Crops Analysis | September 9, 2021
Price action: Corn futures finished midrange with losses of 1/4 cent to 2 1/4 cents through the July contract following a two-sided day of trade. December corn fell 1/4 cent to $5.10 a bushel, the contract’s lowest settlement since $5.04 1/4 on April 13.
Fundamental analysis: Corn futures extended their price slide overnight, but some corrective buying surfaced during daytime trade. Still, buyer interest was limited as traders prepared for USDA’s September crop reports tomorrow morning. Traders expect NASS to raise its yield and production estimates from last month. The surprise could come on acreage as FSA data suggests that will also increase from last month, as NASS incorporates it into its production estimate a month earlier than normal. With that said, prices have fallen sharply since USDA’s August report and a bigger crop estimate is factored into the market. If there isn’t a huge bearish yield or acreage surprise, some corrective buying could surface even if the report data is bearish on the surface, though it would likely take a bullish surprise to trigger a strong upside price move.
Changes to the old- and new-crop balance sheets tomorrow won’t be the headliner, given the attention on crop size. Both old- and new-crop ending stocks are expected to rise from last month. Key will be whether projected new-crop ending stocks approach the 1.5-billion-bu. “comfort” level for traders. If that happens, it could give funds incentive to more aggressively pare long positions.
Technical analysis: December corn futures poked below the July low at $5.07 but found support at the 200-day moving average around $5.04 1/2. That level is key near-term support, with additional key support at the May low at $5.00 1/4. Violation of those levels would open downside risk to the $4.85 to $4.65 range. To signal a short-term low, the contract would likely need to clear the 10-day moving average, which was around $5.28 1/2 today.
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 soybeans fell 9 cents to $12.70 1/2 a bushel, hitting a 2 1/2-month low. December soybean meal rose 10 cents to $337.90 per ton, near a nine-month low. December soyoil fell 130 points to 56.19 cents, hitting a 2 1/2-month low.
Fundamental analysis: It appears soybean market traders are bracing for a bearish USDA monthly supply and demand report on Friday morning. Indeed, recent history shows that September USDA U.S. soybean production numbers tend to come in above the average of analysts’ pre-report estimates more years than not. USDA is expected to raise its forecast for the U.S. soybean crop by around 0.9%, to 4.377 billion bu., and raise the average national yield to 50.4 bu. an acre, from 50.0 bu. per acre in its last estimate.
Soybean bulls got no traction today after USDA announced another daily U.S. soybean sale of 132,000 metric tons (MT) to China for the 2021-22 marketing year. Since the beginning of August, USDA has reported over 3.6 million MT of U.S. soybean sales to China or “unknown” destinations.
Traders will also examine Friday morning’s weekly USDA export sales report, delayed by one day due to the holiday on Monday. U.S. soybean sales are seen at 1 million metric tons versus 2.2 million tons reported last week.
Technical analysis: The soybean bears have the overall near-term technical advantage. Prices are in an three-month-old downtrend on the daily chart. The next near-term upside technical objective for the soybean bulls is closing November prices above solid resistance at $13.25. The next downside price objective for the bears is closing prices below solid technical support at the June low of $12.40 1/2.
Soymeal bears have the solid overall near-term technical advantage. Prices are in a four-month-old downtrend on the daily bar chart. The next upside price objective for the meal bulls is to produce a close in December futures above solid technical resistance at $355.70. The next downside price objective for the bears is closing prices below solid technical support at $325.00.
Soybean oil bulls still have the slight overall near-term technical advantage but have faded badly. Prices are in a six-week-old downtrend on the daily bar chart. The next upside price objective for the bean oil bulls is pushing and closing December prices above solid technical resistance at 60.00 cents. Bean oil bears' next downside technical price objective is pushing and closing prices below solid technical support at the June low of 51.98 cents.
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 fell 17 1/4 cents to $6.92 1/4 per bushel, the contract’s lowest closing price since $6.84 1/4 on July 27. December HRW futures plunged 22 cents to $6.82 3/4, also the lowest close since late July. December spring wheat futures sank 22 cents to end at $8.72 1/2.
Fundamental analysis: Futures tumbled to the lowest settlements in over six weeks as chart breakdowns fueled technical selling and weakness in corn and soybeans spilled over into wheat. U.S. wheat exports have been lackluster to start the new marketing year, overshadowing expectations USDA will trim its projections for U.S. and global ending wheat stockpiles in tomorrow’s Supply and Demand report.
U.S. wheat supplies at the end of 2021-22 are expected to total about 616 million bu., down about 1.8% from USDA’s current figure, based on analyst estimates. Projected global wheat ending stocks are expected to be reduced to about 279.03 million metric tons from 279.06 MMT previously.
In overnight export news, Saudi Arabia’s main state wheat buying agency issued an international tender to buy around 360,000 MT of milling wheat. Egypt purchased 240,000 MT of wheat from Ukraine and 60,000 MT of wheat from Russia.
Technical analysis: Charts have turned increasingly bearish after both December HRW and SRW contracts closed below the psychologically important $7.00 level. December SRW futures have dropped 12% from the contract high of $7.86 1/2 posted Aug. 13. Downside levels to watch include late July lows of $6.75 for December SRW and $6.42 3/4 for December HRW.
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.
Price action: December cotton futures fell 86 points to 93.22 cents a pound, the contract’s lowest settlement since 92.30 cents on Sept. 1.
Fundamental analysis: Futures fell as trade readied for tomorrow’s USDA Supply and Demand report, which may show an increase in U.S. cotton supplies in light of what’s expected to be a strong U.S. harvest. Traders also await tomorrow’s USDA weekly export sales report, which was delayed due to the Labor Day holiday. In last week’s export sales report, sales and shipments for the week ended Aug. 26 totaled 105,200 and 168,600 bales, respectively, an indication cotton prices over 90.00 cents were slowing demand.
Yesterday, USDA’s Farm Service Agency released certified acreage figures two days earlier than scheduled, after the data was “inadvertently posted” online. Based on averages of the past five years, we estimate 2021-22 cotton plantings will decline to 11.35 million acres, compared to USDA’s current estimate of 11.72 million acres. Analysts polled by Bloomberg expect USDA to raise its production estimate 430,000 bales from August to 17.69 million bales.
Technical analysis: Market bulls retain a near-term technical advantage, with prices in a 4 1/2-month uptrend on the daily bar chart. Upside price objectives for bulls include closing December futures above solid technical resistance at the contract high of 96.71 cents. For bears, downside objectives include closing December prices below solid technical support at 90.00 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.
