Crops Analysis (VIP) -- January 25, 2013

January 25, 2013 08:55 AM


Price action: Corn futures posted slight losses for the week, but didn't do any technical chart damage as futures largely remained within the boundaries of the two-week consolidation range.

5-day outlook: The corn market has entered the "winter doldrums" and needs a dose of fresh demand news to excite bulls since the tight supply situation is well known. But given the slow pace of corn export sales and sluggish domestic demand, it's unlikely corn will get the needed boost from demand. Without fresh news, corn will following neighboring markets next week.

30-day outlook: The battle for acreage should gain more momentum during February. Currently the market anticipates corn to pick up around 1 million acres from last year -- around 98 million planted acres. But it will be difficult for corn to build more than a trendline yield unless weather conditions improve dramatically.

90-day outlook: Currently, the drought footprint over the Corn Belt is larger than at this time last year and forecasts aren't favorable for near-term relief. This hasn't become a major market factor yet, but that could change quickly if conditions remain dry into spring.

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 closed 1/4 to 5 3/4 cents higher through the July contract. Farther deferred months ended 1 1/2 to 3 1/2 cents lower.

5-day outlook: South American weather and Chinese demand will remain traders' fundamental focal points next week. Some forecasters are calling for improved rain chances in central Argentina the second half of next week, while others show a drier pattern. Rainfall amounts and coverage levels will be key as nearly all forecasts signal hotter temps. On the demand front, traders are waiting to see if talk of additional old- and new-crop Chinese purchases late this week are confirmed.

30-day outlook: Chinese demand for U.S. soybeans will decline seasonally as South American supplies hit the world market. The first bean shipments from Brazil should start in mid-February, but active South American exports are not likely until March/April. Until new-crop South American supplies are available, China will rely on U.S. soybeans.

90-day outlook: As USDA's Prospective Plantings Report on March 28 approaches, there will be increased attention on acreage. At the current 2.2:1 ratio, new-crop soybean prices are strong enough in relation to new-crop corn prices to "steal" a lot of acres from corn.

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 saw two-sided trade today, but the market ended in the upper half of its trading range with Chicago and Kansas City wheat roughly 4 to 8 cents higher and Minneapolis up 6 to 9 1/2 cents. Nevertheless, Chicago wheat posted moderate losses for the week.

5-day outlook: Wheat futures will likely trend steady to lower over the near-term as this week's action signaled how tough it is to get traders excited about drought with the winter wheat crop in dormancy in the Southern Plains. News of major export sales will be needed to get wheat to rally. Recent "decent" export sales numbers have failed to do the job.

30-day outlook: However, dryness across the majority of the Winter Wheat Belt will gain more attention over the next 30 days as the battle for acres heats up and spring nears. Tight supplies of high-protein wheat will likely keep Minneapolis wheat futures at a premium to Chicago and Kansas City wheat.

90-day outlook: A number of forecasters have noted increasing signs of a La Nina weather pattern. If this weather system takes hold, it would point to another year of dryness in both the Midwest and the Southern Plains. If that were the case, the market would likely be supported by both wheat and corn production concerns.

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 saw profit-taking today and ended 64 to 237 points lower through the July contract while deferred months were narrowly mixed. Still, futures ended with solid gains for the week.

5-day outlook: Cotton futures staged a major upside breakout this week. Key will be whether the market is able to sustain buying interest at these prices. Pressure on nearby contracts today signals traders are not convinced this will be the case. This week's surge comes from speculation already decent Chinese demand may improve and concern about 2013 plantings.

30-day outlook: Cotton plantings are expected to fall from 12.32 million acres in 2012 to around 10 million acres in 2013 as producers switch to corn and soybeans. This means cotton is likely headed higher over the next month as the market will have to compete against these crops to keep even this relatively acreage tally.

90-day outlook: Chinese demand will remain a major influence on U.S. cotton prices. Poor demand at recent Chinese state reserve auctions could indicate higher import demand from from Chinese mills if the government allows more import quotas. Demand from Bangladesh and Pakistan is also expected to improve; both have been actively selling duty-free yarn to China.

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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