Crop Analysis (VIP) -- January 24, 2014

January 24, 2014 09:04 AM
 

Corn

Price action:
Corn futures firmed into the close to finish mostly 1/4 to 1/2 cent higher. While not an impressive upside day of trade on the charts, it did help corn post gains for the week. March corn ended the week 5 1/2 cents higher, with December corn up 1/2 cent.

5-day outlook: Old-crop corn futures were supported this week by solid demand, as it signals prices have fallen far enough to rebuild demand. But key moving forward will be a continual flow of demand, as that's needed to convince traders lows have been posted. It will be difficult for the market to rally significantly unless demand strengthens considerably, as traders remain fearful the demand base hasn't fully recovered.

30-day outlook: We are moving into the traditional "February break" timeframe, which can serve as a self-fulfilling prophesy. Even if there's no major news moving the market (which is often the case during February), this mindset could make it difficult for corn futures to build on the recent base of price support.

90-day outlook: Traders' focus will soon shift to 2014 acreage. Current expectations are that a 2.5:1 price ratio with soybeans will result in soybeans stealing some acres from corn as producers return to a more normal rotation after disappointing corn-on-corn yields the past few years.

Hedgers: 60% sold in the cash market on 2013-crop. 20% of expected 2014-crop production is sold via cash forward contract sale for harvest delivery.

Cash-only marketers: 50% sold in the cash market on 2013-crop. 20% of expected 2014-crop production is sold via cash forward contract sale for harvest delivery.

 

Soybeans

Price action: Soybean futures wrapped up a choppy day of trade with gains of 6 to 7 cents in old-crop contracts, while new-crop futures were mostly fractionally higher. For the week, however, futures ended lower after sharp losses Tuesday.

5-day outlook: South American weather and Chinese demand will remain the key price drivers in the soybean market next week. After rains this week, a second wave of precip is expected to move across Argentina late next week. That could pressure the market. On the demand side, concerns about Chinese cancellations were brushed aside today as there was chatter of Chinese interest in buying U.S. beans. If rains remain in the Argentine forecast, it may take confirmation of Chinese purchases to support futures.

30-day outlook: Rains slowed harvest activity in Mato Grosso, Brazil, this week. If late-season rains become a problem, it would be supportive for soybean futures because this would keep the export window for old-crop U.S. soybeans open longer than expected.

90-day outlook: There are nearly 7.4 MMT (around 271 million bu.) of outstanding old-crop soybean sales to China on the books. That's double year-ago and 42% greater than the five-year average for this date, which is why traders are concerned about Chinese cancellations. But if there are any serious problems getting Brazilian soybeans into exportable position, it would reduce the odds of active Chinese cancellations of U.S. soybean purchases.

Hedgers: 100% sold in the cash market on 2013-crop production. 10% of expected 2014-crop production is sold via cash forward contract sale for harvest delivery.

Cash-only marketers: 75% sold on 2013-crop production. 20% of expected 2014-crop production is sold via cash forward contract sale for harvest delivery.

 

Wheat

Price action: Wheat futures faced pressure to wrap up the week and most contracts of all three flavors settled 4 to 5 cents lower for the day. The market ended near last Friday's close.

5-day outlook: Signs of improved demand have stemmed the slide in prices, but that is about all. Strong, consistent demand news will be needed to encourage buying interest outside of short-covering. Export bookings are well above year-ago, but not strong enough to encourage active buying in futures.

30-day outlook: Lacking strong fundamental support, wheat will likely continue to take its cue from the corn market and the U.S. dollar index. Strength in greenback plays an important role in keeping U.S. wheat prices competitive globally. A record-large Canadian wheat crop could also weigh on the U.S. cash and futures markets as logistic problems are encouraging some producers to move wheat into the U.S. market.

90-day outlook: Traders have thus far displayed limited concern about cold blasts this winter and the possibility of winterkill in winter wheat country where snowcover is lacking. This is unlikely to get much attention until weekly condition updates start up again April 7.

Hedgers: 100% sold on 2013-crop in the cash market. 35% of expected 2014-crop production is sold via cash forward contract for harvest delivery.

Cash-only marketers: 75% sold on old-crop. 35% of expected 2014-crop production is sold via cash forward contract for harvest delivery.

 

Cotton

Price action: Cotton futures posted losses of 31 to 102 points for the day, with nearby contracts seeing the lightest losses. Nevertheless, most contracts edged out minimal gains for the week.

5-day outlook: Cotton futures saw a sell-the-fact reaction to today's strong weekly cotton export sales. However, this should limit the market's downside going forward, so long as export demand strength is maintained. China's decision to end its cotton stockpiling program in favor of direct subsidies to farmers could actually diminish production in areas where this does not apply. This, in turn, would keep demand for U.S. cotton strong.

30-day outlook: Light support has also stemmed from ideas USDA will raise its usage forecasts and lower its carryover projection in the months ahead. Whether or not this occurs will play a major role in price direction going forward.

90-day outlook: Cotton planted acreage in 2014 is expected to be up from this year's small numbers, though to what extent will depend on prices for cotton as well as for corn and soybeans. There will likely be much less incentive to plant corn or beans in the South as prices have dropped significantly from last year's levels.

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

Cash-only marketers: 50% sold on 2013-crop production.

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