Crops Analysis (VIP) -- February 15, 2013

February 15, 2013 08:48 AM


Price action: Corn futures ended mixed for the day, with nearbys slightly firmer and deferreds weaker. All contracts ended with losses compared to last week's close.

5-day outlook: Nearby futures firmed on ideas recent losses were overdone, as well as improvement in country and Gulf basis levels that suggest prices have attracted fresh demand. But a constant flow of demand news is needed to gain bulls' attention. Traders are also aware the February break typically runs its course by mid-month, which could also bring fresh value buying to the market next week.

30-day outlook: Export demand will remain slow and while domestic demand is better, it's not good enough. Therefore, a demand pick-up is needed to support futures, otherwise help will need to come from outside markets.

90-day outlook: Attention should shift from demand back to production as traders begin to prepare for the March 28 Prospective Plantings Report. Expectations for corn to pick up more acres this spring is limiting buying for the time being in new-crop contracts, but the lingering drought footprint across the western Corn Belt promises weather will return as a focus this spring.

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 saw two-sided trade today, but old-crop futures ended high-range with gains around 5 to 6 cents. September futures ended 2 1/4 cents higher, while new-crop futures posted slight losses. Most contracts posted losses around 20 cents for the week.

5-day outlook: Soybean futures are in the process of finding "value" levels that spark demand. How long this will take is unknown, but if the forecast for favorable precip for South America is realized, this will likely set the stage for more "price discovery" pressure next week.

30-day outlook: Barring any unexpected shipping disruptions, a record-large South American bean crop should soon be hitting the export market. This will likely result in slower demand for U.S. beans and possibly additional order cancellations from China and others. However, one cannot rule out logistical or strike-related shipping disruptions, as these are fairly common for the region.

90-day outlook: Attention will be back on the U.S. bean crop and the state of the soils it is being planted into. Drought remains in effect across 59.79% of the Midwest, according to the most recent Drought Monitor. Therefore, timely rains will be essential for ensuring the production rebound needed to ease tight carryover supplies. However, the director of NOAA's National Integrated Drought Information System recently warned the Senate Ag Committee that atmospheric conditions are "setting up for a very similar levels of drought" as last year for the Midwest.

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 finished mostly around 5 to 10 cents higher in Chicago, roughly 1 to 2 higher in Kansas City and mostly 4 to 6 cents higher in Minneapolis. Despite today's mild corrective gains, wheat futures ended lower for the week.

5-day outlook: Unless there's some bullish demand news or corn and soybeans rally sharply, the upside next week is limited to short-covering in the wheat market. Wheat doesn't have a strong enough fundamental base to lead a sustained price recovery.

30-day outlook: There are improved export demand prospects for U.S. wheat. But U.S. prices have struggled to remain competitively priced and India will be an active exporter of wheat onto the world market. The wheat market needs improved demand to spark sustained buying interest in futures.

90-day outlook: Areas of the Plains have received increased precip the past couple weeks, but drought is still entrenched across the region. Still, the rains have been enough to erase buying interest. If there isn't noticeable improvement by April when USDA resumes weekly crop condition ratings, however, traders will start to rebuild weather premium.

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 closed steady to 40 points higher today. For the week, March and May futures were slightly lower, while the other contracts posted slight gains.

5-day outlook: The big question for old-crop cotton is what impact recent price strength is having on export demand. So far, there haven't been any major warning signs, but Chinese purchases for the week ended Feb. 7 slowed noticeably from recent weeks. As a result, traders will continue to closely monitor Chinese purchases of U.S. cotton.

30-day outlook: The annual National Cotton Council survey showed U.S. producers intend to plant only 9.01 million acres to cotton this year. That's 1 million acres less than most have been anticipating. As a result, new-crop futures should be well supported. With that said, there's risk of old-crop futures pulling new-crop contracts lower if export demand slows.

90-day outlook: News the euro-zone economy slipped further into recession in the fourth quarter of last year could have an impact on cotton. The EU is China's top customer for goods, including textiles. If European demand for Chinese goods slumps, the rebound in China's. manufacturing sector may slow.

Hedgers: 50% priced on expected 2012-crop production in the cash market.

Cash-only marketers: 50% priced on expected 2012-crop production in the cash market.


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