Crops Analysis | June 7, 2021
Price action: Price action: July corn futures finished 3 1/2 cents lower and low-range. December futures firmed 11 1/4 cents for the day, but also finished low-range.
Fundamental analysis: Bulls have to be disappointed after futures gapped higher overnight and sharply extended gains. While the price gaps remain open on the daily price charts, the finish was relatively poor as bullish momentum faded throughout the session. Overnight trade and Tuesday’s price action will be driven by USDA’s weekly crop condition ratings and updated weather forecasts.
The near-term weather outlook is somewhat of a mixed bag, with western and northern areas of the Corn Belt expected to be hot with limited rainfall chances, while the southern and eastern Corn Belt, along with the Delta and Southeast are expected to receive rains. Futures are likely to ebb and flow with each new forecast model run given heightened emotions in a weather market, especially with elevated prices.
Weekly corn export inspections were at the low end of pre-report expectations and down sharply from the previous week at 55.6 million bushels. But that lowered the average pace needed to hit USDA’s current export forecast to 46.9 million bu. per week. We believe USDA needs to raise its old-crop export forecast again in Thursday’s report.
Technical analysis: Part of the overnight gap in December corn futures remains open and is near-term support from $5.97 1/2 to $5.92 3/4. Additional support is the 5-day moving average at $5.82 and the 10-day average at $5.58 3/4. Near-term resistance extends from today’s high at $6.18 1/4 to the contract high at $6.38.
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: Soybean futures ended mixed, with July contract down 23 1/2 cents to $15.60 1/4 after an overnight rally lost momentum. November soybeans firmed 4 1/2 cents to $14.40, though that was near session lows. July soymeal fell $9.30 to $386.90 per ton and July soyoil dropped 51 points to 70.83 cents, after earlier reaching a record high on the continuation chart.
Fundamental analysis: Unwinding of bull spreads and signs of softer demand weighed on nearby futures but concerns over extreme heat and dryness in the western and upper Midwest continued to support new-crop contracts.
Limited rainfall is expected in both the upper Midwest and the western U.S. Corn Belt this week, though the areas including the lower and eastern Midwest may receive some rain, World Weather Inc. said. A high-pressure ridge over North America is expected to shift to the west, not the east, later this week, which should limit heat in the heart of the Midwest and may generate showers, World Weather said. Some weather models indicated greater chances for rain in several top production states, including Illinois, Indiana, Iowa and Missouri, this week. However, these prospects are “likely overdone.”
Trade tomorrow will be partly focused on USDA’s first national soybean crop ratings. The soybean’s crop condition is expected to be about 70% “good” or “excellent,” based on analyst estimates, compared to 72% good-to-excellent at this time last year.
U.S. farmers are expected finish planting soon. The soybean crop is expected to be 92% planted as of the start of this week, based on the average analyst estimate.
Weekly soybean export inspections totaled 237,108 MT, which was within the pre-report range of estimates from 100,000 MT to 300,000 MT. For the marketing year to date, soybeans inspected for export totaled 56.7 million MT, up 58.9% from the same period a year earlier, according to USDA.
Speculators made few adjustments in their positions in soybeans and soybean oil futures at the end of May, according to CFTC data. As of June 1, money managers’ soybean net long stood at 138,788 futures and options contracts, down fewer than 1,000 on the week. They extended their net long in soybean oil by fewer than 1,000 contracts to 86,084.
Most-active soybean meal futures rose more than 3% through June 1, more than the rest of the soy complex, but money managers reduced their net long to 20,885 futures and options contracts from 25,232 a week earlier. That is their least optimistic stance in nine months.
Technical analysis: November soybeans reached a contract high at $14.80 overnight, leaving a gap between Friday’s high of $14.38 3/4 and the overnight low of $14.53. The late-day declines filled the gap. July futures rallied to $16.23 1/2, a three-week high, but slumped as low as $15.58 1/2. For bullish traders, near-term upside technical objectives include closing July futures above solid resistance at $16.00. Support starts at last week’s low around $15.37 1/4.
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 7 3/4 cents at $6.80 today and near the session low. July HRW wheat closed down 6 1/2 cents today at $6.30, also near the session low. Spring wheat futures pushed to new contract highs early on today but the backed off to close down, with July futures down 27 3/4 cents to $7.85.
Fundamental analysis: HRS wheat led the early charge in wheat futures today but the buyers quickly became exhausted. The early support came from weather concerns regarding the spring wheat crop. The Canadian Prairies received some good rains over the weekend and more are expected this week. However, little relief from moisture stress is expected in the U.S. Northern Plains, which should limit the downside in HRS futures, unless the forecast shifts wetter.
Some long spring wheat/short winter wheat spread unwinding was featured in the markets today.
Weekly USDA wheat export inspections totaled 418,547 MT, which was closer to the top end of pre-report estimates and above the previous week’s 260,288 MT tally.
USDA’s weekly crop progress reports due out later today are expected to show the U.S. spring wheat condition at 40% in the good to excellent categories, compared to 43% last week, and last year at this time 82% good to excellent. Winter wheat condition is seen at 47% good to excellent compared to 48% last week and 51% last year at this time. Winter wheat harvested is seen by USDA at 4% compared to 7% last year at this time.
Traders are awaiting Thursday’s Supply & Demand and Crop Production Reports. Just mild changes are expected to USDA’s old- and new-crop ending stocks. Traders expect the winter wheat crop estimate to rise nearly 30 million bu. from last month.
Technical analysis: SRW wheat bulls have the slight overall near-term technical advantage. It still appears the May low of $6.39 1/2 marked a near-term bottom. SRW bulls' next upside price objective is closing July prices above solid technical resistance at $7.25. The bears' next downside breakout objective is closing prices below solid technical support at $6.39 1/2. First resistance is seen at today’s high of $7.04 and then at $7.15. First support is seen at $6.75 and then at $6.69 1/4. HRW bulls and bears are on a level overall near-term technical playing field. It still appears HRW put in a near-term bottom at the May low of $5.88. The HRW bulls’ next upside price objective is closing July prices above solid technical resistance at the February high of $6.67. The bears' next downside objective is closing prices below solid technical support at $5.88. First resistance is seen at $6.40 and then at $6.50. First support is seen at $6.25 and then at $6.17 1/2. December spring wheat futures posted an “outside day” down on the daily bar chart that will turn into a more significantly technically bearish “key reversal” down if there is follow-through selling pressure on Tuesday. Remember, however, that in serious weather markets the bulls can come back to life quickly—just like was the case in corn and soybeans just recently.
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 finished low-range and down 144 points for the day. December cotton ended 62 points lower and also low-range.
Fundamental analysis: The cotton market rode the wave of strong buying in the row crop markets overnight and early in daytime trade. But as buyer interest faded in those markets, so did it in cotton. Trade on Tuesday will be centered on USDA’s weekly crop condition data, weather and preparations for Thursday’s USDA Supply & Demand Report.
West Texas will be hot and dry the bulk of this week, though rains are expected this weekend into early next week. Dry areas of the Southeast could also receive some rains, though coverage in Georgia and the Carolinas will be key to the level of relief for the cotton crop in that region.
Technical analysis: December cotton futures posted a simple inside day down after Friday’s wide range. The inability to push above Friday’s high negates the bullish reversal. Near-term resistance extends from last Friday’s high at 86.85 cents to the April high at 87.43 cents. Near-term support is the upward moving 10-day moving average at 84.20 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.
