Crops Analysis (VIP) -- August 17, 2012

August 17, 2012 10:05 AM


Price action: Corn futures saw another choppy day of trade and ended narrowly mixed. The market continues to consolidate and closed steady to just below last week's finish.

5-day outlook: Next week, crop scouts on the Pro Farmer Midwest Crop Tour will be sampling fields across the Corn Belt, with state-by-state results being released each night and the final production and yield estimate released Friday. This will provide the market another reference point by which to gauge the drought-stricken crop.

30-day outlook: Pressure to alter the corn-based ethanol mandate via the Renewable Fuels Standard continues to mount. While no change is currently anticipated, especially ahead of the Nov. 6 elections, Washington officials may be pressured to "do something" if USDA lowers its corn production estimate and prices surge from already historic levels.

90-day outlook: Attention will also shift to the South American growing season once traders get a better handle on U.S. crop size. While South American corn acres are expected to decline, yields are expected to improve from year-ago on a return to "normal" weather. Traders will also watch to see how much demand destruction there is given high prices.

Hedgers: 100% sold on 2011-crop in the cash market. 40% of expected 2012-crop production is covered in Dec. $6.50 put options for 31 1/2 cents. 35% cash forward sold on expected 2012-crop production -- 25% for harvest delivery; 10% for March 2013 delivery.

Cash-only marketers: 100% sold on 2011-crop. 35% forward priced on expected 2012-crop production -- 10% for harvest delivery; 10% for March 2013 delivery; and 15% for May 2013 delivery.


Price action: Soybean futures finished with gains of 10 3/4 to 22 1/4 cents today to end near unchanged for the week.

5-day outlook: Market attention next week will be on the Pro Farmer Midwest Crop Tour as we lead teams of scouts across the Corn Belt. In addition to counting pods, as we always do on Tour, we'll pay particular attention to the number of beans per pod this year.

30-day outlook: While attention will remain on crop size through fall, traders must also pay attention to demand. USDA aggressively cut soybean usage projections in the August Crop Production Report, but there have been no signs of a letup in demand. If that remains the case, it will take a higher price to slow use and ration supplies.

90-day outlook: The initial certified acreage data from FSA signals soybean plantings were stronger than NASS survey data found in the June Acreage Report. NASS will use certified acreage to help with acreage in the October Crop Production Report.

Hedgers: 100% sold on old-crop in the cash market. 25% of expected 2012-crop production is covered in Nov. $14.00 put options for 42 3/8 cents. 50% of expected 2012-crop production is sold via cash forward contract for harvest delivery.

Cash-only marketers: 100% sold on old-crop. 50% sold on expected 2012-crop production for harvest delivery.


Price action: Chicago and Kansas City wheat futures closed high-range with gains of 9 to 12 cents in Chicago and 10 to 25 cents in Kansas City. Minneapolis wheat settled mid-range with slightly lighter gains. Chicago wheat futures settled with slight losses week-over-week.

5-day outlook: Wheat futures proved it needs a steady stream of news to rally on its own. Wheat was the upside leader late this week thanks to heightened crop concerns in the Black Sea region and elsewhere, but on days when fresh news was lacking, wheat followed corn's cue. This will likely be the case again next week.

30-day outlook: Wheat's downside will remain limited not only by strength in the corn market, but also by reduced crop sizes in the Black Sea region. While Russian officials continue to say the country will not restrict exports, tight supplies will do some of this on their own. And Ukraine has indicated it will likely follow suit if Russia restricts exports.

90-day outlook: The Climate Prediction Center's Seasonal Drought Outlook through November points to drought persisting or intensifying for much of winter wheat country. This does not bode well for winter wheat planting -- especially considering this would mark the third consecutive year the crop has been planted into very dry soils.

Hedgers: 75% cash sold on 2012-crop for harvest delivery. 100% sold on 2011-crop in the cash market.

Cash-only marketers: 75% of 2012-crop production is sold for harvest delivery. 100% sold on 2011-crop.


Price action: Cotton futures ended well off their intraday highs with gains of 29 to 117 points. This was near steady with last week's close.

5-day outlook: India's government will meet Aug. 23 to review the latest cotton production estimates for the marketing year beginning Oct. 1. Talk has circulated the country will restrict exports due to disappointing monsoon rains, but India's trade minister has said the government will not make a decision on restricting its cotton exports until this meeting has taken place. The country's exports have fallen by 10% over the past two months.

30-day outlook: Any export or supply-related restrictions in India's cotton exports would be a boon to the U.S. and keep a floor under the market. USDA projects U.S. cotton exports in 2012-13 will top the previous year's pace by 3.3%. But the market's upside potential is also limited as U.S. cotton supplies are expected to be ample.

90-day outlook: On the demand front, Chinese imports and monetary policy will be key. Expectations are that the country will take further action to prevent a hard landing for its economy. Any stimulus measures would likely free up money for Chinese importers to more actively buy U.S. cotton.

Hedgers: 100% sold on old-crop in the cash market. 50% priced on expected new-crop production via cash forward contract for harvest delivery.

Cash-only marketers:s100% sold on old-crop. 50% priced on expected new-crop production via forward contract for harvest delivery.

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