Crop Analysis (VIP) -- August 23, 2013

August 23, 2013 10:16 AM
 

Corn

Price action: Corn futures enjoyed spillover from soybeans today and ended 8 cents higher in the front month and around 5 cents higher in deferred contracts. For the week, the corn market posted modest gains.

5-day outlook: The forecast calls for above-normal temps early next week and over the 6- to 10-day outlook for the Midwest. This, along with limited rain chances will likely keep corn prices moving higher as soils are already dry and tipback is already an issue in many states. Meanwhile, old-crop carryover is very tight, which will keep cash markets at elevated levels.

30-day outlook: The potential for a decent corn crop is there, but with uniformity, dryness and the maturity issues being seeing across the Corn Belt, weather will have to be perfect for the month of September and into October for some areas to prevent yield loss. The weather-watch will drive market action going forward.

90-day outlook: The recent drop in corn prices has brought some export demand back to the table. Key will be if this demand can be sustained.

Hedgers: 100% sold on 2012-crop in the cash market. 25% of expected 2013-crop production is sold via cash forward contract for harvest delivery.

Cash-only marketers: 100% sold on old-crop. 25% of expected 2013-crop production is sold via forward contract for harvest delivery.

 

Soybeans

Price action: Soybean futures staged a strong rally to wrap up the week and futures ended with gains in the 40s through the January contract, while deferred months were 20- to 30-plus cents higher. For the week, soybeans posted sharp gains.

5-day outlook: The Pro Farmer Midwest Crop Tour revealed a bean crop that is in tough shape and lagging in maturity. For this reason, the forecast for high temps and limited rain is worrisome. This will continue to lift futures unless there is a major shift in the weather pattern.

30-day outlook: Pro Farmer's soybean production estimate came in at 3.158 billion bu. with an average yield of 41.8 bu. per acre. But we emphasized that scouts measured yield potential and the next 45 days or more of weather will have to be perfect for the crop to hold onto this potential.

90-day outlook: The U.S. soybean crop has more downside risk than upside potential, as some farmers in Iowa and Minnesota didn't plant until June or even early July. When frost occurs and whether rains fall will be key to the bean crop's finish. Harvest pressure could be limited this year if the weather is less than ideal. We also expect strong demand to be an underlying source of support.

Hedgers: 50% of expected 2013-crop production is sold via a forward-price cash contract for harvest delivery. 100% sold on 2012-crop in the cash market.

Cash-only marketers: 50% of expected 2013-crop production is sold via a forward-price cash contract for harvest delivery. 100% sold on 2012-crop in the cash market.

 

Wheat

Price action: SRW wheat ended mostly 4 to 6 cents higher today, while HRW finished 1 to 4 cents higher. HRS wheat ended fractionally to 3 cents lower. SRW wheat ended near steady with last week's close.

5-day outlook: Wheat futures will continue to follow the corn market's cue, which means the market could trend higher next week if the forecast for hot, dry Midwest weather materializes. Upside potential for HRS futures will likely remain limited due to harvest-related hedge pressure -- at least until harvest is 50% done. The market will receive an update on harvest progress Monday.

30-day outlook: In September, wheat traders will have a number of reports to digest, including the Crop Production Report on Sept. 12 and the Quarterly Grain Stocks and Small Grains Summary on Sept. 30. Bullish data is not expected for the wheat market, but corn data could be a major price driver for the wheat market if there are any surprises.

90-day outlook: Global wheat production is expected to be large this year, which means the U.S. will continue to face stepped up competition for export business, especially from the Black Sea Region. But value buyers will continue to turn to the U.S. for high-quality wheat.

Hedgers: 50% of 2013-crop is sold in the cash market. 100% sold on of 2012-crop.

Cash-only marketers: 25% of 2013-crop is sold. 100% sold on 2012-crop.

 

Cotton

Price action: Cotton futures ended the day mixed, but posted sharp losses for the week. December cotton ended the week 912 points lower due to slowed demand and an unexpected uptick in crop condition ratings.

5-day outlook: All eyes will be on crop condition ratings on Monday after USDA raised the percentage of crop in "good" to "excellent" shape earlier this week. This shifted traders' attention more toward the demand side of the market the remainder of the week, although that should take a backseat to weather over the near-term.

30-day outlook: This week's technical price deterioration is also more reason for bulls to move to the sidelines unless there's a late-season weather scare. Thus far, futures have respected long-standing support at the June lows.

90-day outlook: Chinese purchases have recently slowed and are expected to remain a limiting factor on prices.

Hedgers: 50% of expected 2013-crop production is hedged in December cotton futures at 83.87 cents. 50% of expected 2013-crop production is also sold via cash forward contract for harvest delivery. 100% sold on 2012-crop in the cash market.

Cash-only marketers: 50% of expected 2013-crop production is sold via cash forward contract for harvest delivery. 100% sold on 2012-crop.

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