Crops Analysis | September 10, 2021
5-day outlook: The corn market had a bullish reaction to bearish report data, signaling it was already factored into prices. If futures show followthrough buying next week, it would be a sign the market has bottomed for now. But if today’s lows are violated, it would trigger another wave of fund liquidation. We’ve been saying for months the $5.00 level in December corn was too cheap given the supply/demand outlook. Next week’s trade will go a long way in determining if that’s still the case.
30-day outlook: There’s risk of seasonal pressure over the next month as corn harvest increases. Funds likely need to step back into the market to offset harvest-related selling by farmers and commercials. For funds to be big buyers of corn over the next month, there would likely need to be a strong influx of export demand. While some foreign buying of U.S. new-crop corn can’t be ruled out, soybeans typically dominate the falling shipping season.
90-day outlook: USDA kept its Chinese corn import projection for 2021-22 at 26 million metric tons (MMT), steady with 2020-21 and 6 MMT higher than China’s ag ministry forecasts. With Chinese corn-for-feed use expected to decline amid a slower-than-expected recovery in its hog herd and less corn being used in feed rations, USDA’s outlook may be optimistic. If China isn’t as aggressive a buyer of U.S. corn during the new-crop marketing year, it will be difficult to push prices above $6, which we have contended for months is too pricey given the supply/demand outlook.
What to do: Wait on a price recovery to get current with advised 2021-crop sales if you are behind. Catch up on the advised hedges.
Hedgers: You have hedges covering 10% of expected 2021-crop production in December corn futures at $5.22. You should have 40% of expected 2021-crop production forward-priced for harvest delivery.
Cash-only marketers: You should have 40% of expected 2021-crop production forward-priced for harvest delivery.
Soybeans
Price action: Soybeans and soymeal rallied in the wake of today’s USDA reports while soyoil declined. November soybeans rose 16 cents to $12.86 1/2 per bushel, a 5 1/2-cent weekly decline. October soyoil futures slid 28 points to 55.78 cents per pound, down 322 points over the past week. October soymeal rallied $4.40 to $339.50 per ton, up $1.40 from last Friday.
5-day outlook: Although USDA raised its 2021 soybean harvest estimate and trimmed usage forecasts, the 2021-22 production and carry-out forecasts were quite comparable to pre-report estimates by industry analysts. That triggered a relief rally from those concerned about even larger numbers. The strong ending to this week’s trading seems likely to give the market some bullish momentum to start next week. Having daily export sales announced a couple of times this week will likely encourage bulls as well. The NOPA crush report and the release of the weekly USDA Export Sales reports will be watched closely.
30-day outlook: The U.S. soybean harvest will start soon, which seems likely to exert seasonal downward pressure upon cash quotes. And while today’s strong bullish reaction to USDA data seemed to break the bearish momentum prevailing lately, there is certainly no guarantee that the downward trend won’t resume, especially with seasonal tendencies also pointing lower. Weekly export data and the release of the monthly USDA Fats & Oils report will be key events leading up to the USDA’s Crop Production and Supply and Demand reports due for release on October 12.
90-day outlook: Seasonal downward price pressure will likely be alleviated as the Midwest harvest wraps up in late November. Traders will have shifted their focus much more closely on the rate of domestic usage, exports and stockpiles. Exports to China and planting progress in South America will likely be key to price prospects from that point.
What to do: Wait on a price recovery to get current with advised 2021-crop sales if you are behind. Catch up on the advised hedges.
Hedgers: You have hedges covering 10% of expected 2021-crop production in November soybean futures at $12.73 1/2. You should have 40% of expected 2021-crop production forward-priced for harvest delivery.
Cash-only marketers: You should have 40% of expected 2021-crop production forward-priced for harvest delivery.
5-day outlook: The technically bearish weekly low closes in December winter wheat futures set the table for some follow-through selling pressure early next week. However, the big upside reversals in corn and soybean futures helped pull wheat futures up from daily lows. Look for the wheat futures markets to be a follower of corn and soybean futures for the next several weeks. If corn and beans put in early harvest lows, the downside will be limited in wheat futures.
