Crops Analysis | September 15, 2021
Price action: Corn futures finished 11 to 13 1/4 cents higher through the July 2022 contract, led by December’s gain of 13 1/4 cents to $5.33 1/2, the highest settlement since Aug. 31.
Fundamental analysis: Corn futures sharply extended their move off last Friday’s low amid some industry reports of disappointing corn yields, which sparked speculative buyer interest. Given recent hot, dry weather, traders are growing concerned the crop is finishing too quickly, prompting speculation USDA will have to cut its corn yield estimate. But that would buck the trend when the corn yield rises in September, as it did this year, as the final yield has been even higher 74% of those years since 1970.
To build buyer interest in futures through harvest, there must be strength in the export market. That will put more focus on weekly sales. For the week ended Sept. 9, the day ahead of USDA’s reports and the price reversal, traders expect corn export sales between 500,000 metric tons (MT) and 1 million metric tons (MMT). The weekly sales figure should be a good gauge of how much foreign buyer interest there was just above $5.00 in December futures.
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: November soybean futures rose 12 cents to $12.94 1/2 a bu., the highest closing price since $13.03 1/4 on Aug. 30. December soymeal fell $2.20 to $339.60 per ton, while December soyoil rose 150 points to 58.37 cents a pound.
Fundamental analysis: Soybean futures settled at the highest level in over two weeks after the National Oilseed Processors Association (NOPA) reported stronger than expected crushing activity in August. NOPA members crushed 158.84 million bu. of soybeans last month, up 2.4% from 155.11 million bu. in July and the highest in three months. Analysts expected August crushing to fall to 154.18 million bushels. Last month’s crushing was still 3.8% under the 165.06 million bu. in crushed in August 2020.
Before August, crushing undershot trade expectations for six straight months as more processors than normal idled plants seasonally for needed maintenance and amid tightening soybean supplies, Reuters reported. NOPA also said U.S. soyoil supplies as of Aug. 31 rose to 1.668 billion lbs., up from 1.617 billion lbs. at the end of July.
Also today, USDA reported soybean sales cancellations of 132,000 MT to China and 196,000 MT to “unknown” destinations, both for 2021-22 delivery. There were reports Chinese traders bought six cargoes of Brazilian beans to meet near-term needs given U.S. export disruptions from Hurricane Ida. USDA’s weekly export sales report tomorrow is expected to show U.S. soybean sales for the week ending Sept. 9 at 600,000 MT to 1.4 MMT.
Technical analysis: Soybean futures’ sideways action the past week suggests the market is forming a base of support, though the market remains in a three-month downtrend on the daily chart. Upside objectives for market bulls include closing November above solid resistance at $13.25. Downside objectives include closing November below its June low of $12.40 1/2. Chart levels to watch include the 20-day moving average at just under $13.00, as well as last week’s low at $12.62 3/4 and the 200-day moving average around $12.65.
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.
Price action: December SRW futures climbed 11 1/2 cents to $7.12 1/4 per bushel, the highest closing price since $7.19 3/4 on Sept. 7. December HRW futures advanced 14 1/4 to $7.16. December spring wheat surged 17 1/2 to $9.04 3/4.
Fundamental analysis: Wheat futures gained spillover support from strength in the corn and soybean market. With winter wheat planting under way, the market is “bidding for acres” to stay competitive with other crops. Ongoing concern over tightening global supplies in the wake of harvest shortfalls in other top wheat producing countries also lended support.
France’s farm office expects the country to export 9.6 MMT of soft wheat outside the European Union in 2021-22, a 900,000-MT cut from its July outlook. This may have been foreshadowed by a similar production cut in the recent past, but still emphasized the tightening of the global situation. That was also the implication of a forecast cut in Russian winter wheat plantings this fall. A Reuters report cited poor weather conditions, a switch to oilseeds plantings in some regions and concerns about the country’s grain export tax.
Tomorrow’s weekly USDA export sales report is expected to show U.S. wheat sales of 300,000 to 700,000 MT.
Technical analysis: Wheat market bulls have the technical advantage at this point, especially after last weekend’s price action. Bears twice made runs at underlying support in the wake of last Friday’s bearishly construed USDA reports. But tests Friday and again Monday of the $6.80 level on the December SRW chart were quickly reversed. From a purely pragmatic standpoint, an inability to sell-off in the wake of bearish news implies the market is ready to reverse to the upside. That’s exactly what the SRW market has gotten the past two days. Bulls are now looking to test overhead resistance at the December contract’s 20- and 40-day moving averages around $7.20 and $7.23 1/2, respectively. Support is at the 10-day MA near $7.06 1/2, at the psychologically important $7.00 level and at $6.80.
The December HRW chart looks even stronger, with today’s advance pushing the contract above short-to-intermediate terms moving averages, as well as the downtrend line drawn across its August and September highs. Bulls will now be targeting last week’s high at $7.29 3/4, then the August 30 high of $7.35 1/4. Trendline support is at $7.10, with the 40-day moving average at $7.07.
The December HRS chart looks similar to that for HRW, with this week’s rebound carrying the December future back above its 10-, 20- and 40-day MAs. However, it faces resistance at the downtrend line drawn across recent highs, now around $9.10. Additional resistance is likely around $9.14 3/4, $9.27 and $9.37. The 40-day moving average puts initial support at $8.99, which reinforces the $9.00 level, with pivotal support at last week’s low of $8.61 1/2.
What to do: Make sure you are current with advised sales. Spring wheat producers should adjust sales levels based on 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 fell 29 points to 93.37 cents per pound.
Fundamental analysis: After posting an impressive rally yesterday, cotton bulls seemed unwilling to push the market higher ahead of tomorrow’s USDA export sales report. Still, the cotton market continues to post a strong performance despite USDA’s recent increase to its 2021 U.S. crop forecast. Bullishness in part stems from consistently robust demand despite elevated prices. Last week’s vigorous sales results on the USDA Export Sales report testified to that strength. However, bulls need to be constantly fed, so traders will be watching tomorrow’s export data for confirmation of those ideas. We suspect long position holders did some evening-up today just in case the numbers prove disappointing.
Technical analysis: While the market hasn’t recently mounted a serious challenge to the Aug. 16 contract high of 96.71 cents, bulls retain a technical advantage. For example, bears took a run at support around December’s 40-day moving average (now at 92.36) and the mid-2021 uptrend line near 91.70 last Friday, and the market immediately sprang back into the recent trading range. Yesterday’s rally pushed December back above the downtrend line drawn across its Aug. 16 and Aug. 30 highs. Yesterday’s high at 93.94 marks initial resistance, with the 95.00 level representing psychological resistance. The contract high is clearly a major goal for bulls. Conversely, a drop below the 40-day moving average would have bears looking to test the pivotal 90.00-cent level.
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.
