Crop Analysis (VIP) -- October 25, 2013

October 25, 2013 09:28 AM
 

Corn

Price action: Corn futures traded in a very narrow band this week to extend the consolidation range. December corn posted just an 8-3/4-cent trading range this week.

5-day outlook: Upside potential for corn was limited by expectations the bulk of harvest-related hedge pressure was still ahead of the market. Harvest should cross the halfway mark very soon, which should ease pressure on the market. With demand strong, it should result in a harvest low being posted in the near-term.

30-day outlook: The national average corn basis softened slightly this week to dip below the three-year average. This reflects supplies becoming more readily available. But with ethanol production ramping back up and exports strong, basis weakness should be short-lived. Traders are also anxiously awaiting the November 8 Crop Production Report.

90-day outlook: Realization of rebuilding demand limits downside risk, although there could be one more downside push before a post-harvest recovering begins.

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

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

 

Soybeans

Price action: Soybean futures slumped in late trading on profit-taking ahead of the weekend. Futures finished 9 to 10 1/2 cents lower just off the lows of the day. However, nearby futures closed higher versus a week earlier and at their highest level in a month.

5-day outlook: Soybeans may come under limited pressure due to chart-related selling as November futures were unable to push through overhead resistance in the $13.20 area and close above the 50-day moving average at $13.19 3/4. Strong export sales are expected and are needed to give traders the momentum needed to push through resistance.

30-day outlook: Soybean futures are working on posting their harvest low with plenty of clues in place to suggest those lows have been made. But nothing is confirmed until November futures close above the 50-day moving average and above resistance at $13.28. Traders already anticipate plenty of export business for soybeans, which means the market needs to see a steady flow of export news to move higher.

90-day outlook: Prices will move higher with harvest winding down and the bin doors slamming shut on remaining supplies. The market will have to bid up for supplies to pry those bid doors open between now and the start of harvest in Brazil.

Hedgers: Get to 100% sold in the cash market on expected 2013-crop production. We'll manage risk on the board the remainder of the marketing year.

Cash-only marketers: Get to 75% sold on expected 2013-crop production.

 

Wheat

Price action: Wheat futures spent much of the morning in positive territory, but as the day progressed profit-taking took hold and futures ended mostly steady to 5 3/4 cents lower in the SRW market and roughly 3 to 7 cents lower in the HRW and HRS markets. Week-over-week the market posted slight to moderate losses.

5-day outlook: Traders were somewhat disappointed the export sales report for the week ended Oct. 3 did not indicate a surge in export buys during the government shutdown and reporting blackout. But this data preceded the major drop in the U.S. dollar index that makes U.S. wheat more attractive. Next week's export data will include sales from Oct. 3-24. Any surprisingly large or small numbers could spur big price moves.

30-day outlook: Spillover from corn has made it tough for the wheat market to continue its fall rally. This could begin to ease once corn harvest passes the halfway complete mark. What the November Crop Production Report reveals for the corn crop will also be important. Many expect USDA to raise its production estimate. Pro Farmer does not anticipate a major increase, however.

90-day outlook: The winter wheat crop is off to its best start in a number of years. But it is still early in the season and there is no shortage of production concerns overseas. Ongoing drought improvement will be key.

Hedgers: 75% sold on 2013-crop in the cash market. No 2014-crop sales are advised.

Cash-only marketers: 50% sold on 2013-crop. No 2014-crop sales are advised at this time.

 

Cotton

Price action: Cotton futures saw bouts of short-covering at times today, but bears had control of the market at the close. Futures ended at or near session lows with losses of 30 to 53 points. This added to already sharp losses for the week.

5-day outlook: After posting a major downside breakout this week, attention will be on how low prices have to drop for the market to put in a low. Poor export sales for the week ended Oct. 3 and technical pressure were the major drivers of this week's selloff. Both will be key again next week. USDA on the 31 will release export sales data for Oct. 4-24.

30-day outlook: Since the October Crop Production and Supply & Demand Reports were canceled, the Nov. 8 Crop Production Report will take on even more importance. Otherwise, traders will continue to watch the U.S. dollar index as well as export sales data to gauge what sort of prices are needed to entice strong export demand for U.S. cotton.

90-day outlook: It is still unknown whether China will abandon its cotton stockpiling program. Its decision on this will be highly influential when it comes to future price action for the fiber. Economic health in this major cotton holding country will also be key. Recent economic data has pointed to improved economic growth, but rapid credit expansion raises the possibility of liquidity tightening.

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.

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

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