Crops Analysis | June 28, 2021
Price action: July corn futures rose 39 cents Monday to close at $6.75 1/2, while December corn futures closed up 28 cents at $5.47 1/4 today. Prices closed near the session highs today.
Fundamental analysis: Coming out of a weekend that produced a mixed bag of weather for the Midwest, the speculators decided to add some length in corn futures just ahead of the historically warmest and driest two months of the growing season—July and August. The surprising buying interest in the corn market today also squeezed any tentative shorts right out of their futures positions.
While much of the Corn Belt received beneficial rains the past three days, significant portions of the region did not, and remain worrisomely dry. Drew Lerner of World Weather, Inc. in his midday update said he does not expect a solid heat wave to impact the eastern Plains or western Corn Belt before the latter part of July. “No sooner than mid-month and more likely in the last ten days of the month. However, when that time comes the dry bias that will still be prevailing in the northern Plains and upper Midwest will become much more significant and there could be some expansion to the southeast…. Keep watching the western Corn Belt,” he said, as that’s where there is the potential for serious crop problems if timely rains don’t come in the next few weeks.
Trading may be more subdued Tuesday and early Wednesday morning, ahead of Wednesday’s 11 a.m. CDT U.S. acreage and grain stocks reports from USDA. Traders expect U.S. corn plantings to rise by about 2.7 million acres from March intentions. June 1 corn stocks are expected to be 4.144 billion bu., down nearly 18% from year-ago.
Weekly U.S. corn export inspections totaled 1.008 MMT (39.7 million bu.), down 43.2% from the previous week, which was revised nearly 300,000 MT higher.
Traders will closely examine Monday afternoon’s weekly USDA crop progress reports, expected to show 66% of the U.S. corn crop in good to excellent condition, compared to 65% last week and a reading of 73% in that category for the five-year average.
Technical analysis: The corn bulls have regained the slight overall near-term technical advantage amid recent choppy and volatile trading. The next downside target for the bears is closing December prices below chart support at the May low of $5.00 1/4. The next upside price objective for the bulls is to close December prices above solid chart resistance at $5.85. First resistance is seen at $5.50 and then at $5.60. First support is at $5.35 and then at $5.20.
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 closed sharply higher and were led by new-crop November contract, which rallied 42 3/4 cents to $13.12 1/2. July soybean meal rose $4.40 to $351.60 per ton and soybean oil rose 260 points to 62.31 cents.
Fundamental analysis: Soybean futures’ gains stemmed in part from technical recovery driven by beliefs the market was oversold after heavy losses the previous two weeks. The widespread rainfall across much of the Midwest has been absorbed by traders, and focus is shifting to potentially hot July weather and persistent dryness in certain pockets of the Midwest. A high-pressure ridge “will slowly drift more into the Plains by the end of the second week of July bringing warmer and drier conditions to the western Corn Belt,” World Weather Inc. said today. Eventually expanding dryness “will reach more deeply into Nebraska, Iowa southern Minnesota and Wisconsin during July.” Expected rain “will be too light and too infrequent during the next two weeks to prevent continued drying and rising levels of crop stress, while a lack of significant heat through Thursday in most areas should prevent rapid increases in crop stress,” the forecaster added.
USDA’s weekly crop condition report later today are expected to show the first ratings improvement in three weeks. Soybean acreage rated “good” or “excellent” at the start of this week is expected to total 61%, based on the average analyst estimate in a Reuters survey, up a point from last week.
Weekly soybean export inspections of nearly 104,000 MT for the week ending June 24 was near the low end of expectations. Inspections for the week ending June 17 were revised 30,000 MT higher to a still light 205,155 MT. For the marketing year to date, total soybeans inspected for export totaled 57.2 million MT, up 55% for the same period the previous year.
Technical analysis: November soybeans today reached $13.19, within 10 cents of last week’s high, with other upside levels to watch including $13.40. On the downside, last week’s low of $12.59 3/4 may offer near-term support.
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: Spring wheat futures closed 22 to 27 cents higher in the most actively traded contracts. HRW contracts firmed 16 to 17-plus cents in most contracts, while SRW wheat finished 9 to 11 cents higher.
Fundamental analysis: Spring wheat was supported by heightening crop concerns. A strong high-pressure ridge in the far western U.S. is expected to move eastward, bringing the record temps currently in the Pacific Northwest into the Northern Plains to go along with already parched soils. That will keep extreme stress on the spring wheat crop. Traders are expecting weekly spring wheat condition ratings to drop another point or two this afternoon. If the forecast verifies, the sharp downward path in spring wheat conditions would continue.
Winter wheat markets followed spring wheat, along with the corn and soybean markets, higher. It typically takes a unique situation for the winter wheat markets to rally during harvest. For the winter wheat markets to shake off seasonal selling pressure, spring wheat and corn need to keep leading the way.
Export demand remains a concern as U.S. prices are above global values. Weekly wheat export inspections totaled only 10.5 million bu. and the market-year-to-date tally is 23.5% behind last year. Egypt purchased 180,000 MT of Romanian wheat from its snap tender – no U.S. supplies were offered.
Technical analysis: September HRS futures posted their highest close during the life of the contract. The contract high at $8.45 3/4 is the last remaining resistance on the daily chart. Above that, this year’s high on the continuation chart at $8.57 would be next resistance, followed by the psychological $9.00 mark. Initial support is the five-day moving average around $8.06 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.
Price action: Cotton futures finished a quiet, two-sided day of trade near the middle of today’s range with gains of 23 to 32 points through the March contract.
Fundamental analysis: Cotton futures pulled a little support from the row crop markets today, but given their strength, buyer interest in cotton was light. Buying was limited by weekend rainfall across cotton areas of West Texas. But rains were highly varied, with localized flooding in some areas, while others got little rainfall. Overall, conditions have improved and much of the Texas cotton crop has sufficient moisture for normal development.
Traders await Wednesday’s planted acreage update from USDA. Based on pre-report estimates, analysts expect cotton acreage to decline around 180,000 acres from March intentions. But the range of estimates extends from 11.5 million to 12.4 million acres, so someone will be surprised.
Technical analysis: December cotton futures are working on a pattern of higher highs and higher lows since the late-March low. To keep that pattern intact, the contract must push above the June 11 high at 88.50 cents and hold above June 17 low at 83.37 cents. Contract-high resistance is at 89.28 cents, with solid support at 80.99 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.
