Crops Analysis (VIP) -- February 8, 2013

February 8, 2013 08:39 AM


Price action: Corn futures enjoyed gains this morning, but the market softened following USDA's Supply & Demand Report on sharp spillover from soybeans. Futures ended with slight losses for the day and moderate losses for the week.

5-day outlook: USDA's 30-million-bu. increase to its carryover estimate to 632 million bu. was larger than traders had anticipated due to further declines in export demand. But this still points to very tight supplies, which limited any sharp bearish reaction to the report. This will likely keep corn in a choppy, sideways trend for the near future.

30-day outlook: The market will shift more attention to U.S. growing season in coming weeks. Given the tight supply situation, corn must hold onto last year's acres and see a sharp improvement in yields. Traders are anticipating a slight increase in corn acres from year-ago.

90-day outlook: Timely rains on still-parched U.S. will be key during planting and early development for the crop. There is even less "in the tank" in terms of soil moisture across the Midwest than at this time last year. A return to more normal conditions would likely lead to a pullback in futures prices, while tight old-crop supplies will likely keep basis levels elevated.

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 faced sharp profit-taking pressure today to end 30-plus to 40-plus cents lower for the day and sharply lower for the week. Meal and soyoil saw strong spillover pressure.

5-day outlook: USDA trimmed 2012-13 carryover by 10 million bu. to a very tight 125 million bu., but the usage increase came in the crush category, with USDA leaving its export projection unchanged. Traders took this as their clue that even though the soybean bookings pace is running well ahead of what's needed to reach USDA's export projection, China will soon switch its focus from booking U.S. soybean supplies to Brazilian beans.

30-day outlook: As expected, USDA raised the size of the Brazilian bean crop to a record 83.5 MMT, which is higher than the 2012 U.S. crop of 82.06 MMT. This added to price pressure today, as it reminds traders Brazil is well supplied with soybeans until the 2013 U.S. crop is available.

90-day outlook: The focus should shift back to the U.S. supply situation during this period as traders prepare for USDA's March 28 Prospective Plantings Report. Today's price action makes new-crop corn an even more attractive alternative to soybeans.

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 unable to stave off heavy pressure from the wheat market today. Chicago wheat closed narrowly mixed, Kansas City wheat was fractionally to 1 cent lower in most contracts and Minneapolis wheat was 1 to 3 cents lower. Futures at all three exchanges ended lower for the week.

5-day outlook: The fundamental picture for the wheat market is improved as feed wheat use is gradually chewing through supplies. But wheat doesn't have enough support to lead a price rally. If the soybean market extends today's sharp losses next week, wheat will likely slide.

30-day outlook: Unless export demand picks up, the wheat market doesn't have enough support to fuel sustained buying interest. With Russia and Brazil looking to bring in duty-free wheat, there is some hope export demand for U.S. wheat will improve, but traders want to see actual results before they are active buyers.

90-day outlook: Rough HRW wheat conditions won't be price-supportive until weekly crop condition ratings provide a constant reminder. USDA is set to resume issuing weekly crop condition ratings April 1.

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: Old-crop cotton futures finished 86 to 135 points higher today, while new-crop contracts posted slight gains. Aside from the March and May contracts, cotton futures finished higher for the week.

5-day outlook: The strong close to the week gives bulls momentum heading into next week. Technically, March cotton futures are threatening an upside breakout from the bullish pennant on the daily price chart. A confirmed breakout could attract fresh chart-based buying.

30-day outlook: USDA raised its export projection and lowered carryover this morning amid expectations for stronger Chinese demand. But with China sitting on roughly half of the world's cotton supplies, Chinese demand must be strong to keep price pointed higher. There are some concerns a further rise in prices will choke off demand.

90-day outlook: December cotton futures have rallied 8 1/2 cents since the beginning of November. Despite the strong price rally, cotton acreage will very likely decline sharply from year-ago as row crops steal acres. USDA will give the market a better indication of cotton acreage in the March 28 Prospective Plantings Report.

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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