Crops Analysis | June 2, 2021
Price action: Corn futures fell, with nearby contracts leading declines. July futures dropped 13 1/4 cents to $6.75 a bushel, while December fell 4 1/4 cents to $5.72 3/4.
Fundamental analysis: The corn market was under pressure throughout the session from government crop ratings that showed the crop off to a strong start. The U.S. corn crop was rated 76% “good” or “excellent” as of the beginning of the week, the USDA reported yesterday. That was at the high end of analysts’ expectations. The corn crop was 95% planted at the beginning of the week, compared with the five-year average of 87%, the USDA said.
Concerns over dry conditions in parts of the Midwest helped boost soybean futures today and should support corn prices as well. Much of the region received rainfall last weekend, but amounts were relatively light in some areas. Short- and mid-term outlooks call for hot temperatures in much of the Midwest as a high-pressure ridge expands, with highs around 90 F in Des Moines, for example, this weekend, according to the Weather Channel.
Strong export demand and expectations for crop shortfalls in other top producing countries may also underpin corn futures. StoneX Group cut its forecast for Brazil’s total corn crop to 89.68 million metric tons (MMT), down from 100.25 MMT in a May projection, as drought grips the country. U.S. corn exports are running a blistering 59% above last year’s levels, based on USDA export inspections report yesterday.
Technical analysis: While many fundamentals remain bullish, corn futures are up more than 75 cents from last week’s lows and some consolidation is to be expected. A high-range weekly close may be needed to keep momentum rising. December corn futures face resistance around yesterday’s high of $5.58 1/2 and support around yesterday’s low of $5.51 and the 40-day moving average near $5.49.
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 soybeans closed up 14 cents at $15.62 1/2 a bushel today and nearer the session high today. July soybean meal closed down $4.70 at $394.00 today and nearer the session low. July soybean oil futures soared 299 points at 70.38 cents today, hitting a new contract high.
Fundamental analysis: The soybean bulls continue to recover from last week’s sell off that appear to have marked a near-term market bottom. Bean bulls have regained some technical momentum but worrisome is the fact that soybean meal futures continue to under-perform. It appears that the spreaders are again selling meal and buying soybean oil. The rally in oil pushed the July futures crush markets 9 3/4 cents higher to 79 3/4 cents.
Weather patterns and extended forecasts continue to support the soybean futures market at mid-week. A strong high-pressure ridge will progress slowly eastward over the next nine days, which will limit rainfall and cause extreme heat with highs ranging from the upper 80s to the upper 90s in much of the Corn Belt. The early weather runs showed a ridge of high pressure strengthens and expands in the central U.S. June 8 – 15, which led to the decreases of rain in the forecast from June 11 to 16. Showers late next week will need to verify to limit stress in parts of Iowa, Illinois, northern Missouri, southern Wisconsin, eastern North Dakota, central South Dakota and western Minnesota.
U.S. farmers have seeded 84% of their soybean crop. Seeding progress has not been a market concern this spring amid the drier-than-normal conditions. USDA will release its first U.S. soybean crop ratings next week and they may not be as high as the initial corn ratings yesterday after frost across portions of the Dakotas, Iowa, Minnesota and Wisconsin.
Brazilian soybean exports reached 16.4 MMT in May, a record for the month and less than 1 MMT below the record shipped in April, official customs data showed Tuesday.
Technical analysis: The soybean bulls have the firm overall near-term technical advantage. The next near-term upside technical objective for the soybean bulls is closing July prices above solid resistance at $16.00. The next downside price objective for the bears is closing prices below solid technical support at last week’s low of $14.89 1/4. First resistance is seen at this week’s high of $15.78 1/2 and then at $16.00. First support is seen at this week’s low of $15.37 1/4 and then at $15.25. Soybean meal bears have the overall near-term technical advantage as prices are trending lower on the daily bar chart. The next upside price objective for the meal bulls is to produce a close above solid technical resistance at $410.00. The next downside price objective for the bears is closing prices below solid technical support at the May low of $378.30.
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.
