MARKET SUMMARY 7-9-2021

The technical picture in the December corn market continues to weaken as prices traded to their lowest point since May 28 on Friday afternoon.  Despite a perceived tight supply picture overall and weather concerns, technical selling and long liquidation has pressured the market.  Friday’s close showed some additional technical breaks.  December corn pushed through trendline support, and traded below the 100-day moving average on the close yesterday and followed through today.  This could open the downside to challenge the $5.00 level and the market is watching the gap on the chart at $4.77.  With a USDA report next week on Monday, a bearish reaction could push price to this area to fill that gap from April.  In the short-term, the corn market looks defensive and more potential technical selling could pressure the market.

CORN HIGHLIGHTS: Corn futures started the day weaker on continued expectations for rain and likely a continuation of long liquidation. September corn lost 7-1/4 cents on the day, closing at 5.29-1/2, while December lost 6-3/4, finishing the session at 5.17. This was the lowest close for December since May 25. The trend is sharply lower with December futures averaging a daily loss of 12 cents since last peaking at 6.11-1/4 on July 1 and closing that session at 5.89. Beneficial rainfall and a cooldown in temperatures was enough to send prices reeling in a shorted week with markets closed on Monday. Of all weather scenarios, the most recent has likely been the near ideal development. More rain is needed of course, but for now, the crop is likely improved. The technical signal stochastics is in the over-sold region, yet has not indicated a buy signal. Export sales at 6.8 mb were termed neutral to weak, bringing the year-to-date total to 2.745 bb or 96.3% of and estimated total sales figure of 2.850 bb. On Monday, the next WASDE Supply and Demand report will be released by the USDA. The pre-report average estimate has projected carryout at 1.071 bb (same as June) for the 2020/21 crop and 1.361 for the 2021/22 season. Focus will also be on the Brazilian crop where another reduction is expected. While carryout is snug, the market this week focused on long liquidation and prospects for improved conditions. Word from the USDA to China is suggesting China imports may be lower in the year ahead.

SOYBEAN HIGHLIGHTS: Soybean futures rebounded today, closing with a gain of 14 cents in August and 9-3/4 higher cents in November. August settled at 13.79-1/4 down 54 cents for the week. November lost 69-3/4 cents compared to last Friday. Improved weather inconducive forecasts for production, as well as heavy liquidation, not only in soybeans, but also corn and wheat weighed on prices this week. The calendar indicates that crop conditions will likely stabilize by mid-July, or improve. They have recently been on a downslide due to drier than normal conditions, mostly in the western half of the Corn Belt. Tight world supplies of vegetable oil provide underline support for soybeans, yet this market looks like it may have topped in its price. Crushers have indicated they have enough beans to keep meal supplies available to the market until new crop is harvested. Therefore, price direction from this point forward mostly resides on weather and crop developments. Late July and August are the key windows for crop production. Less than ideal crop ratings early in the season will not necessarily mean a smaller crop, but it does make it more challenging to argue that beans will reach trendline yield of 51 bushels per acre. This number presently seems too aggressive. Paper thin carryout will again be revealed on Monday’s USDA Supply and Demand report. Projected carry out is expected to be 135 million bushels for the 2020/2021 crop and 147mb for the 21/22 crop. Private exporters reported to the U.S. Department of Agriculture export sales of 228,600 metric tons of soybeans for delivery to Mexico during the 2021/2022 marketing year, helping to provide underlying support today, as well as signaling. Export sales at 2.3 million were non-eventful, bringing the year-to-date total to 2.275 bb or 99.8% of expected sales of 99.8 mb. 4.4 mb were noted for new crop sales.

 WHEAT HIGHLIGHTS:  Sept Chi down 3 cents at 6.15 & Dec down 3 cents at 6.23 3/4.  Sept KC wheat up 6 cents at 5.94 & Dec up 5 3/4 cents, closing at 6.05.  Today was pretty similar to yesterday regarding trade direction, with Chicago down slightly and KC wheat following MNPLS wheat and remaining positive throughout the day. Rain has slowed harvest this week, with more on the horizon, mainly affecting SRW harvest more so than HRW.  Some farmers are trying to get wheat out of the field and try to plant a late crop of soybeans to take advantage of higher prices.  Northwest Plains continue to suffer from extreme drought conditions for at least the next 2 weeks.  Globally, some concerns that part of Russia may be becoming too warm and dry are starting to circulate.  Monday’s USDA report is expected to lower US production and ending stocks, but still expected the global number will continue to be a record large production number. With that, EU crops are still being rated well and it was released that Australia may end up producing a record crop this year with optimal growing conditions thus far.

Author

Bryan Doherty