Crop Analysis (VIP) -- August 10, 2012

August 10, 2012 09:33 AM
 

Corn

Price action: Corn futures had a sell-the-fact reaction to USDA's report data today as traders opted to take profits ahead of the weekend. Corn futures posted new contract highs earlier today, but ended with little net change for the week.

5-day outlook: Traders are again looking for a drop in crop condition ratings Monday. But at this stage, it's going to take more than declining crop ratings to fuel fresh buying. Corn needs some demand news or a fresh wave of speculative buying to trigger the next leg higher.

30-day outlook: We'll get a first-hand look at this year's crop Aug. 20-23 on the Pro Farmer Midwest Crop Tour. That will give us an idea of whether USDA will have to lower its Aug. 1 crop estimate in coming months.

90-day outlook: If USDA cuts its crop estimate, it will have to get creative on the usage side of the Supply & Demand table as much of the "fat" has already been trimmed as USDA currently projects 2012-13 corn use to be down 1.265 billion bu. from the current marketing year.

Hedgers: 100% sold on 2011-crop in the cash market. 40% of expected 2012-crop production is covered in Dec. $6.50 put options for 31 1/2 cents. 35% cash forward sold on expected 2012-crop production -- 25% for harvest delivery; 10% for March 2013 delivery.

Cash-only marketers: 100% sold on 2011-crop. 35% forward priced on expected 2012-crop production -- 10% for harvest delivery; 10% for March 2013 delivery; and 15% for May 2013 delivery.

 

Soybeans

Price action: Nearby soybean futures traded as much as 50-plus cents higher today, but the market backed well off its gains to close with gains in the teens to 20s. Futures still ended with strong gains for the week.

5-day outlook: Today's report data emphasized the importance of the soybean crop in the field. Thus attention will likely shift back to rainfall for the filling bean crop next week. There are still some rains in the near-term forecast, along with cooler temps, but timely rains need to continue into September to assure adequate pod fill.

30-day outlook: Harvest is getting started and the market will soon have yield data with which to gauge 2012 production. USDA's crop estimates for beans today is far from a "sure thing" because rains could still boost crop prospects. We'll also have our own assessment of the crop on the Pro Farmer Midwest Crop Tour Aug. 20-23.

90-day outlook: Today USDA confirmed tight old-crop and new-crop carryover. As a result, action in the month ahead will center on finding a price level that will slow use enough to stretch supplies. Strong daily soybean buys this week signal prices have not yet done the job.

Hedgers: 100% sold on old-crop in the cash market. 25% of expected 2012-crop production is covered in Nov. $14.00 put options for 42 3/8 cents. 50% of expected 2012-crop production is sold via cash forward contract for harvest delivery.

Cash-only marketers: 100% sold on old-crop. 50% sold on expected 2012-crop production for harvest delivery.

 

Wheat

Price action: Wheat futures ended with losses in the teens to 20s at all three locations, with nearby contracts the downside leader. Nearby Chicago wheat contracts settled with slight losses for the week.

5-day outlook: Action in the wheat market tracked that of corn today; this will likely be the case next week, too. If corn sees followthrough pressure, an all wheat production outlook well above year ago will leave wheat vulnerable to more profit-taking, too. But if corn rallies, wheat will likely benefit from increased feed demand prospects.

30-day outlook: Crop concerns in the Black Sea region have heightened of late and talk has circulated that Russia will take action to curb exports. So far this is merely speculation and officials have generally said that will not occur. Plus, the nation's ascension to the World Trade Organization this year will bring with it political reasons not to do so.

90-day outlook: Drought has not been confined to the U.S. Midwest this year. Soils are again dry in the Southern Plains, and this will become an increasing concern as winter wheat planting season nears. The occurrence of El Nino-associated rains will be key.

Hedgers: 75% cash sold on 2012-crop for harvest delivery. 100% sold on 2011-crop in the cash market.

Cash-only marketers: 75% of 2012-crop production is sold for harvest delivery. 100% sold on 2011-crop.

 

Cotton

Price action: Cotton futures faced heavy pressure today and ended low-range with losses of 241 to 293 points. Today's losses caused cotton futures to finish lower for the week.

5-day outlook: Cotton futures could see some followthrough selling next week as USDA's U.S. cotton production estimate and 2012-13 carryover projection came in on the bearish side of expectations. But with recently heightened concerns about global stocks, the market's downside is likely limited.

30-day outlook: Indian monsoon rains have disappointed this season, which has improved the global stocks outlook from burdensome to sufficient. While this certainly doesn't point to a rally, it does make a sharp move to the downside unlikely.

90-day outlook: The exception to this would be an easing of monetary policy by the U.S. and/or China. Recent weak economic data from both countries has most expecting stimulus is ahead, but there is no certainty as to when this will occur. Such a move by either country would boost the commodity sector as a whole.

Hedgers: 100% sold on old-crop in the cash market. 50% priced on expected new-crop production via cash forward contract for harvest delivery.

Cash-only marketers:s100% sold on old-crop. 50% priced on expected new-crop production via forward contract for harvest delivery.

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