Crops Analysis (VIP) -- Advice -- August 16, 2013

August 16, 2013 10:04 AM
 

Corn

Price action: Corn futures faced light profit-taking to wrap up the week and futures ended roughly 7 to 9 cents lower for the day. Futures edged out slight gains for the week.

5-day outlook: Focus will be on the Pro Farmer Midwest Crop Tour next week. Check your site often for updates from your Tour leaders and nightly results. Scouts will be tweeting photos and updates as they collect roughly 1,100 corn samples. (See "Evening Report" for more.)

30-day outlook: Weather to finish the crop along with the Sept. 12 Crop Production Report from USDA will be major drivers of the corn market going forward. Drought is expanding and intensifying in the western Corn Belt; the one-month weather outlook calls for equal chances of above, below or normal precip chances, providing little insight as to what's ahead.

90-day outlook: The frost watch will be on as slow corn development and a late planting date for much of the crop means an early frost could be highly detrimental to yields. Also, USDA will begin incorporating prevent plant data from Farm Service Agency into its October Crop Production Report.

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

Advice: Hedgers and cash-only marketers are advised to sell 30% of expected 2013-crop production via cash forward contract sale for harvest delivery to get to 50% forward priced on new-crop.

Price action: Soybean futures settled roughly 5 to 12 cents lower and near the day's lows as traders pocketed profits following strong gains this week. Futures closed sharply higher versus last week and at their highest level in four weeks.

5-day outlook: Traders will watch for signs the recent surge in prices is trimming demand. The market uncovered buying interest in recent weeks as end-users viewed prices at value levels. But the $1 climb in prices may change their view. Meanwhile the trade will watch for clues on the size of this year's soybean crop from the Pro Farmer Midwest Crop Tour.

30-day outlook: The trade will look to USDA's September Crop Production Report for guidance on potential average yield. But the market will also follow FSA certified acreage updates to calculate total planted acreage. With acreage still somewhat of an unknown and crop development delayed significantly, the market is more vulnerable to volatility than usual.

90-day outlook: Despite the uncertainty over the size of the growing crop, total supplies will rise from the current-year's tight supplies. This will tend to limit upside potential for the new crop.

Hedgers: NEW ADVICE: Make a 30% cash forward contract sale on expected 2013-crop production to get to 50% forward priced on new-crop for harvest delivery. 100% sold on 2012-crop in the cash market.

Cash-only marketers: NEW ADVICE: Make a 30% cash forward contract sale on expected 2013-crop production to get to 50% forward priced on new-crop for harvest delivery. 100% sold on old-crop.

 

Wheat

Price action: Wheat futures closed near the lows of the day, with losses around 3 to 6 cents in most flavors. Futures also closed the week slightly lower on a weekly basis.

5-day outlook: Wheat futures will favor the downside as fundamentals are not supportive and the HRS harvest is underway. Harvest-related hedge pressure will weigh on the market until half the crop is in the bin. Wheat will also follow the lead of corn futures.

30-day outlook: HRS harvest will continue to weigh on that market. HRW and SRW will follow corn futures until there are some sign that U.S. wheat is seen as competitively priced on the global market.

90-day outlook: Global wheat supplies are large and Black Sea Region-sourced wheat is seen as a bargain versus the U.S. That will keep the pressure on U.S. wheat futures until those wheat exporters run out of supplies. It will likely take until the U.S. corn harvest surges past the 50% completed mark before wheat gains some relief from spillover pressure from that market. Due to the late maturity of this year's corn crop, that 50%-harvest point will be reached later than usual.

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 posted strong gains today, finishing at the top-end of the day's trading range on concerns about growing conditions for this year's crop. Futures closed sharply higher on a weekly basis and at their highest level of the year for nearby contracts.

5-day outlook: Traders will watch Monday's Crop Condition Report and weather updates next week as the crop is suffering from too much precipitation in the Southeast and drought in the key Southwestern crop area. In addition, crop watchers will keep an eye on growing conditions in the key Chinese cotton-growing regions.

30-day outlook: Crop size has become a worry as weather has proven very unfavorable for both the U.S. and Chinese cotton crops. However, China's import demand remains a concern as retail demand has been disappointing this year. For the first seven months of the year, cotton imports are down 20.5% from year-ago.

90-day outlook: An upswing in domestic retail demand is key to triggering the demand boost needed to sustain this week's upswing in cash cotton prices. Barring this, cotton futures will likely settle back into their long-standing range between 80 and 90 cents as the small crop size should limit downside risk.

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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