Crops Analysis | June 4, 2021

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Corn

Price action: Corn futures finished on a high note today, with prices mostly 20 3/4 to 25 cents higher. For the week, July futures firmed 26 cents to $6.82 3/4, while the December contract rallied 47 1/2 cents to $5.91 1/2.  

5-day outlook: No one wanted to go home short for the weekend in the throes of a weather market. Conditions will remain hot and dry across the central U.S. during the weekend. There are some rain chances for the middle of next week, though it appears unlikely rains will be enough to avoid net drying, especially in the driest northern and western areas of the Corn Belt. USDA’s Supply & Demand Report next Thursday should show an increase to old-crop corn-for-ethanol use and potentially an uptick in exports, which will pull ending stocks lower. Few changes aside from beginning stocks (old-crop carryover) are expected on the new-crop balance sheet. Globally, attention will be on USDA’s Brazilian corn crop forecast, though it’s likely to remain (well) above most private estimates.

30-day outlook: The corn crop is off to a quick and strong start. But soils are dry in northern and western locations of the Corn Belt. That means the crop in these areas will need timely rains into pollination and during grain fill. Prices will ebb and flow with weather. If summer weather remains hot and dry as it started June, there will be ammo for bulls to push prices higher. But if summer weather moderates after the current heat wave, corn will face price pressure.

90-day outlook: Besides weather, cyberattacks, geopolitics, trade policy and money flow could keep price volatility high through summer, especially given elevated prices. Buckle up. More importantly, have price targets in place that reward price rallies while not getting you oversold, especially if you are in the dry areas.

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 closed the day up 34 1/2 cents at $15.83 3/4, at a technically bullish weekly high close, and for the week rising 53 1/4 cents. July meal futures gained $4.60 at $396.20 and for the week rising 70 cents. July bean oil rose 249 points at 71.34 cents today, setting another new contract high and for the week gaining 555 points.

5-day outlook: The strong closes in soybean and soybean oil futures today, at their weekly high closes, sets the stage for follow-through buying early next week. However, soybean meal futures continue to languish and that is still an unsettling element for the soybean market bulls.

Weather in the U.S. Midwest is in the spotlight as the meteorological summer is just under way. The north-central U.S. weather forecast is crop-threatening and conditions may get stressful in the coming weeks. The European model has correctly been drier than the U.S. forecasts and that has curbed selling interest and increased speculative long positioning Friday. Limited rainfall is forecast across the Plains and the northern half of the Midwest over the next two weeks. The Dakotas, Nebraska, Iowa, Minnesota and Michigan will be particularly dry. However, keep in mind that weather forecasts in the summertime can change quickly. Any significant deviation in Corn Belt weather forecasts come Monday morning will very likely impact soybean futures prices.

The big speculative funds have trimmed bullish bets, which means there is now money sidelined that could jump back into the grain markets on confirmation hotter, drier weather will extend past this month.

The June 10th USDA supply and demand report will be closely scrutinized by grain traders. However, traders are not expecting any big surprises coming from the agency’s monthly update.

30-day outlook: The debate over U.S. planted soybean acres is intense, with USDA’s June 30 updated planted acres report the next big data point for the grain futures markets. Some market watchers have argued that U.S. corn acres could have replaced intended bean acres due to last month’s surge in corn futures prices.

Demand for U.S. soybeans needs to remain robust to help keep prices at their elevated levels. USDA this morning reported net old-crop soybean sales totaled just 17,800 MT but not a reduction as some expected the week ending May 27. New-crop sales were 180,300 MT. China bought 10,000 MT, which was slightly disappointing for market bulls betting on better business after last week’s price weakness. Meal sales rose 31% from the prior four-week average, which could help to at least stabilize the meal futures market.

90-day outlook: Late-summer is arguably the most important growth period for the U.S. soybean crop, so there are several weeks ahead of producers “keeping their eyes to the skies” for rain, as the late, legendary grain market watcher Conrad Leslie once said. The rapid planting pace of the U.S. soybean crop the past few weeks does favor a bountiful crop gathered in the fall.

