Crops Analysis | June 8, 2021
Price action: July corn futures closed up 3/4 cent at $6.80 today. December futures gained 6 3/4 cents at $6.09 1/2. Prices closed nearer their session lows.
Fundamental analysis: The corn market could not hold the solid overnight gains but still held above unchanged as the serious weather market continues to play out. (Monday) was “another hot and stressful day” for crops, World Weather Inc. said today, and recent weather outlooks convey little relief for parched fields across much of the Corn Belt this week. Parts of the eastern Midwest received rain over the past day, with 0.25 to 0.75 inch reported in central Illinois, north-central Indiana and much of Ohio, according to World Weather. Most of Iowa, Nebraska and southern Minnesota remained dry. Next week may hold better prospects for rain. A high-pressure ridge over North America is expected to shift westward this weekend, creating a “northwesterly flow pattern” in the Midwest that may bring showers and thunderstorms, though rain coverage will be limited in northern and western areas.
Trading has turned choppy and volatile recently, which is typical of a serious weather market scare. Look for more of the same until this latest weather market has run its course.
USDA’s weekly crop progress report, released late Monday afternoon, showed 72% of the U.S. corn crop rated “good” or “excellent” at the start of this week, down from 76% a week earlier and below analysts’ expectations for a reading of about 74%. When USDA's weekly condition ratings are plugged into the weighted Pro Farmer Crop Condition Index (CCI; 0 to 500-point scale, with 500 representing perfect), the corn crop dropped 6.2 points to 381.8 points. The CCI rating was still 4.7 points above the five-year average for the first week of June.
Traders are also looking ahead to Thursday’s USDA monthly supply and demand report. However, the weather forecasts will very likely trump the latest USDA updates.
Technical analysis: The corn bulls have the firm overall near-term technical advantage. The next downside target for the bears is closing July prices below chart support at the May low of $6.02 3/4. The next upside price objective for the bulls is to close July prices above solid chart resistance at this week’s high of $7.06 1/4. First resistance is seen at $6.90 and then at today’s high of $6.98. First support is at this week’s low of $6.74 1/2 and then at $6.65.
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 finished near midrange with gains in the teens today. July beans firmed 19 3/4 cents, while the November contract rose 17 cents. Meal futures ended in the lower portion of today’s range with gains of $2.50 to $3.60 through the December contract. Soyoil futures slipped from their daily highs but finished 113 to 125 points higher.
Fundamental analysis: July soybean futures led price gains on bull spreading today, despite weakening basis. Traders expect USDA to hold old-crop ending stocks near unchanged in Thursday’s reports, limiting seller interest and encouraging some fresh buying.
New-crop soybeans were supported by yesterday’s initial condition ratings in which USDA pegged a lower-than-expected 67% of the crop as “good” to “excellent.” While the critical timeframe for soybeans doesn’t come until later this summer during the flowering and pod setting/filling stages, traders are still reactive to weather and crop ratings, as ending stocks aren’t projected to rise much in 2021-22. USDA is expected to mildly raise its new-crop ending stocks forecast on Thursday.
Near-term weather forecasts suggest limited rains across dry northern areas of the Midwest, while rains are expected to be heavier and more widespread across southern and eastern areas of the Midwest, along with the Mid-South, Delta and Southeast.
Technical analysis: November soybeans traded within Monday’s broader range. Near-term resistance is Monday’s contract high at $14.80, followed by the $15.00 mark. Above that, resistance would come at 25-cent intervals. Near-term support starts at the five-day moving average at $14.30 and is heavily layered down to the May low at $13.25 3/4. Within that range lie all the short-term and intermediate moving averages.
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: SRW wheat futures finished 4 to 5 cents higher, with HRW contracts mostly 1 to 2 cents higher, while spring wheat finished as much as 13 3/4 cents lower.
Fundamental analysis: USDA’s spring wheat crop condition ratings dropped more than anticipated Monday afternoon, which provided initial support. But active profit-taking hit the market as updated forecast models signaled better-than-previously-anticipated rainfall chances across the U.S. Northern Plains the remainder of the week. Heavy rains are also expected in the Canadian Prairies. If the forecast remains wet, there’s risk of additional price losses as traders will remove weather premium from the market.
Winter wheat futures firmed on spreading with the spring wheat market. Traders unwound long HRS/short winter wheat spreads. But with winter wheat harvest underway, though at a slower-than-average pace, it’s going to be difficult to find sustained buying if spring wheat futures slide further.
Technical analysis: After posting key reversals in some contracts yesterday and near reversals in the others, HRS futures showed follow-through today. That type of price action suggests short-term tops are in place and an extended price pullback is possible. September HRS futures closed below the five-day moving average today, making the 10-day average at $7.56 initial support, with more critical support being the June 1 gap from $7.50 to $7.41 1/2. Near-term resistance starts at the five-day average near $7.90 and extends to Monday’s contract high at $8.45 3/4.
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 closed up 78 points at 85.14 cents today and December gained 73 points at 85.99 cents. Prices closed near mid-ranges today.
Fundamental analysis: The cotton futures market today was again lifted by firmer grain futures prices. The fiber has also been supported this week by Nymex crude oil prices on Monday hitting a 2.5-year high of $70.00 a barrel. U.S. stock indexes hovering near or not far below their record highs at present is another bullish outside market factor for the fiber. Furthermore, the U.S. dollar index remains in an overall near-term price downtrend and that’s helping to keep U.S. cotton prices more competitive on the world market.
Monday afternoon’s USDA weekly crop progress reports showed U.S. cotton at 71% planted as of Sunday, versus 76% one year ago and 78% for the five-year average. The slower planting pace so far this year was also friendly for the cotton futures market today. The USDA report showed 46% of the U.S. crop in good to excellent condition. Nine percent of the crop was squaring compared to 12% one year ago a 11% for the five-year average.
Weather forecasters say West Texas will see normal to above normal temps the bulk of this week and into next week, with isolated rains possible. Favorable conditions are expected for the Delta region in the near term, with the Southeast also to see mostly favorable conditions but with some scattered rains causing some remaining planting delays. Georgia remains a bit dry in spots.
Traders on Wednesday will be looking ahead to Thursday’s USDA monthly Supply & Demand Report and the weekly USDA Export Sales report. Many traders are looking for the monthly supply and demand report to see USDA cut ending U.S. cotton stocks.
Technical analysis: The cotton bulls have the slight overall near-term technical advantage. The next upside price objective for the cotton bulls is to produce a close in July futures above solid technical resistance at 88.00 cents. The next downside price objective for the cotton bears is to close prices below solid technical support at the May low of 81.50 cents. First resistance is seen at this week’s high of 86.50 cents and then at 87.00 cents. First support is seen at this week’s low of 84.10 cents and then at 83.30 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.
