Crops Analysis (VIP) -- December 20, 2013

December 20, 2013 08:27 AM


Price action:
Corn futures settled 2 3/4 to 3 3/4 cents higher through the July 2015 contract today, which was near session highs. The market posted modest corrective gains for the week amid light short-covering.

5-day outlook: Trading volume is likely to dip next week as some traders will take an extended holiday break. Therefore, price action may be light and choppy, though lower volume can sometimes lead to increased price volatility. Key is probably whether funds actively cover some of their shorts on year-end positioning.

30-day outlook: If markets are going to make a push to "buy" acres, it typically starts around the beginning of the new year. That could support the corn market this year as corn acreage is expected to be down sharply in 2014. But with the supply situation "cured" there isn't a lot of incentive for the corn market to attempt to buy acres this year.

90-day outlook: A pickup in demand signals prices have dropped to levels that are encouraging more end-user buying. But the process of rebuilding the demand base is going to take time. With plentiful supplies projected through the 2013-14 marketing year and beyond, sustained price strength will be hard to come by in the corn market.

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.




Price action: Soybean futures traded higher through the day and closed near their highs. January through September futures closed 8 1/4 to 12 cents higher. New-crop futures finished mostly around 5 cents higher. Futures closed higher versus a week earlier.

5-day outlook: Soybean futures trade could become quite choppy in the holiday-shortened week ahead. The market has become accustomed to positive export news but export tallies have disappointed recently. Futures have been contained in a sideways trading range since the end of November. A large number of sell and buy stops may exist on each side of that trading range, which means prices could move quite sharply if they push through either side of that trading range.

30-day outlook: It will take a steady dose of strong export news to keep soybean prices firm. If those exports fail to appear, traders will fear buyers have decided to bypass U.S. soybeans in favor of waiting for supplies out of South America.

90-day outlook: The arrival of new-crop South American supplies into export channels during this period will relieve tight global supplies of soybeans and pressure U.S. prices. Traders will begin looking ahead toward 2014-crop plantings in the United States. With expectations that the new-crop plantings will rise substantially, deferred contracts may come under pressure as a result.

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.




Price action: Wheat futures closed mostly 2 to 4 cents higher in all three flavors today amid late short-covering. However, new contract lows were posted each day this week to produce weekly losses.

5-day outlook: Aside from short-covering as traders square positions around the holidays and before year-end, the upside is likely limited for the wheat market given bearish attitudes. Thin holiday trade volume will keep price action relatively quiet next week, though it won't take as much to get the market moving.

30-day outlook: Wheat export demand is improved over year-ago, but not strong enough to encourage active buying in futures. Plentiful global wheat supplies are likely to keep U.S. wheat exports from becoming overly strong. Without a strong surge in export demand, the upside in wheat futures is limited.

90-day outlook: The National Weather Service's extended weather outlook through March calls for above-normal temps across the Southern Plains. That could increase moisture needs next spring, though the winter wheat crop went into dormancy in generally favorable condition.

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.




Price action: Cotton futures ended slightly lower in all but the July contract, which finished 13 points higher. For the week, cotton futures were choppy and showed little net price movement.

5-day outlook: Cotton futures paused this week following recent, strong gains. That could be a sign the market is catching its breath before moving the next leg higher or that the price recovery has run out of steam. While next week is expected to be relatively quiet around Christmas, technical price action could set the near-term price tone.

30-day outlook: The Chinese demand concerns that plagued the cotton market through much of fall have eased. It appears China will not cap cotton exports at low-tariff-rate quotas, suggesting firms can import as much cotton as they wish. But with China sitting on 60% of world cotton reserves, we still question how much cotton the country will import.

90-day outlook: After a big downturn in cotton acres this year, cotton plantings are expected to increase in 2014 as row-crop returns won't be nearly as strong. Most are looking for a relatively modest increase of 500,000 to 1 million acres, however.

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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