Crops Analysis (VIP) -- April 17, 2014

April 17, 2014 09:54 AM
 

Corn

Price action:
Corn futures ended 2 to 3 cents lower through the December 2015 contract. That locked in slight losses for the week.

5-day outlook: Warmer temps are expected across the Corn Belt next week, which will warm soil temps and allow corn planting to increase. But conditions are too wet in some areas for a rapid increase, especially if forecast rains materialize.

30-day outlook: Traders won't get concerned about corn planting delays unless they extend into mid-May. Even then, traders are likely to have an attitude that intended corn acres will get planted. Severe planting delays, however, would limit the odds of corn plantings increasing significantly from March intentions.

90-day outlook: A weather market is likely at some point during the growing season. The question is whether summer weather drives prices up or down. The development of El Nino likely holds the answer. The sooner and stronger El Nino develops, the greater the odds of favorable weather across the Corn Belt.

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: Soybeans closed 1 1/2 to 4 3/4 cents lower through the September contract, while new-crop futures posted 1- to 2-cent gains. For the week, soybeans posted strong gains, led by old-crop contracts.

5-day outlook: Soybean traders will remain focused on demand next week. With exports and crush signaling current prices are not slowing the usage pace, traders must find a price that does to ration tight old-crop supplies. That keeps the upside open and limits the downside to stints of corrective selling.

30-day outlook: Corn planting is off to a slower-than-normal start, but it's not "late" yet. If corn planting delays extend into mid-May, talk of intended corn acres switching to soybeans will heat up. That could cap buying interest in new-crop futures, though we don't expect new-crop beans to face sharp pressure if old-crop contracts continue to rally.

90-day outlook: Forecasters signal El Nino is building. If El Nino is established by summer, it increases the odds of favorable weather for the country's midsection. With soybean acreage forecast to be up sharply from year-ago, favorable weather could produce a huge crop and change the fundamental dynamics of the soybean market.

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 enjoyed strong gains for most of the day, though the market pared gains heading into the close. Futures ended low-range with gains mostly around 3 to 4 cents in SRW and HRW wheat, while HRS wheat ended roughly 3 to 6 cents higher. The market posted strong gains for the week.

5-day outlook: The wheat market got a boost from multiple freeze events on the Southern and Central Plains this week. This, along with mostly dry conditions for the region, are expected to result in additional condition rating declines. Any updates as damage is assessed will also be important to price action next week.

30-day outlook: The Wheat Quality Council's HRW wheat tour will provide the market with a better idea as to the condition and development of the winter wheat crop. Meanwhile, weekly crop progress and condition updates from USDA will allow the market to monitor planting and development of the spring wheat crop. Planting is off to a slow start, but considering recent freeze events, that is actually fortunate.

90-day outlook: While weather concerns lifted the market this week, the wheat market will need strength in the corn market for it to sustain strength. Weather concerns and tensions in the Black Sea region (which are currently fading -- see "Evening Report"), should prevent a major selloff. But ample world supplies will also be a limiting factor to the upside.

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

Price action: Cotton futures saw a mixed day of trade, with nearbys ending 23 to 87 points lower and October and later contracts 17 to 65 points higher. For the week, most contracts posted slight to moderate gains.

5-day outlook: After giving some signs a top may be in the works, the cotton market has renewed its uptrend. But traders are unlikely to push prices sharply higher for fear of slowing export demand. Weather is also increasingly in focus with cotton planting underway.

30-day outlook: The 30-day outlook from the Climate Prediction Center (CPC) provides little guidance as to precipitation over the next month, but it does call for above-normal chances of above-normal temps for the South through May. This, along with the outlook for drought to persist or intensify, should keep support under the market. While an increase in cotton plantings is anticipated, a major surge is not likely in the works.

90-day outlook: When it comes to the demand side of the equation, China is the main driver. There is much uncertainty about how the nation's transition to a subsidy-based farmer support system and, even more so, how the nation's efforts to reduce its massive reserves will impact Chinese demand for U.S. cotton.

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

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

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