Crops Analysis (VIP) -- August 9, 2013

August 9, 2013 09:47 AM
 

Corn

Price action: Corn futures finished 5 to 7 cents lower today, which was on or near session lows. For the week, corn futures extended their sharp price slide.

5-day outlook: Traders are heading into Monday's first survey-based crop estimate with bearish attitudes. USDA is expected to show a record corn crop as traders feel this summer's mild conditions are helping build yields after a delayed start. To get a bullish price response, the crop estimate would likely have to come in under the bottom end of the guess range.

30-day outlook: We'll be in fields across the Corn Belt Aug. 19-22 on the Pro Farmer Midwest Crop Tour. After observing roughly 1,100 fields firsthand and taking other factors into consideration, we'll release the Pro Farmer crop estimates after the markets close on Friday, Aug. 23.

90-day outlook: Lower prices will eventually attract increased end-user demand. Rebuilding the demand base after it was dramatically cut due to last year's drought and the runup to all-time highs in corn futures is a necessary step in the price recovery process.

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

Price action: Soybean futures traded higher initially but then lost ground as traders evened positions ahead of the weekend. September futures closed down 9 1/4 cents and new-crop futures closed unchanged to 2 cents lower near the day's lows. Futures posted slight weekly gains.

5-day outlook: USDA's Crop Production Report on Monday will take the market's attention early in the week. Then export demand news will drive old-crop prices and weather will dominate new-crop futures. Current weather trends are viewed as favorable for crop development, which will make it difficult for futures to rally.

30-day outlook: The recent round of export news suggests futures have fallen far enough to be considered a value buy. That will help stabilize prices. But if forecast rains in the long-range weather forecasts do sweep over the driest areas of the western Corn Belt, trader attitudes will turn decidedly bearish and prices will head lower. Funds currently hold long positions in futures. But if they switch to building a large short position as they have done in corn, prices could be pressed significantly lower.

90-day outlook: The onset of harvest will relieve the current tight supply situation and pressure spot cash prices. It will also rebuild projected new-crop carryover projections, which is also price negative. But the lower prices will rebuild demand. That increase in demand, while slow in coming, will eventually lift prices later in the marketing year.

Hedgers: 100% sold on 2012-crop in the cash market. 20% forward priced on expected 2013-crop production for harvest delivery.

Cash-only marketers: 100% sold on old-crop. 20% of expected 2013-crop production is sold via forward contract for harvest delivery.

 

Wheat

Price action: Wheat futures ended the session with slight losses after spending most of the day in negative territory. A number of SRW contracts posted new contract lows. Most contracts of all three flavors posted slight losses for the week.

5-day outlook: USDA's Crop Production and Supply & Demand updates Monday will drive market action to start the week. The market does not anticipate any major changes to USDA's wheat production or carryover figures since July. But action in the wheat market will likely follow that of corn if there are any "surprises."

30-day outlook: Areas of the Southern Plains received heavy rain this week, recharging soils and pointing to much-improved planting conditions. That could encourage more HRW seedings than market conditions warrant. If continued, favorable early harvest results for HRS wheat will also likely weigh on the market.

90-day outlook: Strong demand is needed to lift wheat futures. While recent action signals solid wheat demand, cheaper prices and a rebound in production in the Black Sea region means the U.S. will continue to face steep export competition.

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 slight losses for the day but strong gains for the week.

5-day outlook: USDA will release its Crop Production and Supply & Demand Report estimates Monday at 11:00 a.m. CT and then it will provide a weekly update on the condition and development for the U.S. cotton crop at 3:00 p.m. These will set the tone for the week. The market expects USDA to raise its cotton production forecast slightly from July to 13.7 million bales. Ending stocks for 2013-14 are expected to come in at 3.1 million bales.

30-day outlook: Weekly crop condition ratings will remain in focus as dryness in Texas is drawing increasing concern. USDA rated nearly a third of the state's cotton crop in "poor" to "very poor" condition Monday. Considering the sharp drop in cotton seedings this year, the poor state of the Texas crop takes on added significance.

90-day outlook: China is the other to-watch region in the months ahead. A heat wave in the country this week raised production concerns in this major cotton importing country. The market will continue to try to get a read on the country's production situation and its economic health to gauge its need for U.S. cotton. Traders expect USDA will leave its cotton export projection at 11 million bales on Monday.

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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