Crops Analysis (VIP) -- February 22, 2013

February 22, 2013 09:17 AM


Price action: Corn futures posted weekly losses and finished near weekly lows. The inability of the market to follow soybeans higher this week signals traders expect demand will continue to struggle.

5-day outlook: This week's USDA Outlook Forum turned traders' attention away from the tight 2012-13 supply situation and put more focus on the upcoming marketing year. USDA's initial look at 2013-14 reflects optimism in terms of drought improvement, as its initial 2013-crop peg is a record 14.53 billion bu. on fewer planted acres than in 2012. USDA's initial yield projection is at 163.6 bu. per acre.

30-day outlook: Prices are at levels that have attracted fresh demand in the past. But traders don't expect demand to be strong enough to lift prices dramatically, as the saying "short crop, long tail" often rings true. It takes lower prices to rebuild demand, which limit upside potential unless China unexpectedly becomes an aggressive buyer.

90-day outlook: The latest drought outlook signals most of the Corn Belt will be free of drought this spring, but drought in Nebraska is expected to linger. Rains this spring would be helpful in mending the central Corn Belt drought, but could create planting delays.

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 were highly volatile to finish out the week. Old-crop futures dropped 17 to 26 3/4 cents, while new-crop contracts were 10 1/4 to 17 3/4 cents lower today. For the week, old-crop contracts were sharply higher, while new-crop futures were slightly higher.

5-day outlook: Demand, specifically Chinese demand, will determine if soybean futures build on this week's strong gains or if today's losses signal the rally has run out of steam. With Chinese crushers worried about shipping delays out of Brazil (and Argentina), it's possible more purchases of old-crop soybean will be seen next week. As long as Chinese importers are relying on U.S. soybeans to fill needs, there's additional upside potential.

30-day outlook: How the Argentine crop finishes will also have an impact on soybean prices over the next month. If Argentine soybean crop forecasts continue to decline, it would build support. But if the Argentine crop stabilizes, it would be harder for soybeans to rally.

90-day outlook: USDA's initial projections for 2013-14 put plantings at 77.5 million, harvested area at 76.6 million acres and yield 44.5 bu. per acre, which would result in crop of 3.405 billion bushels. Total domestic use is put at 1.795 billion bu. (crush of 1.660 bill., seed of 87 mil. and residual of 48 mil. bu.) and exports of 1.5 billion bu. leaves carryover at 250 million bu. with season average farm price of $10.50 per bushel. USDA will release its first "official" look at the 2013-14 marketing year in the May Supply & Demand Report.

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 were 3 to 6 cents lower in Chicago, around 7 cents lower in Kansas City and 3 to 8 cents lower in Minneapolis today. Wheat futures extended the recent price drop this week.

5-day outlook: Export demand is showing signs of improving, but for the market to get more than a needed short-covering bounce, consistent demand is needed. Without that, wheat remains vulnerable to more near-term pressure.

30-day outlook: Recent heavy precip across the Plains have been enough to ease traders' concerns with the HRW crop -- for now. But the extended weather outlook through May is not promising for the Plains as it calls for above-normal temps across HRW country and below-normal precip over the western half of the region. As spring draws closer, traders will refocus on crop and weather conditions.

90-day outlook: USDA's initial projections for 2013-14 put wheat seedings at 56.0 million acres and harvested at 46.5 million with a yield of 45.2 bu. per acre to produce a crop of 2.100 billion bushels. Total domestic use is at 1.332 billion (1.032 billion bu. for food, seed and industrial, 300 million bu. of feed and residual) and exports of 950 million bu. results in carryover of 639 million bu. with a season average farm price of $7 per bushel.

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 ended ended the day mixed and closed near week-ago levels, although improved the near-term technical outlook by posting a fresh for-the-move high earlier this week.

5-day outlook: Cotton futures must respect this week's low, as violation of this support would suggest recent price action was a bull trap. But attitudes remain price-positive toward cotton given strong demand and expectations for a sharp reduction in planted cotton acres this year.

30-day outlook: News China appears ready to increase cotton import quotes due to squeezed margins at mills sets the stage for ramped-up demand for U.S. cotton. If export sales of U.S. cotton remain at the current strong pace, USDA will need to increase its export projection, which would tighten carryover. But currently, the cumulative bookings pace is running slightly behind the pace needed to reach USDA's export projection.

90-day outlook: USDA's initial look at the 2013-14 marketing year shows a crop of 14 million bales on 10 million planted acres. USDA's early acreage peg is above the survey-based estimate of 9.01 million acres released by the National Cotton Council earlier this month.

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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