Price action: Corn futures scored double-digit gains of 14 1/4 to 20 3/4 cents on today's surprising USDA reports. Most contracts finished near their daily highs. March futures posted their highest weekly close since Dec. 6. Funds bought a whopping 30,000 contracts (150,000 million bu.) of corn today.
5-day outlook: Today's huge key reversal increases the odds a post-harvest low has finally been posted. While the pervasive bearish attitude may ease, fundamentals are still negative. That means rallies will be likely be short-lived and may be met with fresh selling.
30-day outlook: Futures have probably put in a "washout" low. But rallies will be limited as the overall supply and demand picture still shows the likelihood we'll finish the marketing year with carryover that's nearly double what it was at the end of 2012-13. The market now knows prices are low enough to stimulate demand, which makes the market vulnerable to any news suggesting a downturn in demand.
90-day outlook: Traders will now shift some of their focus to how many acres soybean may or may not take from corn this spring. The assumption has been that planted corn acres will be lower -- potentially much lower. This will tend to support corn futures on the downside but will also tend to limit rallies as fewer corn acres are needed in 2014.
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.
Price action: Soybean futures enjoyed some short-covering ahead of USDA's report release, and this accelerated following the reports, but eventually some light profit-taking took hold. Futures closed 2 1/2 to 7 1/2 cents higher higher through the September contract, while deferred months were around 1 cent lower. Nearby contracts posted slight gains for the week.
5-day outlook: Traders for the most part responded positively to USDA's report data. While USDA's final 2013 bean crop peg surpassed expectations, Dec. 1 bean stocks in all positions were 22 million bu. below the average pre-report trade guess. This was thanks to record-high use for the first quarter of the 2013-14 marketing year. This could help the soybean market put in a seasonal low.
30-day outlook: But upside potential will be highly dependent upon South American production and the area's ability to get beans shipped. Traders expect China to cancel some of its large bean buys if Brazil is able to get its crop shipped in a timely fashion.
90-day outlook: The March 31 Prospective Plantings Report will be closely watched for its read on the corn/soybean crop mix. Most expect soybeans to gain acres over corn, but price action and weather over upcoming months obviously have the potential to alter such assumptions. In addition, in the unlikely event new farm bill efforts fail and another 2008 Farm Bill extension occurs, the attractive ACRE program could shift some acres to corn.
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: 75% sold on 2013-crop production. 20% of expected 2014-crop production is sold via cash forward contract sale for harvest delivery.
Price action: Wheat futures finished mostly 12 to 15 cents lower in SRW contracts, mostly 10 to 13 cents lower in HRW contracts and mostly 8 to 9 cents lower in HRS contracts. For the week, wheat futures sharply extended the price decline and posted new lows.
5-day outlook: Attitudes are bearish, the technical picture is eroding and world supplies are building. That suggests wheat futures will continue to face price pressure next week. But the market is overdue for a correction, though the upside is limited to mild short-covering unless the corn market surges and pulls wheat higher. But even that isn't guaranteed to help wheat, as was witnessed by today's price action.
30-day outlook: The winter wheat crop has endured a very cold start to winter so far. But given that the crop went into dormancy in very good shape and there is some protective snowcover for a portion of the crop, traders aren't worried. That's not likely to change as traders will want to see proof of winterkill damage before they factor it into prices.
90-day outlook: The wheat market must find a price that encourages a sharp pickup in export demand to fuel a price recovery. With the global ending stocks forecast building, that won't be any easy task. With a surge in export demand, wheat will struggle to find buying interest.
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.
Price action: Cotton futures saw earlier gains pared and the market turned lower upon the release of USDA's January crop reports. But futures were able to fight back to close slightly higher in most contracts. For the week, there was little net price movement despite increased price volatility.
5-day outlook: USDA's report numbers cast a negative shadow over the cotton market as global ending stocks were again raised and are forecast to be record-large. That will make it difficult to generate additional near-term buying interest. Plus, the recent pickup in price volatility is a sign the recovery rally may be running out of steam.
30-day outlook: The National Cotton Council will hold its annual meeting Feb. 7-9. The council's producer survey will give the market the first snapshot of planting intentions for this year. Cotton acres are widely expected to rise from year-ago as row-crop returns will be down, but how much cotton acreage will increase could well depend on price action into spring.
90-day outlook: China has yet to officially set its cotton policy for 2014, but most are anticipating a switch from the government stockpiling program to one that features direct subsidies for farmers. How that impacts Chinese cotton acres and Chinese cotton demand remain to be seen. With China stockpiles consisting of more than half of global cotton supplies, there are concerns the government will actively dump those stocks onto the domestic market and curb Chinese import demand.
Hedgers: 50% of 2013-crop is sold in the cash market.
Cash-only marketers: 50% sold on 2013-crop production.