcher said in a report today.
The crop-friendly weather outlook prompted traders to dismiss further deterioration in the USDA’s crop ratings. USDA rated 68% of the U.S. corn crop “good” to “excellent,” as of Sunday, a four-point slide from last week and a point lower than analysts expected on average.
But growing conditions are hardly ideal for the entire Corn Belt, as many western states remain parched. The eight-point drop in the USDA’s good-to-excellent rating was comparable to the 2012 drought year, Reuters reported. In Iowa, the top corn-producing state, corn rated good-to-excellent plunged 14 percentage points, to 63%, this week. A drop of that magnitude has not been observed during June in Iowa since 1988, which brought a severe drought. Iowa’s good-to-excellent corn rating was 81% two weeks ago.
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 finished 6 1/2 cents lower, while the August through March contracts dropped 15 1/4 to 21 3/4 cents on the day. Meal futures ended $1.50 to $5.70 lower through the December contract. Soyoil dropped 39 to 59 points through the December contract.
Fundamental analysis: Traders ignored the bigger-than-expected five-point drop in soybean crop condition ratings USDA reported Monday afternoon. Instead, they focused on cooler, wetter weather that’s advertised in the forecast models for the weekend through next week. The midday GFS weather model reduced rain for much of the Midwest June 22-24, which moved futures off their lows into the close. Traders will monitor overnight early morning weather model runs for price direction Wednesday. While the critical weather period for soybeans isn’t until August and September, the market will remain responsive to forecasts and likely take the lead of the corn market.
Much of the focus is on new-crop supply prospects, but demand is still critical for determining old-crop ending stocks. NOPA data this morning showed the crush pace down from year-ago but up from April at 163.5 million bushels. That implies a full crush of 173.5 million bu. for the month. To reach USDA’s old-crop crush forecast of 2.175 billion bu., the crush pace over the final three months of 2020-21 needs to total 531 million bu., down 5 million bu. from the same period last year. Given tight supplies and weak summer crush margins, there’s risk USDA may have to lower its old-crop crush forecast.
Technical analysis: November soybean futures closed below the 40-day moving average for the first time since March 30 but remain in the long-term uptrend from the April 2020 low. To maintain the uptrend, bulls must defend support at the last reaction low at $13.25 3/4. Prior to that, support is at the 50-day average around $13.60 1/2. Resistance is layered from the violated 40-day moving average at $13.84 to the contract high at $14.80. Within that range lies the 5-, 10- and 20-day averages.
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 closed down 13 cents at $6.61 1/2 today and near mid-range. July HRW wheat closed down 15 1/4 cents today at $6.12 3/4, near mid-range and hitting a 2.5-week low. Spring wheat futures settled $1 3/4 cents lower at $7.47 3/4.
Fundamental analysis: Wheat futures were pressured by early losses in the corn market today that did see July corn make a rebound by the close, but new-crop December corn closed lower. Soybean futures finished lower across the board and that also weighed on wheat futures. Spring wheat futures rebounded from daily lows by the close and that allowed the winter wheat futures to close near mid-ranges.
The likely increase in U.S. wheat harvesting in the near term is also a negative for the futures markets. Weather forecasts for U.S. wheat country are mostly favorable for harvest the next two weeks. As of Sunday, USDA reported only 4% of the U.S. winter wheat crop was harvested, which is 11 points behind the five-year average. All states are behind their average harvest pace for mid-June. USDA said harvest has not yet started in top wheat producer Kansas.
USDA on Monday afternoon rated 37% of the U.S. spring wheat crop “good” to “excellent,” down 1 point from last week but just above the 36% analysts surveyed by Reuters expected. Twenty-seven percent of the spring wheat crop is rated “poor” to “very poor,” a two-point gain from the week prior. In top-producing North Dakota, just 29% of the crop is rated in the top two categories.
Technical analysis: Winter wheat bulls and bears are on a level overall near-term technical playing field but the bulls are fading. SRW bulls' next upside price objective is closing July prices above solid technical resistance at the June high of $7.04. The bears' next downside breakout objective is closing prices below solid technical support at the May low of $6.39 1/2. First resistance is seen at today’s high of $6.76 1/4 and then at Monday’s high of $6.80 3/4. First support is seen at today’s low of $6.49 and then at $6.39 1/2.
The HRW bulls’ next upside price objective is closing July prices above solid technical resistance at the June high of $6.54 1/2. The bears' next downside objective is closing prices below solid technical support at the May low of $5.88. First resistance is seen at today’s high of $6.28 1/4 and then at this week’s high of $6.36 1/2. First support is seen at today’s low of $6.02 1/4 and then at $5.88.
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 closed up 33 points at 85.28 cents today and nearer the session high on a bounce after big losses Monday that saw profit-taking from recent gains. December cotton rose 67 points at 86.80 cents.
Fundamental analysis: Cotton futures today were supported in part by the S&P 500 and Nasdaq stock indexes hitting record highs in early trading, suggesting American consumers, overall, are continuing to make a good recovery from the pandemic. That bodes well for demand for the fiber. Also, raw commodity sector leader Nymex crude oil futures pushed to a 2.5-year high today above $72.00 a barrel, further helping out the cotton market bulls.
Gains in the cotton futures market were limited today by generally weaker grain futures prices. Expect cotton traders to continue to look to the grains for price direction in the near term.
Weather in West Texas saw isolated showers Monday, but it’s expected to be mostly dry Tuesday-Friday. Temps will be near to above-normal.
Monday afternoon’s USDA crop progress reports showed U.S. cotton at 90% planted as of Sunday, compared to 87% last week and 89% one year ago. Squaring was 13% versus 16% a year ago. The cotton crop’s good to excellent rating by USDA was 45%, with 45% fair and 9% poor to very poor condition.
Technical analysis: The cotton bulls have the overall near-term technical advantage. The next upside price objective for the cotton bulls is to produce a close in July futures above solid technical resistance at last week’s high of 87.74 cents. The next downside price objective for the cotton bears is to close prices below solid technical support at the May low of 81.50 cents. First resistance is seen at 86.00 cents and then at this week’s high of 87.00 cents. First support is seen at 84.00 cents and then at this week’s low of 83.10 cents.
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.
