Crops Analysis | September 8, 2021
Price action: December corn futures fell 1/2 cent to $5.10 1/4 a bushel, a five-month low settlement for the second day in a row.
USDA yesterday reported 59% of the U.S. corn crop in “good” or “excellent” condition as of Sept. 5, down from 60% the previous week and one percentage point lower than analysts expected. 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 slipped 0.3 point to 355.3 points, 9.7 points below the five-year average.
Grain exports from U.S. Gulf Coast terminals in Louisiana remained limited this week following damage from Hurricane Ida, keeping buyers in corn futures timid. The main problem continues to be getting electrical power to the shipping operations.
Technical analysis: Corn market futures bears have a firm overall near-term technical advantage. Prices are trending down. The next downside target for the bears is closing December prices below chart support at $5.00. The next upside price objective for the bulls is to close December prices above solid chart resistance at $5.30. First resistance is seen at $5.20 and then at $5.25. First support is at $5.07 and then at $5.00.
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 2 1/2 cents to $12.79 1/2 a bushel following two-sided, narrow-range trade. December soymeal ended unchanged at $337.80 per ton, after earlier falling to the lowest price since last November. December soyoil fell 21 points to 57.49 cents per pound.
Fundamental analysis: Soybean futures faded from stronger overnight gains but still managed to end slightly higher as fresh Chinese demand bolstered export optimism. Early today, USDA announced a daily sale of 106,000 metric tons (MT) of soybeans to China for the 2021-22 marketing year. Since the beginning of August, USDA has reported over 3.5 million MT of U.S. soybean sales to China or “unknown” destinations.
The grain and soy complex was relatively subdued as the marketplace awaits USDA’s Sept. 10 Crop Production and Supply and Demand reports, in which the agency is widely expected to hike its yield and production estimates. U.S. farmers will harvest 4.377 billion bu. of soybeans this year, 0.9% higher than the USDA’s August projection, based on the average estimate in a Reuters survey of analysts. The average national soybean yield is expected to be raised to 50.4 bu. an acre from 50 bu. per acre in the USDA’s August report.
USDA’s weekly crop condition ratings yesterday were about as expected for soybeans. USDA reported 57% of the U.S. soybean crop in “good” to “excellent” condition as of Sept. 5, up from 56% the previous week but down from 65% a year ago. The latest rating met trade expectations. When USDA's weekly condition ratings are plugged into our weighted CCI, the soybean crop declined a half-point to 345.6 points, 12.5 points below the five-year average.
Technical analysis: Market bears have an overall, near-term technical advantage, with futures in a downtrend for much of the past three weeks, based on the daily chart. But November soybeans appear to have found support around $12.70, last week’s low. The new-crop contract fell to $12.72 today before rebounding. For market bulls, objectives include closing November above solid resistance at $13.40. For bears, objectives include a close below solid technical support at the June low of $12.40 1/2. Other chart levels to watch include the 200-day moving average around $12.59.
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: Despite general firmness in the corn and soybean markets, wheat futures turned decidedly lower. December SRW futures fell 10 1/4 cents to $7.09 1/2 per bushel, while December HRW dropped 12 3/4 cents to $7.04 3/4. December spring wheat futures sank 13 3/4 cents to $8.94 1/2.
Fundamental analysis: Today’s across-the-board wheat declines likely represented a response to an announcement from Stats Canada, that country’s USDA counterpart, which indicated its domestic wheat stocks as of July at 5.71 million metric tons. In contrast, the USDA had most recently estimated that figure at 3.83 MMT. Given its tendency to rely upon other countries’ estimates of their domestic data, the USDA is likely to make a similar revision to its Canadian stocks figure in Friday’s Supply & Demand report. Traders probably won’t be particularly aggressive in the markets tomorrow with the monthly Supply and Demand and Crop Production reports, as well as the weekly Export Sales report due for release Sept. 10. The U.S. spring wheat harvest is essentially complete, while winter wheat plantings are only just getting under way, so the wheat markets have little crop news to work with at this juncture.
Technical analysis: Bearish traders have seized the technical advantage on in SRW and spring wheat charts, with both markets dropping below 40-day moving averages. December SRW futures closed just above support at last Thursday’s low of $7.05 1/2, with additional support around the $7.00 level and extending from the July 26 low at $6.75. The 40-day moving average now places initial resistance at $7.22 3/4, with backing from the 20-day moving average at $7.36, as well as recent highs around $7.45.
By contrast, December HRW futures closed just above 40-day moving average at $7.02 1/2, and is backed by strong psychological support at the $7.00 level. Additional support is likely to emerge around $6.85. Initial resistance is marked by the 20-day moving average near $7.23, by last week’s highs near $7.35 and by mid-August trading in the $7.50 area.
December spring wheat likely enjoys support around today’s low at $8.90, with backing at July 26 low of $8.57. Short-term moving averages indicate layered resistance between $9.00 and $9.09.
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: Cotton futures rallied early but mostly erased those gains by the close, with December futures rising 3 points to 94.08 cents per pound.
Fundamental analysis: USDA’s Crop Progress report yesterday showed cotton rated “good” or “excellent” at the start of this week plunged to 61% from 70% the week prior. This did not reflect damage done by Hurricane Ida, but represented a broad drop suffered by the Texas crop. Moreover, the national “poor” to “very poor” rating rose just 1 percentage point, to 7%. The early rally likely marked a bullish response to news of the drop in crop ratings, whereas mature reflection on the topic likely spurred subsequent selling. We at Pro Farmer theorize that a large number of marginal acres farmers in the region had not expected to harvest have now been added to those they will pick, which USDA scouts added to their survey, causing the ratings to dive.
The industry is looking ahead to USDA’s weekly Export Sales report, as well as the agency’s Crop Production and Supply and Demand reports, all to be released Sept. 10. Trading will likely to be muted tomorrow as traders even up positions ahead of the reports.
Technical analysis: Although yesterday’s intraday reversal was not encouraging for bulls, the technical picture still appears firm. Not only is the 2021 uptrend still very much intact, the flat price action of the past two days pushed the closing price above the short-term downtrend drawn across the December contract’s August 17 and August 30 highs. It also ended the day above the confluence of its 10- and 20-day moving averages at 93.79 and 93.71 cents per pound, respectively. Strong support persists at the contract’s 40-day MA near 91.80, as well as the six-month uptrend line near 91.30. Today’s high at 95.17 marks initial resistance, with stiff resistance also waiting at the August 17 contract high of 96.71.
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.
