Crops Analysis | June 25, 2021
Price action: Despite the tight old-crop situation, nearby July corn futures fell Friday, down 16 3/4 cents to $6.36 1/2 in concert with the new-crop contracts as they reacted badly to favorable weather forecasts through late June and to a Supreme Court decision implying less energy industry need for ethanol. December futures tumbled 16 3/4 cents to $5.19 1/4. The two contracts ended the week 18 3/4 cents and 47 cents lower, from last week’s respective closes.
5-day outlook: The industry will be watching the weather and the latest forecasts early next week to see whether and how much the Corn Belt receives beneficial rains in late June and early July. Plentiful moisture would render plants much less vulnerable to high temperatures and dryness during the critical mid-July pollination period. Traders will then focus closely upon the results of the June 30 Acreage and Grain Stocks reports from the USDA, since the former will have huge implications for the fall harvest, while the latter will offer indications for spring demand and stockpiles going forward.
30-day outlook: Mid-July is critical to the corn outlook, since scalding conditions during the pollination period could limit the size of the fall harvest. Late June-early July rains over the Corn Belt would greatly diminish the risk of a supply reduction, so it may take another significant shift in the weather pattern to reinvigorate bullish arguments. Confirmation that Friday’s Supreme Court decision will curb the petroleum industry’s need for ethanol would also tend to undercut corn prices.
90-day outlook: Summer weather will obviously be a major factor affecting the corn outlook through the third calendar quarter. Droughty August weather might boost prices significantly, especially if it is seen as reducing harvest prospects for soybeans and sends the soy complex higher. Traders will also be watching corn off-take, especially from the export sector, to see how the recent price decline affects U.S. and global demand for the yellow grain.
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: Soybean futures fell 22 to 41 1/2 cents, led by the July contract. Meal futures finished $1.40 to $4.10 higher. Soyoil posted daily bearish reversals and plunged 292 to 307 points. For the week, November soybeans dropped 43 1/4 cents to $12.69 3/4.
5-day outlook: Soyoil futures got hammered after the Supreme Court ruled in favor of refineries in their attempt to get exemptions from biofuel blending requirements. We think the initial negative market reaction in corn and soyoil was overdone considering the administration will not likely approve many (if any) additional SREs. Soybeans followed the soyoil market sharply lower. While futures held above last week’s lows, bulls may have to defend that support next week. If the support falters, it would open the door to more aggressive fund liquidation and speculative selling.
30-day outlook: Soybean export demand is slowing seasonally as importers have turned their attention to new-crop Brazilian supplies. The crush pace is also slowing amid tight old-crop supplies and poor crush margins. That could push old-crop soybean ending stocks a little higher than anticipated. But more than anything, it means soybeans need a weather threat to reignite buyer interest.
90-day outlook: August and September are the critical months for soybeans as they set and fill pods. But there is a greater tendency for sub-trendline soybean yields in years with crop condition ratings were around 60% “good” to “excellent” in late June, as they are this year. In the driest areas with the worst conditions, timely rains will likely be needed the remainder of the growing season to avoid sharp yield declines.
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: July SRW wheat futures closed down 14 1/4 cents at $6.37 and December SRW fell 10 1/2 cents to $6.48. For the week, December SRW fell 23 1/4 cents. July HRW futures dropped 5 3/4 cents at $6.00 1/4 and December fell 5 1/4 cents at $6.18 3/4. On the week, December HRW fell 7 1/2 cents. September spring wheat futures today rose 2 3/4 cents to settle at $8.08, up 41 3/4 cents for the week.
5-day outlook: Spring wheat futures will be in the spotlight again next week after recent solid gains, including more today. September futures surged this week and are poised for a run at the $8.45 3/4 contract high, hit June 7. Meantime, winter wheat futures again today were pulled down by solid losses in corn and soybean futures. Look for price action in winter wheat futures next week to also be significantly influenced by the corn and soybean markets.
Focus will also be on weather, especially in the northern Plains. World Weather Inc. today reported excessive heat from the U.S. Pacific Northwest and British Columbia east into Alberta, Saskatchewan and Montana in this coming week will have a negative impact on crops. Montana and the unirrigated crops in central Washington will be most impacted in a negative manner. USDA will provide an update on U.S. spring wheat plantings as well as quarterly grain stocks next Wednesday.
Meantime, Kazakhstan will experience five to seven days of dry and hot weather, further stressing its spring wheat crop. Similar conditions will occur north of the border in the southwestern portions of Russia’s eastern New Lands.
30-day outlook: HRW futures prices could be supported in the coming weeks on notions a short spring wheat crop may boost demand for higher-protein HRW supplies. Meantime, SRW futures in the coming weeks are likely to see buying interest limited by the accelerating winter wheat harvest. Still, the winter harvest is thus far behind the typical pace. USDA said the winter harvest was 17% complete as of June 20, compared to 26% for the five-year average. Any rallies in the coming weeks will likely require leadership from HRS.
90-day outlook: How the U.S. corn and soybean crops fare during the rest of their growing seasons will continue to have an impact on wheat futures markets. However, if the volatile weather market in corn and beans plays out and daily price action is tamped down, look for those two markets to have much less of a daily impact on the wheat futures markets.
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 futures on Friday rose 40 points to 86.43 cents and December futures gained 45 points at 87.18 cents. On the week, December futures rose 200 points.
5-day outlook: Today’s bullish weekly high closes in cotton futures set the table for followthrough buying interest early next week. Especially impressive in the cotton market this week is that the fiber was able to tack on price gains in the face of slumping grain futures prices.
Weather in U.S. cotton country will remain in focus next week. World Weather Inc. reported today that “waves of rain marching toward and eventually through West Texas in this coming week will prove to be extremely well timed and beneficial.”
Traders await the June 30 USDA Acreage Report. Analysts polled by Bloomberg News expect U.S. cotton plantings to slip 200,000 acres from March intentions to 11.8 million acres.
30-day outlook: Cotton traders will continue to closely monitor weather in the Southeast and West Texas in July, but right now the weather situation appears to be improving. Meantime, U.S. cotton weekly export sales and shipments numbers in the coming weeks will have to remain robust to keep futures prices elevated. Bulls were disappointed with this week’s sales numbers.
90-day outlook: Two key “outside markets” are likely to keep a solid floor under the cotton market in the coming weeks, or longer. The U.S. stock market remains at or near record highs, implying better consumer demand for apparel heading into the fall. Also, Nymex crude oil futures this week hit a 2.5-year high. Crude oil prices are the leader of raw commodity sector, and when they are on the rise, most other commodity markets tend to benefit due to increased speculator buying interest.
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.
