Crops Analysis (VIP) -- December 14, 2012

December 14, 2012 09:08 AM


Price action: Corn futures strengthened into the close on help from sharp gains in the soybean market and weakness in the U.S. dollar index. But futures still posted losses for the week and remained in the lower quarter of the long-lasting consolidation range.

5-day outlook: Key for building on today's gains early next week will be if soybean futures extend gains. Without help from either outside markets or neighboring pits, corn is at risk of softening into year's end unless fresh demand news surfaces. But sharp deterioration in Gulf basis this week signals no fresh demand news is on the horizon.

30-day outlook: USDA left its export projection unchanged in the December Supply & Demand Report, but there is risk of it declining as total bookings are running behind the pace needed to reach USDA's projection. While supplies will remain tight, traders suspect they aren't quite as tight as current balance sheets currently suggest.

90-day outlook: As the calendar turns to 2013, more focus will be on the battle for acres and the dry soil moisture profile across the bulk of the Corn Belt. This could attract fresh buying interest for corn futures as corn battles with competing crops like soybeans for acres.

Hedgers: 100% sold on 2012-crop in the cash market -- 10% for March 2013 delivery. No 2013-crop sales recommended yet.

Cash-only marketers: 75% sold on 2012-crop --10% for March 2013 delivery; 15% for May 2013 delivery. No 2013-crop sales recommended yet.




Price action: Soybean futures posted gains of 11 3/4 to 19 1/2 cents through the August contract. Farther deferred futures finished mostly 7 to 8 cents higher. With today's gains, old-crop contracts ended solidly higher for the week.

5-day outlook: Strong demand suggests soybean futures will continue their rebound from the November low next week, especially if China continues to actively buy U.S. soybeans. But improved weather in Brazil and the looming fiscal cliff could curb buying interest.

30-day outlook: China has purchased 1.518 MMT of U.S. soybeans the past two weekly export sales reporting periods (weeks ended Nov. 29 and Dec. 6). Assuming all of those purchases are for first quarter delivery, that still leaves Chinese end-users needing between 1.5 MMT to 2 MMT of soybeans for the first three months next year. China should continue to actively buy U.S. soybeans as new-crop South American supplies won't be readily available for export until sometime in February even if there are no harvest delays.

90-day outlook: Brazilian soybean conditions are favorable, with 95% of the crop rated "good" and 5% rated "normal." In Argentina, however, the situation is very uncertain as heavy rains and flooding are making planted acreage and yields a moving target. Given tight U.S. supplies, the market will respond sharply if there are any serious South American concerns.

Hedgers: 100% sold on 2012-crop in the cash market. No futures/options positions at this time. No 2013-crop sales advised yet.

Cash-only marketers: 75% sold on 2012-crop production for harvest delivery. No 2013-crop sales advised yet.




Price action: Wheat futures managed modest corrective gains today, but finished the week sharply lower than last Friday's closing level.

5-day outlook: With weekly crop conditions ratings no longer being issued, focus is on demand. With USDA lowering its wheat export projection, market bulls may struggle to get back on their feet. The lack of global end-user buying despite this week's sharp price plunge signals they are hopeful of even more price pressure before booking additional needs.

30-day outlook: USDA's lowering of its wheat export projection clearly signals it does not expect the U.S. export picture to improve anytime soon. Even if global end-users ramp up wheat purchases, the U.S. won't likely get the bulk of the business as U.S. wheat prices still aren't competitive on the global market.

90-day outlook: The winter outlook does not favor much improvement to the drought situation in the Plains. But the only updates traders will get on crop conditions this winter will come from monthly individual state releases.

Hedgers: 75% sold on 2012-crop in the cash market. No 2013-crop sales advised yet.

Cash-only marketers: 75% of 2012-crop is sold. No 2013-crop sales advised yet.




Price action: Cotton futures benefited from improved risk appetite toward commodities to wrap up the week thanks to weakness in the U.S. dollar index. Futures ended high-range with gains of 53 to 67 points, which helped futures to end with moderate gains for the week.

5-day outlook: As was the case this week, action in the cotton market will likely be driven by broad risk appetite, which will be tied to fiscal cliff negotiations. These will take on even more importance next week as month-end nears and any package deal must allow for time for leaders to convince both parties to vote for the package.

30-day outlook: Recent data out of China has signaled its economy is rebounding, which signals the country's demand for the cotton will remain solid, if not impressive. This will keep a floor under the market, barring a fall off the fiscal cliff. But the market's upside potential is also limited as both global and U.S. carryover for 2012-13 are expected to be well above levels of the previous marketing year.

90-day outlook: The spring battle for acres is expected to result in many producers switching acres to corn and soybeans from cotton in the South. Cotton will have to rally along with these crops to hold onto acres.

Hedgers: 50% priced on expected 2012-crop production via cash forward contract for harvest delivery. A breakout from that range is needed to spark a trending move.

Cash-only marketers: 50% priced on expected 2012-crop production via forward contract for harvest delivery.


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