Monday’s supply and demand reports for corn and soybeans weren’t anticipated to supply a lot in the means of surprises, and so they didn’t. Forecasts for each received tweaked because of acreage and shares knowledge reported June 30.
In any other case, the solely actual headline news came in wheat, the place the authorities launched its first estimate of durum and spring wheat manufacturing, crops devastated by the drought on the northern Plains. Minneapolis futures paced the wheat complicated greater, with positive factors spilling over into corn and soybeans after final week’s hemorrhage.
Wheat’s coattails could assist stabilize corn and soybean futures for a bit, however aren’t prone to distract merchants from their predominant obsession throughout the summer time: the dimension of 2021 crops. The following milestone in that debate comes Aug. 12, when USDA releases its first survey of grower estimates. Monday’s replace continued to make use of so-called “normal” yields of 179.5 bushels per acre for corn and 50.8 bpa for soybeans. As I discussed final week, June precipitation, whereas traditionally dry in a number of states, general didn’t meet the threshold throughout key states that will have prompted an adjustment earlier than the August survey.
Climate forecasts proceed to level in the direction of extra of the similar: heat and dry in the northwest a part of the Corn Belt, with extra average situations elsewhere. American fashions see extra widespread warmth and fewer moisture than European runs over the subsequent two weeks, however long-range maps into the finish of August stay pretty benign. Adjustments in Vegetation Well being Indexes for corn and soybeans proceed to trace the development from weekly Crop Progress stories, although the VHI for corn stays considerably beneath my forecasts primarily based on crop rankings and climate forecasts. Monday’s situation stories confirmed a slight uptick for corn with soybeans marginally improved after changes for state-by-state outcomes.
So, USDA’s present “normal” soybean yield nonetheless appears in the ball park, whereas its corn quantity seems a bit of excessive. Barring huge shifts in the knowledge, historical past and value charts might present clues about the place markets are headed into harvest.
December corn’s chart is the extra precarious of the two markets after final week’s selloff. The rebound off June 24 lows following bullish acreage information June 30 didn’t get the market above its June excessive, which was beneath the Could contract excessive. Futures stay in a downtrend after final week’s low took out the June low as properly.
If December can maintain, it nonetheless has loads of heavy lifting to do. The break after Independence Day left an enormous hole on the chart from $5.735 to $5.5225. The 25-day and 50-day shifting averages lie in the center of that vary, with a bearish sign produced when the short-term common once more moved beneath the longer one. Even a bounce to the 61.8% “Fibonacci” retracement of the July break wouldn’t shut the hole.
To the draw back, a number of development traces come into play beneath $5 if the dike breaks.
The November soybean chart isn’t so ugly, although the July rebound additionally didn’t take out June contract highs and the similar bearish shifting common crossover as corn is obvious as properly. However July lows stay properly above June lows and final week’s downturned failed to verify a break beneath the 61.8% retracement of the July bounce. Total, November reveals a wedge sample from a tightening value vary. The primary check for bulls is to shut the Independence Day hole from $13.825 to $13.7325, then to take goal at the $14.23 July 1 excessive.
So far as the path of the market by means of harvest, USDA common money value forecasts maintain some clues. There’s a powerful correlation between futures’ fall lows and USDA’s estimate of farmer promoting costs for the crop. USDA’s goal accounts for round 95% of the variance with futures lows when extra turns into identified about manufacturing as combines roll.
This technique of forecasting harvest lows isn’t good, as a result of it appears to be like at the authorities’s remaining money value estimate made after the finish of the advertising and marketing 12 months. Whereas most of the time the two costs are shut, uncommon years may cause a wider unfold. That’s what occurred final 12 months, when forecasts for carryout dropped sharply from early estimates attributable to decrease manufacturing and robust demand. However barring one other 12 months of surprises, the backside line value forecast from July 12 stories might present a place to begin for backside pickers.
In fact, there’s loads of room for dialogue on simply what the common money value will likely be. USDA put that benchmark for corn at $5.60, with soybeans at $13.70. These translate into projected fall lows of $5.24 for December corn, which closed at $5.33 Monday. The projected low for November soybeans is $12.73 – the contract closed Monday at $13.5125, suggesting draw back threat forward.
And USDA’s value forecasts may very well be too optimistic. My mannequin places the common corn value at $5.16, which tasks to a futures low at $4.75. My present soybean common value of $12.72 could be huge hassle for soybeans, pointing to a low at $11.91.