Crops Analysis (VIP) -- February 28, 2014

February 28, 2014 08:56 AM
 

Corn

Price action:
Corn futures rallied into the close and finished 9 to 10 cents higher and near the weekly high to post mild gains for the week. Futures were supported by concerns that unrest in Ukraine will result in reduced grain exports, which would increase business for the U.S.

5-day outlook: Key on Monday will be whether funds return to continue building their long positions. From a technical standpoint, the ability of March corn to post a high weekly close above $4.50 is positive for fund buying on Monday. From a fundamental standpoint, it's impressive that demand -- domestic and export -- remained strong during the February rally.

30-day outlook: While demand remains strong, traders remain of the opinion that if prices rally too far too far it will slow demand. The slow and steady uptrend established from the January low hasn't shut off demand, which signals there is more near-term upside potential. Traders during this period will also begin to focus more on 2014 crop fundamentals as they prepare for the March 31 Prospective Plantings Report.

90-day outlook: Traders expect fewer acres in 2014, but they also look for carryover to be steady to higher compared to 2013-14 due to large carry-in stocks. It could be difficult to convince the market a late start to planting will reduce yield potential after last year's better-than-expected yields, but the heavy snowfall and cold temps across the Belt raise the potential for a late starting to planting this spring, which raises the risk of acreage shifts.

Hedgers: 60% sold in the cash market on 2013-crop. 20% of expected 2014-crop production is sold via cash forward contract sale for harvest delivery.

Cash-only marketers: 50% sold in the cash market on 2013-crop. 20% of expected 2014-crop production is sold via cash forward contract sale for harvest delivery.

 

Soybeans

Price action: Soybean futures saw pressure overnight and early this morning, but this was viewed as a bargain buying opportunity. The market finished high-range with gains of 18 to 24 cents in old-crop futures, with new-crop roughly 13 to 14 cents higher. Futures posted weekly and monthly gains. Funds bought 10,000 soybean contracts (50 million bu.) today.

5-day outlook: Today's close back above $14.00 for near-term contracts turned that level into support as the market has benefited from harvest delays and crop concerns, logistic troubles in Brazil as well as ongoing strong export demand. These factors will likely continue to lift the market as no swift solution is likely in getting the Brazilian crop shipped.

30-day outlook: The March 31 Prospective Plantings Report will be a major market driver as it will provide more insight as to planting intentions for the 2014 growing season. That acres will be up over the 2013 levels is nearly a given, but with old-crop exports holding strong, the rebound in ending stocks for the year-ahead may not be as strong as earlier assumed.

90-day outlook: Attention will be on planting -- timeliness of getting the seed into the ground, soil conditions and the acreage mix. Extended forecast models point to a cool, wet spring. With abnormally dry or drought conditions stretching across much of the Midwest, moisture is needed. But the flip side of this is this will delay spring plantings. But after the 2013 late planting season, the market may discount any such delays.

Hedgers: 100% sold in the cash market on 2013-crop production. 10% of expected 2014-crop production is sold via cash forward contract sale for harvest delivery.

Cash-only marketers: 90% priced on old-crop. 10% of expected 2014-crop production is sold via cash forward contract sale for harvest delivery.

 

Wheat

Price action: SRW wheat futures finished mostly 12 to 13 cents higher, HRW futures were mostly 8 to 9 cents higher and HRS futures closed mostly 10 to 13 cents higher today. Volatile price action was seen this week but futures had very little net price movement compared to last Friday's close.

5-day outlook: Increased volatility after the extended price recovery could be a sign the rally is running out of steam. If futures drop through this week's lows, it would be a sign to increase old- and new-crop sales. Stay in touch.

30-day outlook: The Ukrainian situation hasn't been a major market factor yet, but with Russian forces reportedly moving near Ukrainian territory, the tensions in the Black Sea region could escalate. If this causes any slowdown in wheat shipments from the region, it could boost demand for U.S. wheat. It also appears Brazil will continue to rely on U.S. wheat to fill its needs as Argentina isn't a reliable supplier given its economic instability.

90-day outlook: The HRW wheat crop has endured a rough winter amid bitterly cold temps through the Central Plains and ongoing drought in the Southern Plains. Initial crop conditions ratings of the spring will be down from when the crop entered dormancy, but spring weather will determine if traders need to a premium into futures.

Hedgers: 100% sold on 2013-crop in the cash market. 35% of expected 2014-crop production is sold via cash forward contract for harvest delivery.

Cash-only marketers: 75% sold on old-crop. 35% of expected 2014-crop production is sold via cash forward contract for harvest delivery.

 

Cotton

Price action: Cotton futures closed slightly lower through the December contract, while far-deferred contracts ended narrowly mixed. For the week, futures posted losses.

5-day outlook: Old-crop futures are flashing signs a top may be in place. Therefore, you should be prepared to advance old-crop sales on followthrough selling next week. We're also likely to advise additional new-crop sales if old-crop sales are made.

30-day outlook: Technically, futures are at a price level that has stalled multiple rally attempts over the past year. That's why we are on alert for potential topping action. Fundamentally, traders are showing signs they are growing tired of waiting on USDA to tighten its old-crop carryover projection. If it doesn't happen in the March 10 Supply & Demand Report, it will be more difficult to attract buying interest.

90-day outlook: Cotton acres are going to increase this year. USDA's Prospective Plantings Report on March 31 will give traders a good starting point from which they can add or subtract acres based on spring weather and price action. Generally, traders are expecting cotton acres to increase to around 11 million acres or slightly more.

Hedgers: 75% of 2013-crop is sold in the cash market. 25% of expected 2014-crop production is sold via cash forward contract for harvest delivery.

Cash-only marketers: 75% of 2013-crop is sold. 25% of expected 2014-crop production is forward sold for harvest delivery.

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