Crops Analysis | September 21, 2021
Price action: December corn futures fell 4 3/4 cents to $5.17 a bushel, while deferred contracts dropped 4 to 4 3/4 cents.
Fundamental analysis: December futures declined for the fourth consecutive session as the Midwest harvest accelerated and USDA reported an unexpected increase in its crop rating. USDA yesterday said 10% of the U.S. corn crop was harvested as of Sept. 19, matching trade expectations. Harvest progress was up from 4% a week ago and above the five-year average of 9%. The crop was rated 59% “good” or “excellent,” up from 58% a week ago. The good-to-excellent rating was expected to hold at 58%.
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 improved 3.4 points to 357.2 points, which is still 8.5 points below the five-year average.
Crop Consultant Dr. Michael Cordonnier kept his U.S. corn crop yield estimate unchanged at 176 bu. per acre, with a neutral to slightly lower bias. Earlier this month, USDA estimated the nationwide yield at an average of 176.3 bu. per acre. Heat and dryness in the central and eastern Corn Belt “took the ‘top end’ off the corn yields, and I might trim my U.S. corn yield in the coming weeks,” Cordonnier said in a weekly report.
Technical analysis: Market bears have a near-term advantage, with future in a five-week downtrend on the daily charts. December futures fell as low as $5.12 3/4, the lowest intraday price since $5.07 1/2 on Sept. 13. Chart levels to watch include $4.97 1/2, a five-month low hit Sept. 10, and the 200-day moving average around $5.09. Upside objectives include closing December futures above resistance at $5.50, with resistance also seen at $5.27 and $5.30 1/2.
What to do: Wait on an extended price recovery to get current with advised 2021-crop sales if you are behind. Catch up on the advised hedges. We are targeting a return to the mid-$5 level to increase 2021-crop sales.
Hedgers: You have hedges covering 101% 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 soybeans climbed 11 1/2 cents to $12.74 a bushel, while December soyoil gained 42 points to 55.29 cents a pound. December soymeal advanced $2.00 to $341.80.
Fundamental analysis: The soy complex bucked weakness corn and wheat futures to end higher across the board, led by soybeans. The soybean market may be vulnerable to seasonal harvest pressure, especially after the weekly USDA reported the soybean harvest 6% complete as of Sept. 19, about 1 percentage point ahead of the five-year average. The quick start to the harvest may indicate late-summer weather wasn’t conducive to a strong finish for the soybean crop. Stability in equity and energy markets today may also have encouraged soy traders that yesterday’s widespread breakdown, amid worries over China’s economy, was overdone, triggering short-covering in the soy complex.
Technical analysis: November soybeans yesterday closed at the lowest level since June 17, which seemingly set the stage for a test of solid support at that day’s low of $12.40 1/2. Today’s rebound loosened the bearish dominance to some extent, but downside risk to the $12.00 level or below is still very much intact. Bulls need to overcome 10- and 20-day moving average resistance in the $12.81 and $12.92 areas, respectively, if they want to avoid a bearish follow-through, and probably need to challenge stiffer resistance at the 40-day moving average (around $13.16 1/2) and the downtrend drawn across recent highs (near $13.31 1/2).
The October soyoil chart looks similar to that of soybeans, with today’s low also marking the lowest quotes since mid-June. The higher close looks somewhat promising, especially if one places much credence in one-day “hammer” reversal signals on the candlestick charts. Still, bears are targeting support at the June 18 low of 52.44, whereas bulls face resistance at 56.35, 57.92 and 59.83.
October soymeal futures have traded mostly sideways since dipping to a multi-month low of $332.50 on September 8. Tentative support has emerged around today’s low at $335.30, but a drop below these recent lows suggests risk down to the $325.00 to $330.00 area. The 20-day moving average places initial resistance near $341.20, backed by resistance around the mid-August lows in the $345.00 area. That’s closely backed by the 40-day moving average at $347.50.
What to do: Wait on an extended price recovery to get current with advised 2021-crop sales if you are behind. Catch up on the advised hedges. We are targeting a return to the mid-$13 level to increase 2021-crop sales.
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 wheat fell 10 1/2 cents to $6.90 1/4 a bushel and nearer the session low. December HRW wheat fell 9 1/2 cents to $6.90 1/2, also nearer the daily low. December spring wheat fell 6 1/4 cents to $8.87 3/4.
Fundamental analysis: HRW and SRW futures led wheat prices lower as the market largely followed weaker corn. USDA yesterday said the U.S. winter wheat crop was 21% planted as of Sept. 19, up from 12% the previous week but 1 percentage point below trade expectations. Limited rainfall is expected at least the next two weeks in HRW country, keeping topsoil moisture in short supply for a majority of the region. Rainfall needs will increase in October as recently seeded crops begin germination and emergence, said World Weather Inc. Spring wheat areas in the Northern Plains will also see little to no rain the next two weeks, with temperatures mostly above average.
Wheat market bulls are fading as prices sustain near-term downtrends, inviting the shorter-term technical traders to the short side of futures. The price downtrends and recent selling pressure in the corn and soybean futures markets are also squelching buying interest in wheat. Wheat markets will likely continue to look to corn and soybeans for direction in the near term.
Technical analysis: SRW bulls and bears are on a level overall near-term technical playing field, though prices have been trending lower for five weeks. SRW bulls' next upside price objective is closing December futures above solid technical resistance at $7.33 1/4. Bears' next downside breakout objective is closing prices below solid technical support at the September low of $6.77.
HRW bulls have the slight overall near-term technical advantage but need to show fresh power soon to keep it. Bulls’ next upside price objective is closing December above stiff technical resistance at $7.35. The bears' next downside objective is closing prices below solid technical support at the September low of $6.70 1/4.
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 rose 101 points to 90.03 cents a pound, closing nearer the session high on a short-covering and bargain-hunting bounce from six-week lows yesterday.
Fundamental analysis: The cotton futures market today saw a decent rebound, but the bulls have much more work to do in the near term to begin to suggest a price uptrend can be restarted on the daily chart. For cotton price action this week, much will depend on key outside markets, including U.S. stock indexes, the U.S. dollar index and crude oil. If stocks see more selling pressure this week, the cotton market bulls are likely to again run for cover.
USDA in its weekly crop progress report said the U.S. cotton crop was in 64% good to excellent condition, with 9% harvested as of Sept. 19. The harvest pace compares to 10% completed a year ago at this time and the five-year average of 11%. Forty-eight percent of the cotton crop had bolls opening.
West Texas weather will remain dry and warm over the next couple of weeks, favoring normal crop development, said World Weather Inc. today. The U.S. Delta will finally start drying down after the first half of this week. Southern parts of the region have been too wet recently, raising concern over fiber quality and possible boll rot.
Technical analysis: The cotton bulls still have the overall near-term technical advantage. However, a 4 1/2-month uptrend on the daily bar chart has been negated and prices are now in a four-week downtrend on the daily bar chart. The next upside price objective for the cotton bulls closing December futures above solid technical resistance at this week’s high of 92.42 cents. The next downside price objective for cotton bears is a close below solid technical support at 88.00 cents. First resistance is seen at today’s high of 90.75 cents and then at 92.00 cents. First support is seen at 90.00 cents and then at this week’s low of 88.95 cents.
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.