On the export demand front, traders in the coming weeks will be specifically watching for Chinese buying of new-crop U.S. supplies as they are completing purchases of Brazilian soybeans.

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.

Wheat

Price action: July SRW wheat closed up 11 1/2 cents at $6.87 3/4 today, up 24 1/4 cents from the end of last week. July HRW wheat closed up 12 1/4 cents at $6.36 1/2, up 23 1/4 cents this week. September spring wheat futures surged 33 cents to $8.15 3/4, up 82 1/4 cents on the week.

5-day outlook: Concern over hot and dry weather in the U.S. Northern Plains and southern Canadian Prairies may continue to support wheat prices. There was “too much heat and dryness” this week across the Northern Plains, upper Midwest and southern Canada Prairies, resulting in notable crop stress, World Weather Inc. said in a report today. Some rains may develop this weekend, but many areas will remain too dry for an extended period of time, and a drier-than-usual tendency will prevail in the Northern Plains and upper Midwest, according to World Weather.

30-day outlook: Traders will closely follow a high-pressure ridge currently extending from the Rocky Mountains into the Northern Plains. The ridge is expected to briefly flatten this weekend, then strengthen early next week with its ridge axis running from Texas to North Dakota and Minnesota on Tuesday. Some weather models show “a strong south wind from the western Gulf of Mexico through all of the Great Plains,” according to World Weather, bringing a potential flux of Gulf moisture that “could prove to be a game-changer for some areas in Canada. Excessive heat then builds again into the Great Plains, which would keep stress on the already-struggling U.S. spring wheat crop.

90-day outlook: China will remain a wildcard in the global export markets after China aggressively increased purchases this past year. Unlike corn and soybeans, U.S. wheat exports so far this year are running below last year’s levels. For the marketing year to date, exports of all types of U.S. wheat totaled 24.3 MMT, down about 0.8% from the same period a year earlier, USDA data showed.

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.

Cotton

Price action:  July cotton futures closed the Friday session up 159 points at 85.80 cents, hit a three-week high and closed at a technically bullish weekly high close. For the week, July cotton rose an impressive 368 points.

5-day outlook: The outside markets worked in favor of the cotton market bulls Friday, as the grain futures rallied, crude oil prices hit a 2.5-year high and the U.S. dollar index backed down a bit from this week’s gains. The strong finish to the week in cotton futures should support follow-through buying interest on Monday.

USDA today reported net cotton sales of 180,800 running bales (RB) for 2020/2021--up 6 percent from the previous week and 82 percent from the prior 4-week average. Increases were primarily for Pakistan (74,900 RB), China (43,200 RB), and Vietnam (22,900 RB). For 2021/2022, net sales of 98,800 RB were primarily for South Korea (36,100 RB), Pakistan (24,200 RB), and Turkey (13,600 RB). Exports of 366,500 RB were up 13 percent from the previous week and 5 percent from the prior 4- week average. Exports were primarily to China (96,400 RB) and Vietnam (96,100 RB). Another week of good sales and shipments increases speculation USDA will raise its export forecast and cut ending stocks in the June 10 Supply & Demand Report.

30-day outlook: Weather forecasts show some rain and showers for much of Texas and the Southeast. Recent rains in parts of Texas have helped to get seeds in the ground, but more is needed in the coming weeks for good development. In the Southeast, it has been very dry the past month, but the weather models are pointing to some very important rains coming over the next week. Some growers have already switched acres from cotton to soybeans because of the dry soils.

In the coming weeks, look for the cotton market to continue to be impacted by the key outside markets—grains, crude oil and the value of the U.S. dollar on the foreign exchange market.

90-day outlook: The U.S. added 559,000 jobs in May, the Labor Department reported today, as the economy continues recovering from the pandemic. May’s non-farm payrolls number was below economists’ expectations for an increase of about 667,000. The U.S. unemployment rate fell to 5.8% from 6.1%, stronger than forecasts for 5.9%. The numbers reflect an economy continuing to gain steam, and that’s a bullish element for the cotton market due to the likely increase in consumer demand for apparel in the coming months as Americans get out in public more.

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.

 

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