Crops Analysis (VIP) -- April 4, 2014

April 4, 2014 09:45 AM
 

Corn

Price action:
Corn futures closed 1 3/4 to 2 1/4 cents higher in the May and July contracts, respectively. New-crop futures posted gains of 4 to 5 1/2 cents. For the week, corn futures were higher and posted a potential upside breakout from the March consolidation range.

5-day outlook: Traders expect USDA to trim its old-crop carryover projection in next Wednesday's Supply & Demand Report, as March 1 stocks confirmed strong corn use through the first half of the 2013-14 marketing year. Positioning ahead of and after USDA's report will be the primary focus next week.

30-day outlook: There is a little concern about cold, snowy conditions that are hanging around the Midwest, though it's too early for traders to push the panic button, especially after last year. If the cold weather lingers through April, however, the level of concern will grow and traders will build weather premium into the market.

90-day outlook: Strong export demand signals the price rally from the winter low has not choked off foreign demand. As long as export demand remains strong, downside risk should be relatively limited. But we still believe price strength needs to be sold.

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 closed fractionally to 6 cents higher with the exception of the lead May contract, which closed down 1 1/2 cents. Futures have extended their rally off their Feb. 1 low with the front-month contract moving almost $2 higher.

5-day outlook: Soybean futures will look forward to the release of USDA's Supply & Demand Report due Wednesday. With the export window staying open much longer than anticipated, traders will look for USDA to boost its export projection and tighten carryover. But a boost in the estimate of soybean imports into the Southeast U.S. could offset the reduction in carryover.

30-day outlook: Continuing strong export demand is the key going forward for old-crop soybeans. The export window has stayed open much longer than expected now that Brazilian soybean supplies are available. If there is no decline in the strong export pace, the market will have to readjust its attitude about global and U.S. carryover supplies. Also, USDA's record-high planted acreage projection signals no strong rally in new-crop soybeans will be needed to hold onto those acres. But if corn continues to firm, it would underpin new crop beans until the planting window closes.

90-day outlook: Attention will be on weather and its impact on the 2014 soybean growing season. Weather watchers have talked about increased odds for El Nino this year, which is typically beneficial for Midwest crops, but the timing of any such event would be key.

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 another day of losses to violate uptrends, which signals near-term highs have been established. May SRW wheat ended the week 25 1/2 cents below last week's close. May HRW wheat posted 29-cent losses for the week and May HRS ended the week with losses of 18 1/4 cents.

5-day outlook: Traders actively took weather premium out of the market. Rains across the Plains and forecasts for more precip the next week triggered sharp selling this week. But with drought still covering the entire HRW Wheat Belt, well-timed rains will be needed to improve crop condition ratings. USDA will release its first official such ratings of the season on Monday and on Wednesday will update its Supply & Demand tables.

30-day outlook: March 1 wheat stocks of 1.056 billion bu. were above the average trade guess and therefore failed to provide the market with a signal that USDA will trim its 2013-14 carryover peg on April 9. Traders are now challenged with finding a price that stimulates demand, as they have been unimpressed with recent weekly export sales data.

90-day outlook: The Prospective Plantings Report pegged intended spring wheat acres below traders’ expectations at just over 12 million, but well within the range of pre-report guesses. The markets’ bearish response signals there is little concern about achieving that acreage peg.

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.

 

Cotton

Price action:
Old-crop cotton futures closed 142 points higher today, while new-crop futures posted gains of 15 to 53 points. For the week, futures finished modestly lower.

5-day outlook: There's some expectation USDA will further lower its old-crop cotton carryover projection next Wednesday to reflect strong demand. But after cutting it by 200,000 bales last month, it wouldn't surprise us if USDA paused this month. A steady carryover projection could trigger some profit-taking.

30-day outlook: USDA's March planting intentions were right in line with expectations. But there's already talk cotton could pick up some southern corn acres if relief from drought doesn't come soon. There are some rains in the short- and mid-range outlook across the South, but likely not enough to break the drought.

90-day outlook: The longer-term price outlook for cotton can be summed up in one word -- China. Unfortunately, there's a lot of uncertainty about the level of Chinese demand, meaning the price outlook is also somewhat cloudy. But the big discount new-crop futures hold to nearby contracts signals traders aren't as bullish longer-term.

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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