Crops Analysis (VIP) -- December 28, 2012

December 28, 2012 08:47 AM


Price action: Corn futures traded in a narrow, choppy range today and ended near the top of it with slight gains. Futures ended with slight losses for the week.

5-day outlook: Action in the corn market will largely hinge on whether lawmakers and the administration allow the U.S. to tumble over the fiscal cliff. Some sort of fiscal cliff deal would likely send the markets higher for the near-term as traders will likely add risk amid enthusiasm that likely economic recession was averted. But that could be short-lived, depending on what any deal entails. If lawmakers fail to deliver a tax and spending plan, investors will dump risk, including commodities.

30-day outlook: In January, traders will have another Supply & Demand Report and the Annual Crop Production estimate from USDA to digest. This will give traders a better feel for available supplies. Based on recent export figures, USDA may again lower its export forecast. Closure of the Mississippi River in early January to barge traffic will further complicate the picture and will likely lead to varied basis levels around the country.

90-day outlook: Back-to-back disappointing harvests mean corn must strongly compete for acres to offset recent production shortfalls. Early estimates from private firms project corn acres will surpass last year's lofty acreage tally.

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 enjoyed short-covering after a choppy week of trade. Futures didn't stray too far from unchanged in either direction this week to post little net price change from last week's close.

5-day outlook: Traders' focus on Monday will be to close their books for the year, if they haven't already done so. As a result, low trade volume increases the risk of an exaggerated price move. A lot is also riding on weekend fiscal cliff talks. If no deal is reached, investors will continue to shed risk. But if it looks like Congress could pass a measure, it could attract some fresh "relief" buying to the market.

30-day outlook: Brazil will begin to harvest its early planted soybeans next month. Indications are for favorable yields in Mato Grosso, which will take some of the pressure off the U.S. in terms of supplying the world with soybeans. Recent large sales cancellations from China are also an indication the world is preparing for new-crop Brazilian soybeans.

90-day outlook: The soybean:corn price ratio has moved slightly in favor of soybeans this month, but still encourages planting corn over soybeans. Traders will also keep an eye on the price relationship between soybeans and cotton for southern grower planting intentions.

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 favored a firmer tone in choppy trade amid short-covering to wrap up the week. But bears gained more momentum this week as more technical chart damage was done. Wheat posted sharp losses compared to last week's close.

5-day outlook: The fact wheat futures couldn't find strong buying on an impressive weekly export sales tally signals traders have a "prove it" attitude toward demand. As a result, a constant flow of fresh demand news is needed to help wheat secure a near-term low. But with Egypt at the top of this week's buyer's list, it appears U.S. wheat is once again price-competitive on the global market.

30-day outlook: Given historically high wheat prices, exporters have been selling as much wheat as as they comfortably can without depleting stocks to dangerously low levels. This seems to be the case in the Black Sea region, as the export "caps" put in place for Ukraine have been reached, but the country still hasn't restricted wheat shipments.

90-day outlook: Without meaningful precip this winter, the HRW wheat crop in the U.S. Plains will come out of dormancy in very tough shape, considering that crop ratings were the worst on record this fall. But price action in wheat will continue to be closely tied to that of corn. So, how corn trades will likely set the trend for wheat.

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 faced pressure throughout today's session and ended just off session lows with losses of 38 to 135 points for the day and similar losses for the week.

5-day outlook: Cotton futures lacked fresh fundamental news this week and that may also be the case next week, with the exception of the release of the export sales report next Friday. Whether the market continues to soften or rebounds for a test of this week's high will depend on whether lawmakers deliver a fiscal cliff solution to avoid across the board cuts.

30-day outlook: Followthrough selling today after a bearish reversal yesterday signals a near-term high may be in the works. But downside risk is likely limited to the November low as prices below 70 cents have sparked value buying. On the other hand, upside potential is likely also limited as buying interest has faded in the the 77 to 78 cent area.

90-day outlook: Cotton futures will likely see a boost as it engages in acreage battle with corn and especially soybeans. Talks with southern producers at recent Pro Farmer Profit Briefing Seminars signal they have little economic incentive to plant cotton, and thus will shift acres to corn or beans.

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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