Crops Analysis | September 7, 2021

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Corn ­

Price action: December corn futures fell 13/ 1/4 cents to $5.10 3/4 a bushel, the new-crop contract’s lowest settlement since $5.04 1/4 on April 13.

Fundamental analysis: Futures extended last week’s 5.4% slide as speculators continued to pare long positions and traders eyed USDA’s Sept. 10 Crop Production Report, in which the agency is widely expected to hike its yield and production estimates. U.S. farmers will harvest 14.94 billion bu. of corn this year at an average national yield of 175.8 bu. per acre, based on average estimates in a Reuters survey of analysts. In August, USDA estimated the crop at 14.75 billion bu. and the average yield at 174.6 bu. per acre.

Rains across much of the Midwest last week benefitted crops, crop consultant Michael Cordonnier said in a weekly report, though he kept his corn yield forecast unchanged, at 175.5 bu., per acre ahead of USDA’s crop condition updates this afternoon. Analysts on average expect USDA will rate 60% of the crop “good” or “excellent” at the start of this week, unchanged from the previous week. About 59% of the crop was dented as of Aug. 29, USDA said last week, 4 percentage points higher than the average at this point the previous five years.

USDA today reported 275,799 metric tons (MT) of corn inspected for export during the week ending Sept. 2, down from 583,498 MT the previous week. Trade expectations ranged from 125,000 MT to 550,000 MT. Last week’s sharp decline likely reflected disruptions at the U.S. Gulf from Hurricane Ida.

Technical analysis: Corn futures charts are under severe technical pressure after the market breached key support levels over the past week. A drop under the July intraday low of $5.07 may fuel further selling, with other key chart levels including the 200-day moving average around $5.03 1/2 and the May low at $5.00 1/4. Speculators known as managed funds reduced their net long position in corn futures and options to 258,785 contracts as of Aug. 31, the second consecutive weekly decline, according to data from the Commodity Futures Trading Commission.

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: After stabilizing late last week, soybeans turned lower and soy products also declined. Soybean futures fell 12 to 14 cents per bushel, soyoil dropped 1.20 to 1.25 cents per pound and soymeal slipped $2.00 to $3.00 per ton. 

Fundamental analysis: Ideas that recent weather has been helping the 2021 corn and soybean crops finish the growing season well appear to be weighing upon markets at this juncture, with bearish traders also anticipating a traditional seasonal decline as the harvest season looms. Pre-report surveys also showed traders are generally expecting a one-point rise to 57% in the “good” to “excellent” rating on this afternoon’s USDA weekly Crop Progress report. In addition, the industry is probably expecting the USDA to revise down its domestic usage forecasts on Friday’s USDA Supply and Demand report. Bulls have likely been disappointed that no daily announcements of large sales to China have been forthcoming lately, especially after having enjoyed a long string of such news last month.

Technical analysis: After having bounced modestly from support at $12.70 last Wednesday and firming through the balance of the week, bulls had to be disappointed by the November contract’s early failure at its 10-day moving average near $13.03 3/4, subsequent downturn and poor close. Bears will likely target the contract’s June lows at $12.59 3/4 and $12.41 if they’re able to force prices below last week’s bottom. Resistance at the 10-day moving average is backed by likely selling at its 20- and 40-day moving averages at $13.20 and $13.39 1/2, respectively.

October soyoil closed near the daily lows as well. Additional support extends from the August 20 low at 56.55 and from the June 18 low of 52.44. The 40-day moving average represents stiff resistance at 61.76, since it’s reinforced by a downtrend line drawn across the contract’s July and August highs.

October soymeal proved able to bounce from its 9-month low of $333.10, but that seemingly leaves little technical support for the market at this juncture. The contract did congest in the $320 to $330 area last October, so the current slide seems likely to stall in that area. The recent breakdown has flipped support in the $343 to $346 area to initial resistance.

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.

 

Wheat

Price action: December SRW wheat closed down 6 1/2 cents at $7.19 3/4 and nearer the session low. December HRW wheat fell 5 1/2 cents to $7.17 1/2, also nearer the session low. December spring wheat futures fell 4 1/4 cents to $9.08 1/4.

Fundamental analysis: The wheat futures markets were hit on several fronts today, including spillover selling pressure from another downdraft in corn futures prices and weaker soybean prices, too. A stronger U.S. dollar index to start the trading week was negative for wheat. Also bearish for wheat today, Australia is forecast to produce its second-largest wheat crop ever in 2021-22, said the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES). 

Wheat market bulls got no help today from USDA reporting a daily sale of 327,300 metric tons (MT) of hard red winter wheat for delivery to Nigeria during the 2021-22 marketing year. USDA also reported 381,551 MT of U.S. wheat inspected for export in the latest reporting week, up from 370,461 MT the previous week, but still unimpressive from a recent historical perspective for this time of year.

This afternoon’s weekly USDA crop progress reports are expected to show U.S. spring wheat harvest at 94% complete compared to 88% last week and 82% one year ago at this time. U.S. winter wheat planted is seen at 4% complete.

Traders are awaiting Friday’s USDA’s monthly supply and demand report. The agency 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 significant changes to spring wheat harvested acres.

Technical analysis: Winter wheat bulls have the overall near-term technical advantage but are fading. Prices have been trending lower for six weeks. SRW bulls' next upside price objective is closing December prices above solid technical resistance at $7.50. The bears' next downside breakout objective is closing prices below solid technical support at $7.00. First resistance is seen at today’s high of $7.33 1/4 and then at $7.40. First support is seen at today’s low of $7.14 and then at the September low of $7.05 1/2.

HRW bulls’ next upside price objective is closing December prices above solid technical resistance at $7.40. The bears' next downside objective is closing prices below solid technical support at $7.00. First resistance is seen at today’s high of $7.29 3/4 and then at $7.35 1/2. First support is seen at $7.10 and then at $7.00.

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: December cotton closed up 3 points at 94.05 cents today and nearer the session high.

Fundamental analysis: The cotton market bulls continue to show resilience, holding prices near steady at elevated levels despite a sell-off in grain futures, a stronger U.S. dollar index and a wobbly U.S. stock market to start the trading week. Still-firm demand for cotton is keeping a floor under prices.

Traders will closely examine this afternoon’s weekly USDA Crop Progress report, the first post-Ida reports of conditions in the Southeast. Analysts do not expect significant damage occurred to the U.S. crop. Historically, USDA’s crop condition rating for cotton at present, for this time of year, remains very high.

World Weather Inc. today said India is still facing two monsoon depressions and waves of heavy rain associated with each over the next ten days. Heavy rain already occurred during the weekend from northeastern Andhra Pradesh to parts of Maharashtra where rainfall varied from 2.00 to more than 8.00 inches. Some flooding may already be under way. Some cotton crop damage will be possible because of flooding.

Cotton traders are awaiting USDA’s Sept. 10 Crop Production and Supply and Demand reports. A Bloomberg survey showed analysts on average expect U.S. cotton production at 17.69 million bales and U.S. exports at 15.06 million.

Technical analysis: The cotton bulls have the solid overall near-term technical advantage. Prices are in a 4.5-month-old uptrend on the daily bar chart. The next upside price objective for the cotton bulls is to produce a close in December futures above solid technical resistance at the contract high of 96.71 cents. The next downside price objective for the cotton bears is to close prices below solid technical support at 90.00 cents. First resistance is seen at 95.00 cents and then at 96.00 cents. First support is seen at 93.01 cents and 92.08 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.

 

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