Crops Analysis | September 3, 2021
Price action: December corn futures fell 1 1/2 cents to $5.24 a bushel, down 5.4% for the week.
5-day outlook: Since the spike high of $5.94 1/4 in December corn futures on Aug. 12, the market has trended solidly lower and lost around 70 cents per bushel. Technicals have turned more bearish, suggesting prices next week could challenge key support at the July low of $5.07, or even the psychologically important $5.00 level. Adding to the negative tone StoneX late this week raised its U.S. corn yield projection 0.6 bu. from last month, to 177.5 bu. per acre and increased its U.S. corn production estimate from 14.945 billion bu. to 14.998 billion.
Next Friday’s (Sept. 10) USDA monthly supply and demand report will be coming into keener focus early next week, with USDA updates on estimates of the size of U.S. crop harvests. The agency is expected to slightly increase U.S. corn production.
30-day outlook: With the U.S. corn crop nearly done growing, attention is turning to mid-September, when World Weather Inc. says a “large, strong trough of low pressure” may move into the western U.S. Sep. 10-15 with an associated “unusually cool air mass” and rain in the Northern Plains. The weather pattern is too far out to be worried about frost just yet, but producers and traders will be keeping an extra close eye on weather forecasts for that time period.
90-day outlook: This week and likely for the near term, uncertainty over U.S. exports will likely be a bearish weight hanging over the market, after Hurricane Ida early this week punished the Gulf coast and forced the shutdown of several grain-export facilities in the region. However, once harvest gets under way and the marketplace gets a better handle on corn supplies, trader attention will turn to the global supply and demand balance sheet, which still should favor the corn market bulls—suggesting that seasonal harvest lows could come early this year.
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 8 3/4 cents to $12.92 a bushel, down 2.4% from last week’s close of $13.23 1/4. December soybean meal futures rose $1.00 to $341.00, but still ended down from last week’s close, $352.40, and earlier today fell as low as $338.40, a nine-month intraday low. December soybean oil rose 21 points to 59.00 cents, from 60.34 cents at the end of last week.
5-day outlook: Trade focus following the three-day holiday weekend will be squarely on USDA’s Sept. 10 Crop Production and monthly Supply and Demand reports. Analysts generally expect USDA to boost its corn and soybean yield and production forecasts from the agency’s August report. Commodity brokerage StoneX, for example, this week raised its U.S. soybean yield forecast by 0.8 bu. to 50.8 bu. per acre and increase estimated production from 4.332 billion bu. to 4.409 billion bushels. In August, USDA estimated average nationwide soybean yield at 50 bu. per acre and production at 4.339 billion bu., both lower than trade expectations.
30-day outlook: China purchased more U.S. soybeans this week, and trade will be watching closely to see if that pattern continues into the harvest season and how quickly terminals in the Gulf Coast region reopen. Early today, USDA reported a daily sale of 130,000 metric tons (MT) of soybeans for delivery to China during the 2021-22 marketing year. Since the beginning of August, USDA reported U.S. soybean sales totaling over 3.5 million metric tons to China or “unknown” destinations. After USDA’s reports, early harvest results are sure to be of keen interest. Recent chart erosion might portend further futures downside, with November ending this week not far from the 200-day moving average around $12.57.
90-day outlook: Export demand from China and other top global buyers will be key to market direction this fall, as the size of the harvest becomes clearer. There’s also the related question of export disruptions after Hurricane Ida hit the Gulf coast and forced the shutdown of several Louisiana grain terminals. Recent U.S. dollar weakness, if it continues, might provide a supportive background factor. Additionally, the overall path of the U.S. economy and the recent surge in Covid-19 cases will factor into commodity market direction generally. The Labor Department today reported that U.S. job growth slowed significantly during August, with nonfarm payrolls up just 235,000 in August, far below expectations for a gain of 720,000.
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: Wheat futures finished with gains of mostly 8 to 9-plus cents in SRW contracts, 12 to 14 cents in HRW contracts and 12 to 13-plus cents in the HRS market. For the week, December SRW wheat dropped 6 1/4 cents to $7.26 1/4 a bushel, December HRW wheat slipped a penny to $7.23 and December HRS futures declined 5 1/4 cents to $9.12 1/2.
5-day outlook: Wheat futures trimmed weekly losses ahead of the weekend, as fund selling from earlier in the week dried up. Much of the price action after the extended holiday weekend will be positioning ahead of USDA’s Sept. 10 reports and then the reaction to the data. USDA will update its U.S. wheat production forecasts, but it may wait until the Small Grains Summary at the end of the month to make any notable changes to spring wheat harvested acres. Globally, traders will be watching for any additional cuts after USDA slashed projected 2021-22 ending stocks last month. Barring any major surprises, wheat will likely follow the lead of corn and soybeans.
30-day outlook: Winter wheat seeding will pick up over the next month and we anticipate higher planted acreage this year. Aside from northern areas, most of U.S. winter wheat country is free of abnormal dryness and drought. And if winter wheat areas get some timely fall rains, the crop should get off to a solid start ahead of dormancy.
90-day outlook: Wheat exports are off to a sluggish start and are projected to decline during the 2021-22 marketing year. While multiple exporting countries are dealing with reduced production prospects, U.S. wheat is not competitively priced. The supply side of the market gives wheat a chance to rally, but it will take an increase in demand to sustain higher – or even current price levels.
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.
Cotton
Price action: After falling in concert with the other crop markets during the first half of the week, cotton futures staged an impressive late-week comeback. Most-active December futures rallied 73 points to 94.02 cents per pound, still down 82 point for the week.
5-day outlook: Traders will be watching the results of the weekly USDA Crop Progress report Tuesday afternoon (due to the holiday-delayed release of the report); they will be very interested to see the results of the first post-Ida reports of conditions in the Southeast. Anecdotal reports suggest the hurricane did little real damage to cotton in the region. The industry will then shift attention to USDA’s Sept. 10 weekly export sales report, Crop Production and Supply and Demand reports. Of particular interest will be whether USDA analysts cut their estimate of U.S. cotton plantings, since August data suggested USDA’s previous estimate was about 400,000 acres too high.
30-day outlook: Cotton traders will be keeping an eye upon conditions in the Atlantic and Caribbean throughout September, especially with the swift emergence of Ida in late August fresh on their minds. The chances of a major hurricane doing substantial damage to the U.S. crop are likely low, but such events can’t be ruled out. The industry will also be watching for signs of reduced demand for U.S. cotton in the context of the vigorous price strength exhibited this summer. A significant reduction in buyer interest could open the door to a sizable price decline.
90-day outlook: Given the fact that hurricane season lasts through November, the market will be maintaining its watch through Thanksgiving. The industry focus will shift toward harvest progress and the quality and quantity of fiber being processed. Traders will also be watching U.S. economic strength, consumer confidence and the behavior of sector leaders such as corn and crude oil as indications of future demand for cloth and fiber. Weekly and monthly reports on export strength will also be key to the outlook.
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.
