Crops Analysis (VIP) -- December 27, 2013

December 27, 2013 08:59 AM
 

Corn

Price action:
Corn futures enjoyed mild gains for most of the day and the market finished steady to 1 1/4 cents higher. Most contracts posted slight losses for the week.

5-day outlook: Choppy trade amid thin volume is likely next week as well since many traders are taking a long break from the market for the Christmas and/or New Years holidays. Chinese rejections of U.S. corn and dried distillers grains will likely remain a wet blanket over the market, as could forecasts for rain and cooler temps in Argentina over the next 6 to 15 days.

30-day outlook: Weather in South America will remain a market driver in the weeks ahead. Traders will also take note of the Jan. 10 Annual Crop Production Report, which will provide the final estimate of the 2013 corn crop. Thus far, the market has paid little attention to signs of rebuilding demand. It would likely take multiple large sales for traders to take note.

90-day outlook: Attention will shift to any acreage battle between corn and soybeans and soil conditions across the Midwest. Most expect soybeans to pick up acres from corn as the new-crop soybean:corn price ratio mildly favors a transition back to the more traditional crop rotations, but what is actually planted will be determined by both weather and price.

Hedgers: 25% of 2013-crop production is sold in the cash market. Be prepared to advance sales on an overdue bounce.

Cash-only marketers: 25% sold on 2013-crop. Be prepared to advance sales on a bounce.

 

Soybeans

Price action: Soybean futures ended with gains of 7 1/2 to 12 3/4 cents through the July contract. Other contracts were roughly 3 to 5 cents higher. Soybean futures finished slightly lower than last Friday's close following four days of light and choppy price action.

5-day outlook: The fundamental focus next week will be on South American weather, specifically conditions in Argentina. Forecasts call for a break from the recent extreme heat and rain chances by late next week. Aside from South American weather, traders will be focused on year-end positioning, which could lead to some liquidation of long positions by funds.

30-day outlook: Unless conditions are hot and dry for an extended period, traders won't get too concerned about production potential in South America, as record supplies are expected. But if crop estimates disappoint and/or there are indications of pending shipping problems in Brazil, China will continue to actively buy U.S. soybeans. If everything looks good in South America, China is likely to cancel some of its recent U.S. soybean purchases.

90-day outlook: China's rejection of U.S. dried distillers grains (DDGs) should be watched closely. If the situation lingers, it would increase Chinese demand for soybeans to crush for meal as a protein replacement for DDGs in feed rations. Domestically, the longer this situation lingers, the more pressure it will put on DDG prices, which could slow domestic crush.

Hedgers: 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: 75% sold on 2013-crop production.

 

Wheat

Price action: SRW wheat futures managed gains of 2 to 3 cents today after earlier being under pressure. HRW futures finished fractionally lower in most contracts, while HRS futures closed mostly 1 to 3 cents lower. Wheat futures posted fresh contract lows again this week as the price slide continued.

5-day outlook: Wheat may get a boost from end-of-year short-covering next week as traders finalize positions for the year. But so far, traders have shown no urgency to do so. If traders don't cover short positions, wheat futures will continue to struggle to find buying interest.

30-day outlook: Export demand for U.S. wheat isn't bad. In fact, wheat bookings are 29.7% above year-ago and running above the pace needed to hit USDA's export forecast. But given plentiful global supplies, several big tenders are needed to change traders' attitudes toward the demand side of the market.

90-day outlook: The winter wheat crop is far from "made," but traders will be hard pressed to get too concerned unless there are major problems this winter. The extended forecast calls for hot and dry conditions in the Plains, suggesting spring rains will need to be timely for the crop to continue the favorable start it had into dormancy.

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: Cotton futures finished 60 to 123 points higher through the October contract today. Farther-deferred futures posted lesser gains. This week's trade featured a very wide trading range, with futures extending the recovery from the November low.

5-day outlook: Light trading volume is expected next week as traders will be focused on closing out their books for the year. Plus, some traders will remain away from the market on an extended holiday break. But as seen this week, low volume can sometimes lead to increased price volatility.

30-day outlook: Confirmation that China will end its long-standing cotton stockpiling program failed to deter buyers in the cotton market today despite uncertainty over how China will get rid of its massive state reserves. Unless there's some bearish news on that front, demand for those older state-owned reserves will remain limited as current auction prices are too high and quality is a concern.

90-day outlook: Cotton plantings are likely to rise in 2014 after a sharp dropoff this year as row-crop returns will be much lower. But cotton futures would need to make a strong upside push this winter to trigger a big increase in acres.

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

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

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