Crop Analysis (VIP) -- March 21, 2014

March 21, 2014 10:05 AM



Price action:
Corn futures held up relatively well given sharp pressure on neighboring soybean and wheat markets. July and May corn ended fractionally higher, with the rest of the market down 1/2 to 2 cents. But corn posted a low-range close for the week, which means price action early next week could be telling of the near-term trend.

5-day outlook: If corn futures see followthrough pressure from this week's losses to begin next week and support at the bottom of the consolidation range is violated, it could trigger some sell stops. From a fundamental standpoint, the fact that Egypt purchased U.S. corn this week signals prices are a value buy, but there is also concern about tighter livestock supplies due to the spread of PEDV in the swine industry and ongoing tight supplies of cattle.

30-day outlook: USDA's March 31 Prospective Plantings and Grain Stocks Report are known as trend setters into planting season. While a lot of attention is on the acreage data, the stocks data often generates the bigger price reaction.

90-day outlook: The start of planting season will likely be delayed after a very cold and what seemed like a very long winter for the Corn Belt. The outlook is better for removal of drought from the central Corn Belt due to the onset of El Nino later this summer, but weather will be traders' focus as we move into the growing season.

Hedgers: 70% sold on old-crop. 30% of expected 2014-crop is sold via forward contract for harvest delivery.

Cash-only marketers: 60% sold on old-crop. 30% of expected 2014-crop is sold via forward contract for harvest delivery.



Price action: Old-crop contracts posted sharp losses of 19 to 28 1/4 cents today, ending the pattern of four consecutively higher closes. Futures closed higher on the week. New-crop contracts finished 6 1/4 to 12 3/4 cents higher. Funds sold 8,000 contracts (40 million bu.) today.

5-day outlook: Futures will look for clarity on export demand as news surfaced this week China may have overbooked soybean needs due to losses in that nation's poultry flock from disease. Meanwhile, traders continue to absorb news the Brazilian crop may not be quite as large as expected. As the week progresses, traders will turn their attention to the March Grain Stocks Report and Acreage Report due Monday, March 31. Position evening ahead of those key reports could reduce trading volatility at week's end.

30-day outlook: USDA's two key reports due March 31 will drive soybean prices into the early spring. If the trade sees projected old-crop carryover tightening more than previously expected, prices might rally to ration the old crop and to shift a few more acres away from corn and to soybeans.

90-day outlook: Spring planting conditions along with export demand will drive prices through spring. If traders become comfortable with old-crop carryover supplies, new-crop prospects will drive price action. However, if old-crop carryover levels tighten more than expected, old-crop fundamentals will drive price action.

Hedgers: 25% of expected 2014-crop is sold via forward contract for harvest delivery. 100% sold in the cash market on 2013-crop production.

Cash-only marketers: 25% of expected 2014-crop is sold via forward contract for harvest delivery. 90% priced on old-crop.



Price action: Wheat futures faced pressure today and ended near sessions lows with losses mostly around 6 to 12 cents. Nevertheless, futures still posted slight to moderate weekly gains. Funds sold 5,000 wheat contracts (25 million bu.) today.

5-day outlook: Action in the wheat market next week will likely hinge on whether tension in the Black Sea region escalates. This was an important source of support this week as traders believe this could shift some grain business to the U.S. The other major market driver that will remain in focus in the week ahead is drought and its impact on the Central and Southern Plains crops. The forecast calls for ongoing dryness.

30-day outlook: Drought has caused significant declines in the condition of the winter wheat crop on the Southern and Central Plains, according to state crop reports. The official start of USDA crop condition updates in April will be closely watched, as will the weather. Another big focus at the end of March is the Prospective Planting Report and what it implies for the coming growing season.

90-day outlook: The National Weather Service's Climate Prediction Center calls for equal chances of normal, below- or above-normal precip for winter wheat country through June, but the long-term temperature outlook that calls for above-normal chances for high temps could signal drought is here to stay.

Hedgers: 50% of expected 2014-crop is sold via forward contract for harvest delivery. 100% sold on 2013-crop.

Cash-only marketers: 90% sold on old-crop. 50% of expected 2014-crop is sold via forward contract for harvest delivery.



Price action:
Cotton futures wrapped up the week with some additional bull spreading activity. Futures ended 3 to 113 points higher through the March contract, with nearbys leading gains. Far deferred months posted losses of 7 to 20 points. For the week, the market posted solid gains.

5-day outlook: Traders brushed off news Chinese cotton imports for the first two months of the year are down 35.6% from the year prior as weekly export reports have signaled still solid demand for U.S. cotton.

30-day outlook: The prospective planting report will set the tone for the weeks ahead. Cotton acreage is expected to rise 1 million to 1.5 million acres from last year's low levels as increased corn supplies and lower corn basis diminishes the incentive Southern growers have previously had to plant corn.

90-day outlook: Cotton will again be planted into dry soils this year. This should keep a floor under the market unless conditions improve notably. While the latest update from the Climate Prediction Center provides limited guidance in terms of precip over the next three months, cotton country has above-normal chances for hotter-than-normal temps.

Hedgers: 75% of 2013-crop is sold in the cash market. 25% of expected 2014-crop production is sold via cash forward contract for harvest delivery.

Cash-only marketers: 75% of 2013-crop is sold. 25% of expected 2014-crop production is forward sold for harvest delivery.

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