Advice: We advise all wheat hedgers and cash-only marketers to sell an initial 10% of expected 2022-crop production for harvest delivery next year.
Price action: September spring wheat futures rose 12 3/4 cents to $7.88 1/4. September SRW futures fell 6 cents to $6.87 1/2 and September HRW edged 3 3/4 cents lower to $6.33 3/4.
Fundamental analysis: Spring wheat continued to move higher on threatening weather across North America. Concern over this week’s hot and dry weather in the northern U.S. Plains and southern Canada’s Prairies is the market focus, with only limited rain potential for next week. U.S. spring wheat was rated just 43% “good” and “excellent” (G/E) with 80% of the crop emerged.
Improving weather for U.S. hard red winter wheat conditions and harvesting may be a slow process, but traders are more interested in drought across the northern U.S. Plains and southern Canada’s Prairies and returning dry, warm weather in Russia’s New Lands next week. The U.S. winter wheat crop was rated 48% G/E, up 1% from the prior week and right at the five-year average. Drier weather next week will aid harvesting and reduce quality concerns.
Good harvest weather is expected in China while wet weather in Ukraine and Russia’s Southern Region will be closely monitored along with rainy weather in the northeastern China. Rabobank called winter crop area in Australia up 2% from a year ago. Russia's new formula-based grain export taxes will remain in place as long as there is increased global demand for food, Deputy Prime Minister Victoria Abramchenko told Reuters. "Lower supply in the global food market will result in large consumers having to summon food from all over the world,” she said.
Technical analysis: It was another big day of intermarket spreading. September spring wheat touched $8.03 before paring gains into the close. Key resistance remains the contract high at $8.10 3/4 with support at the top of yesterday’s upside gap from $7.41 1/2 to $7.50. Both September SRW and HRW futures failed to clear yesterday’s highs and closed lower. Prices traded inside range, setting up important Friday closes.
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: NEW ADVICE -- Sell an initial 10% of expected 2022-crop production for harvest delivery next year. You should also have 60% of expected 2021-crop sold.
Cash-only marketers: NEW ADVICE -- Sell an initial 10% of expected 2022-crop production for harvest delivery next year. You should also have 60% of expected 2021-crop sold.
Price action: July cotton fell 48 points to 83.77 cents and December edged 15 points lower to 84.66.
Fundamental analysis: Futures consolidation was seen following strong gains to start the month yesterday. After rising to the highest in more than two weeks the market was due for some profit taking. Yesterday, USDA issued its holiday-delayed crop progress and condition data. The nation’s crop was 64% planted, up 15 points from a week earlier and near the five-year average of 65% done. In fact, most states are pretty much on historical pace.
The five-day forecast for Texas indicates the rains will be moving more eastward. The 6- to 10-day forecast shows below-normal temperatures and above-normal rainfall, while the 8-to-14-day outlook indicated below-normal temperatures and normal to above-normal rainfall. The Southeast has improving chances for rain, but still are less than 50%. USDA said 43% of the crop was in “good” and “excellent” condition this week, in line with last year’s 44%. However, 18% was rated in “poor” conditions, up from 7% a year ago.
The markets should have a good reading and understanding as to plant growth prospects in about two weeks. Dryness was partially eased in the U.S. southeastern states during the weekend and more rain later this week will add to that. The Delta will experience a good mix of weather.
A recent statement by Cotton Outlook signaled that the Chinese crop could be down as much as 10% and Pakistan will plant less cotton in favor of edible beans. The same may be true in India amid ever-increasing food prices and the increased cost of inputs.
The market could be quiet again Thursday ahead of Friday’s USDA weekly export sales and the Labor Department June jobs data. In addition, spot July’s options expire on June 11, with the delivery period starting June 24.
Technical analysis: After finding buyers at the 100-day moving average the last two weeks, December cotton futures are trying to build upside momentum to make a run at the April high 87.43 cents and then the February contract high at 89.28 cents. Daily momentum turned back to the upside yesterday and a high-range weekly close Friday would be a positive chart signal. Initial support is at 83.69 with stronger support at the 100-day moving average at 82.29.
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.
