Crops Analysis (VIP) -- December 13, 2013

December 13, 2013 08:41 AM
 

Corn

Price action:
Corn futures finished 7 to 9 cents lower today to finish lower for the week.

5-day outlook: With concerns about Chinese rejections of U.S. shipments due to the presence of an unapproved GMO trait building, it will be difficult for the market to find traction. Traders are expecting more rejections of U.S. corn and now there are concerns U.S. dried distillers grain shipments will be turned back.

30-day outlook: With funds holding a sizable net short position in corn we have hope there will be some end-of-year corrective buying. But without a bullish fundamental catalyst, the upside is limited to short-covering -- and even that may be limited.

90-day outlook: As the calendar flips to 2013, more focus will be on planting intentions for next year's crop. Currently, corn is expected to lose acres to soybeans. A lot can change over the winter months, but it would likely take a dramatic shift in prices to keep corn acres from declining (potentially sharply) for next year.

Hedgers: 25% of 2013-crop production is sold via cash forward contract for harvest delivery.

Cash-only marketers: 25% of expected 2013-crop production is sold via forward contract for harvest delivery.

 

Soybeans

Price action: Soybean futures rebounded from early weakness to finish 3/4 cent to 3 3/4 cents higher through the July 2014 contract. Far-deferred contracts finished steady to 1 cent lower. For the week, soybean futures finished with little net change.

5-day outlook: Soybean futures appeared to have put in a short-term top earlier this week, but today's high-range close signals bulls aren't ready to give up just yet. The pickup in volatility this week could be a precursor of what's to come as traders weigh strong Chinese demand against the likelihood some of those purchases will be canceled if the South American crop continues to develop without any major concerns.

30-day outlook: The South American crop, as a whole, is off to a favorable start. But there's likely to be a crop scare at some point. As the calendar flips to January, there will be greater focus on the South American crop. While production will almost assuredly be record-large this year, the market could find support if production estimates decline.

90-day outlook: Focus will be on how quickly Brazilian farmers can get their record crop from the field to port and how quickly exporters can get supplies loaded onto ships for export. If there are any major hiccups, like last year, it would keep the export window for U.S. soybeans open longer than currently anticipated.

Hedgers: Get to 100% sold in the cash market on 2013-crop production. We'll manage risk on the board the remainder of the marketing year.

Cash-only marketers: Get to 75% sold on 2013-crop production.

 

Wheat

Price action: Wheat futures settled low-range with losses around 4 to 5 cents in the SRW market, while HRW wheat ended roughly 5 to 6 cents lower in all but the front-month, which closed 12 1/4 cents lower. HRS futures posted losses around 3 cents in most contracts. All three markets posted new contract lows today.

5-day outlook: The wheat market sustained major chart damage this week. Considering that and the lack of supportive fundamental data for the market, buying interest will likely remain limited to corrective short-covering over the near future.

30-day outlook: High U.S. shipping costs have resulted in the U.S. losing out on export business, despite lower prices. Focus will be on finding a price that rebuilds demand, since supplies are ample both at home and abroad.

90-day outlook: The winter wheat crop entered dormancy in the best condition in years, but the Southern and Central Plains continue to deal with drought. Therefore, springtime moisture will be closely monitored as spring approaches.

Hedgers: 75% sold on 2013-crop in the cash market. No 2014-crop sales are advised.

Cash-only marketers: 50% sold on 2013-crop. No 2014-crop sales are advised at this time.

 

Cotton

Price action: March through July cotton futures enjoyed followthrough buys today, which helped them finish 10 to 20 points higher on the day. Deferred months were steady to 24 points lower.

5-day outlook: Cotton futures surged this week, giving a strong signal a low is in place. Unclear is whether the market will set back into a choppy range or continue in their uptrend, especially considering light trading volume preceding the Christmas holiday.

30-day outlook: Attention will be on whether 80-cent-plus prices slow cotton demand. Export sales reports of recent weeks have reflected strong demand for U.S. cotton, but this week's report did reflect a pullback. While U.S. cotton supplies are tight, plentiful global cotton supplies mean U.S. prices must stay competitive.

90-day outlook: Demand from China, specifically, will be key to cotton price action. Signs of economic improvement in the country along with generally tepid demand at auctions of Chinese reserves could bode well for the market. The market will also pay attention to soil moisture as growers begin planting the 2014 crop.

Hedgers: 50% of expected 2013-crop is sold in the cash market.

Cash-only marketers: 50% sold on 2013-crop production.

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