Crops Analysis (VIP) -- February 1, 2013

February 1, 2013 08:54 AM


Price action: Corn futures enjoyed slight gains this morning, but the market softened around midday and futures ended narrowly mixed for the day, though slightly higher for the week.

5-day outlook: The result of rain over the weekend in Argentina will drive initial action in the corn market next week, as will the forecast. Current weather models point to building heat and dryness next week. If this holds true, traders will likely build some more weather premium into the corn market.

30-day outlook: But near-term upside potential is likely limited as corn export demand has been dismal for months. Plus, ethanol production is declining. Sluggish demand will make it hard to spark sustained buying interest.

90-day outlook: More attention will be placed on worrisome soil moisture profiles in the Midwest as this could well pave the way for another short crop. With carryover levels already at worrisome levels, this would be disastrous. The Prospective Plantings Report should give traders some idea of corn acreage numbers at the end of March. Early expectations are for plantings to top last year's lofty total, but some producers have signaled they will wait until the last minute to decide between corn and beans.

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 extended the price recovery from the January low this week on support from South American weather concerns -- dryness in Argentina and too-wet conditions in central Brazil. Futures ended mostly 4 1/2 to 6 3/4 cents higher today.

5-day outlook: Traders will remain focused on South American weather next week. After rather disappointing rains across Argentina this week, conditions are expected to be hotter and drier again next week, while harvest-delaying rains are expected to continue in central Brazil. If this forecast holds, it would be price-supportive for soybeans next week.

30-day outlook: Traders are anticipating early harvested soybeans from Brazil will be in exportable position by the middle of this month. If heavy rains continue to slow harvest efforts, however, it could push back the start of the Brazilian harvest season. Active South American exports won't be seen until March/April.

90-day outlook: The export window for U.S. soybean will largely be closed by spring, which will shift traders' attention to U.S. planting intentions. Soybean acreage is likely to be steady to up slightly from year-ago, although there's still time for the market to attempt to "buy" acres.

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: Technical-based selling pressure built in the week market ahead of this afternoon and futures ended roughly 10 to 15 cents lower. Today's losses resulted in a slightly lower weekly finish for all three locations.

5-day outlook: Russia is considering a proposal to suspend its 5% import duty on grain imports until Aug. 1 due to rising domestic prices. The country's prime minister is expected to hold a meeting on the grain situation next week. Otherwise, action in the wheat market will likely again be highly influenced by the corn and soybean markets, meaning the results of a rain event in South America this weekend will be key.

30-day outlook: Wheat futures will need a strong dose of export demand news to stage an upside breakout of its recent trading range. But export demand for the U.S. has been slow to improve, despite tightening global wheat supplies.

90-day outlook: Traders will have the Prospective Plantings Report at the end of March, but that should largely be a non-event as little change is expected for spring wheat acres. Meanwhile, weekly condition reports for the winter wheat crop will start back up April 1, and with that expect more attention to shift to the worrisome drought across winter wheat country and the poorly established crop.

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 posted strong gains this week to extend the recovery from the November lows and improve the near-term technical outlook. March cotton futures moved to the highest level since mid-May.

5-day outlook: Traders are keeping a close eye on demand for clues that high prices have begun to slow importers' appetite for U.S. cotton. While weekly export sales were lower in this week's report than the prior week, they still represented solid-enough demand to be viewed as supportive for the market. Traders also point to a recent weakening in basis levels as a clue that demand is slowing.

30-day outlook: Cotton traders are also keeping a close watch on outside markets and are encouraged by the surge in the Dow Jones Industrial Average and the overall weakness in the U.S. dollar index as signs of strength in the commodity sector.

90-day outlook: Traders are beginning to pay more attention to the battle for 2013 acres and currently expect cotton acres to be down sharply from last year as corn and soybean prices offer producers in traditional cotton areas a better return on their investment.

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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