As expected, there were no major surprises for wheat in today’s USDA supply and demand report for September. USDA projected U.S. wheat carryover at 615 million bu. for 2021-22, down from 627 million bu. in the August report. USDA puts the national average on-farm cash wheat price for 2021-22 at $6.60 a bu., down 10 cents from the August report. A rise in global wheat carryover by USDA was a bit of a surprise to traders, at 292.56 MMT for 2020-21--up from 288.83 MMT in the August report, when traders expected a small decline in world carryover.
Some positive USDA news today came when the agency reported net weekly U.S. wheat export sales at 388,400 MT, up 32% from the previous week and up 54% from the prior four-week average. Expectations ranged from 200,000 to 450,000 MT.
30-day outlook: The U.S. wheat market still needs to be more price-competitive on the world market. This week Canada reported larger wheat stocks and that its wheat exports increased 10% to 26.4 MMT on strong global demand, particularly from China. Wheat market bulls are hoping President Biden’s overture to China with his telephone call to President Xi Jinping Thursday may ease U.S.-China tensions and possibly open the door to some more U.S. wheat business to China. However, that’s probably a stretch, at least for now.
90-day outlook: The U.S. dollar index in August hit a nine-month high but has since backed off a bit. If the greenback continues to appreciate on the world foreign exchange market, it will make U.S. wheat less competitive on the world markets. Technical odds suggest the dollar index will trade sideways-to-higher in the coming months.
What to do: Make sure you are current with advised sales. Spring wheat producers should adjust sales levels based on your expected production levels.
Hedgers: You should be 70% priced in the cash market on 2021-crop. You should also have 20% of expected 2022-crop production forward-priced for harvest delivery next year.
Cash-only marketers: You should be 70% priced on 2021-crop. You should also have 20% of expected 2022-crop production forward-priced for harvest delivery next year.
Price action: December cotton futures rose 28 points to 93.50 cents, down 52 points on the week.
5-day outlook: Cotton market traders got some bullish and bearish news from USDA, but at the end of the day, the bulls won out. USDA increased its U.S. cotton production forecast by 1.245 million bales from August, by about 819,000 bales more than traders expected. The agency raised the national average cotton yield by 95 lbs. per acre, but cut harvested acreage by 434,000 acres, to 9.922 million. USDA reduced old-crop U.S. cotton carryover 50,000 bales from August, to 3.15 million bales. The national average on-farm cash cotton price for 2020-21 is 66.5 cents per pound, unchanged from last month.
On new-crop, USDA increased total U.S. cotton stocks by 1.19 million bales, with a bigger crop estimate more than offsetting the slight cut to beginning stocks. USDA now puts the national average on-farm cash cotton price for 2021-22 at 84 cents, up 4 cents from the August report.
Bullish news from USDA today came from weekly export sales. U.S. cotton net sales of 453,000 running bales (RB) for 2021-22 were primarily for China (261,500 RB, including decreases of 100 RB). Shipments of 155,300 RB were primarily to Vietnam (48,600 RB), China (29,100 RB) and Pakistan (16,600 RB).
30-day outlook: It’s early in the hurricane season but the U.S. has already experienced a major hurricane and more storms are presently brewing in the Atlantic. Cotton traders will continue to keep a wary eye on weather reports for any developing storms, especially as the cotton crop continues to mature.
90-day outlook: Two major elements are likely to help drive cotton prices into the end of the year: the health of the U.S. stock market and progress, or lack thereof, in tamping down the latest Covid variant and its surge. A growing number of investment banks are saying the U.S. stock market is becoming overvalued and may be due for a downside correction. On the pandemic front, it’s unclear how long it will take for the recent virus surge to ebb. It appears the spreading virus is not having the serious negative impacts on businesses and consumers that were seen in the spring and summer of 2020.
What to do: Get current with advised 2020- and 2021-crop sales.
Hedgers: You should be 75% forward-priced on expected 2021-crop production for harvest delivery.
Cash-only marketers: You should be 75% forward-priced on expected 2021-crop production for harvest delivery.
