Headlines:

  • Cotton futures lag gains in soy, cotton as US crop jitters ease
    Cotton futures lagged strong rises in other crops as official US data eased concerns over crop losses in Texas, the top producing state, provoked by a producer report of damage from “high winds and hail”. Cotton futures for December added 0.6% to 68.15 cents a pound, lagging rises of 1.4% to $10.11 a bushel for Chicago-traded soybean futures for November, and a 2.7% surge to $3.98 ½ a bushel in December corn. While the US Department of Agriculture overnight, in a much-watched weekly report on US crop progress, marked down by 1 point its estimates for the proportion of all three crops rated in “good” or “excellent” condition, for cotton, investors had already sent futures in the last session up by 1.8% on crop worries in Texas. However, the data overnight showed the overall US cotton crop still rated 60% good or excellent, well above the five-year average of 50% for the time of year.
  • Urea prices to stay under pressure, amid ‘strong oversupply’ – Yara
    Yara International warned that urea prices, at their lowest in more than a decade, will remain under pressure thanks to a “strong oversupply”, which had squeezed the group’s margins, cutting profits below market expectations. The Norwegian-based group, the world’s largest nitrogen fertilizer producer, said that the benefit to values from weaker Chinese exports, down 32% at 11.3m tonnes in the July-to-May period, was being “effectively offset” by increased output in other countries. “Strong urea capacity increases outside China are weighing on global urea prices, as non- Chinese fob [export] prices are reduced in order to displace Chinese exports,” Yara said. The group flagged in particular dynamics in the much-watched US Gulf region where, prices are “remain depressed” even compared to weak global values, which have fallen below $200 a metric ton to hit their lowest level on data going back a decade. “Urea supply to the [US Gulf] exceeds demand, not adjusting sufficiently to increased US nitrogen production,” which has been boosted by the shale gas revolution, with energy a key need for nitrogen manufacturers.

Summary:

Corn, Soybean and Wheat all gapped higher at the open today but all three markets finished well off of their intraday highs. Corn and Soybean eked out small gains but Wheat ended up lower on the day. Weather forecasts suggested that another heat wave may be coming through the Midwest with temperatures possibly rising to triple digits. The news was perhaps the cause of the gap in prices but as the day rolled on the market seemed to be taking the news in stride.

Our technical metrics showed that 368.25 is an important support level this week for the September Corn contract. The move on the chart today was a strong reversal bar that hints at the potential for lower prices for the balance of the week. If we break 368.25 this week, a run to 360 or even lower may soon follow. September Beans rallied off of Volatility Based Support a couple days ago and it was our impression that the next high might now exceed the 10.7.50 high any time soon. We anticipate that September Wheat has a reasonable shot of remaining above 498. In doing so it would continue to trace out a clean Elliott 5-Wave action.

Investors are eager to see what kind of follow-through we may experience tomorrow after having watched most of the gains from today erode by the end of the day.