Crops Analysis (VIP) -- Advice -- April 11, 2014

April 11, 2014 09:38 AM
 

Corn

Price action: Corn futures finished 2 3/4 to 5 3/4 cents lower today, with new-crop contracts leading gains. For the week, futures posted slight losses and ended near weekly lows. Funds sold 7,000 contracts (35 million bu.) today.

5-day outlook: Warming temps across the Corn Belt sparked a pick up in field work. Though planters aren't actively rolling yet, concerns with a late start to the planting season have been brushed aside for now. Though cooler temps are forecast for next week, there's risk of followthrough selling.

30-day outlook: Traders assume the corn crop will get planted. And barring any severe delays, the general expectation is that corn acres will increase from March intentions. Therefore, it's going to be more difficult for corn to generate near-term buying interest.

90-day outlook: The chances of El Nino developing by summer are increasing, with the U.S. Climate Prediction Center putting odds at greater than 50%, while the Australian Bureau of Meteorology says they are greater than 70%. Timing of El Nino will be key in terms of crop benefits for the Corn Belt, but even the transition to an El Nino should be somewhat favorable for the central U.S. weather-wise.

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.

 

Soybeans

Price action: Soybean futures slumped through the trading day with old-crop contracts losing 9 3/4 to 19 1/4 cents and new-crop contracts declining about 9 to 11 cents. Futures closed lower for the week as well. Funds sold 8,000 contracts (40 million bu.) today.

5-day outlook: The technical picture for soybeans is becoming a little more shaky for the bulls as Wednesday's surge failed to hold, thus negating a potentially bullish pennant formation. However, the $14.60 area on May soybean futures is proving a support area and Friday's close is still a few steps above the winter steep uptrend line and right on the 14-day moving average. Next week's trade could be quite pivotal in pointing to the next move for soybean prices.

30-day outlook: The tight old-crop supply situation will support old-crop prices over the next month, especially if soybean sales remain strong. However, traders will eventually shift more of their attention to new crop futures as planting revs up. While the trade already expects a substantial increase in planted acres, the trade may become nervous about holding the intended increase in soybean plantings as corn planting rolls. Continuing $5-plus December corn futures and favorable planting weather could temp farmers to boost corn plantings and trim soybean plantings. Traders could move to the buy side of new-crop futures to hold intended soybean plantings..

90-day outlook: The split between old-crop and new-crop fundamentals will widen as planting season will come to an end. Tight old-crop supplies will tend to support near-term cash prices, but rising prospects for a strong boost in new-crop supplies will pressure new-crop prices.

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.

 

Wheat

Price action: Wheat futures saw two-sided trade today, but bears took control ahead of the close. SRW and HRW wheat ended roughly 2 to 3 cents lower on the day, while HRS wheat finished narrowly mixed. For the week, all three flavors posted mild losses.

5-day outlook: Rainfall in winter wheat country over the weekend will be the focus early next week, as will the weekly crop condition rating from USDA on Monday. The Southern Plains saw temps near or in the 90s this week, which could lead to additional condition declines. On the other hand, rains could aid the crop in some areas.

30-day outlook: While the HRW wheat crop was battered this winter, wheat has an impressive ability to bounce back from stress. The Wheat Quality Council's HRW wheat tour will be watched for additional insight as to the state of this crop.

90-day outlook: Wheat futures were pressured today by news Egypt bought all Black Sea region supplies in its tender. This reminds that tensions in the Black Sea region have not had an immediate impact on demand for U.S. Wheat. Any export disruptions resulting from Russia/Ukraine tensions could be more of a 2014-15 production issue.

Hedgers: 75% of expected 2014-crop production is sold via cash forward contract sale for harvest delivery. 100% sold on 2013-crop.

Cash-only marketers: 60% of expected 2014-crop production is sold via forward contract sale for harvest delivery. 90% sold on old-crop.

 

Cotton

Advice: Hedgers are advised to make a 25% 2013-crop cash sale to get to 100% sold on old-crop. Cash-only marketers are advised to make a 15% sale to get to 90% sold on old-crop.

Price action: Nearby cotton futures enjoyed some corrective short-covering after recent heavy losses to wrap up the week. Futures ended steady to 66 points higher for the day, with deferreds leading gains. For the week, nearbys posted moderate losses while deferred months staged strong gains.

5-day outlook: Technicals in old-crop cotton signaled a top is in place and that sharp near-term downside price pressure is possible. This prompted us to advise additional sales for hedgers and cash only marketers. Whether the market sees sharp followthrough selling next week will be closely watched. Technicals for new-crop contracts remain fully bullish, however.

30-day outlook: USDA has started issuing its weekly crop progress and condition updates, increasing attention on the U.S. growing season. So far, cotton planting is off to an average start. Whether this changes and there are any weather scares will have market-moving potential going forward. A forecast calling for frost chances in some areas of Texas helped lift cotton today.

90-day outlook: China has taken steps to reduce its stockpiles as it readies for a transition to a subsidy-based farmer support program. How this transition plays out and whether the availability slows demand for U.S. cotton will be an important market driver in the months and year ahead. China's economic health will also be monitored, though many believe the nation will enact stimulus measures if the situation worsens.

Hedgers: NEW ADVICE: Make a 25% 2013-crop cash sale to get to 100% sold on old-crop. 25% of expected 2014-crop production is sold via cash forward contract for harvest delivery.

Cash-only marketers: NEW ADVICE: Make a 15% sale to get to 90% sold on old-crop. 25% of expected 2014-crop production is forward sold for harvest delivery.

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