Crops Analysis (VIP) -- July 19, 2013

July 19, 2013 09:40 AM
 

Corn

Price action: Futures pressed lower in early trading and then rebounded to close 3 cents higher in the September contract, unchanged in the December, and 1/4 to 1/2 cents lower in March through July contracts near the highs of the day. The market posted slight losses for the week.

5-day outlook: Traders will watch for signs of increased export sales on any dips by September futures under $5.35 or to $5.00 for the December contract. These price levels prompted buying in early July. New-crop futures will react to this weekend's weather and weather forecasts for the next two weeks as a large percentage of the Corn Belt's crop will soon pollinate. If weekend weather is drier and hotter than expected, traders may move to the buy side, especially if longer-term forecasts shift to warmer and drier than currently expected.

30-day outlook: Weather the next three weeks will play a key role in determining the size of this year's crop as a very large percentage of the crop will pollinate between now and through the first week in August. Traders will move to the negative side if weather is seen as favorable and to the positive side if temperatures rise and precipitation falls. Meanwhile, tight old-crop supplies will support spot cash prices until the arrival of the southern corn crop.

90-day outlook: While there is still plenty of uncertainty over eventual yields from this year's crop, there will be a strong increase in supplies once this year's crop is in the bin. Prospects of that increase have pressured prices and will continue to pressure prices going forward. Once new-crop supplies begin moving to the market, the support given by the old-crop's tight carryover will be removed and prices and basis will seek market-clearing levels.

Hedgers: 100% sold on 2012-crop in the cash market. 25% of expected 2013-crop production is sold via cash forward contract for harvest delivery.

Cash-only marketers: 100% sold on old-crop. 25% of expected 2013-crop production is sold via forward contract for harvest delivery.

 

Soybeans

Price action: August soybean futures posted gains of 21 1/2 cents, while deferred contracts ended 7 1/4 to 9 3/4 cents higher for the day after a choppy start. The market posted slight to moderate gains for the week as well.

5-day outlook: Attention was squarely on the weather this week and the same is expected when traders return Monday. If forecasts are right and temps moderate and rains fall this weekend, additional pressure on the soybean market is likely. If not, watch for another weather scare rally.

30-day outlook: The crop is off to a very slow start developmentally and some intended acres were likely never planted. USDA's August crop production report will reveal USDA's findings from its rechecking of fields that were intended to be planted to beans. And then the Pro Farmer Crop Tour the third week of August will give the market a sample-based look at the crop's yield potential.

90-day outlook: Frost will be a four letter word this fall, as beans will need several extra weeks at the end of the growing season to reach full development. Barring optimal end-of-season conditions, the market will likely finally take note of poor harvest results from key production states of Iowa and Minnesota. Considering tight carryover supplies and strong demand from China, this should spark higher prices.

Hedgers: 100% sold on 2012-crop in the cash market. 20% forward priced on expected 2013-crop production for harvest delivery.

Cash-only marketers: 100% sold on old-crop. 20% of expected 2013-crop production is sold via forward contract for harvest delivery.

 

Wheat

Price action: Wheat futures finished 1 to 4 cents higher in Chicago, fractionally to 3 cents higher in Kansas City and narrowly mixed in Minneapolis. For the week, wheat futures posted relatively modest losses.

5-day outlook: With wheat reliant on the corn market for direction, the key to price action in the wheat market next week is Corn Belt weather. Wheat will very likely follow the corn market in whichever direction the weather takes that market.

30-day outlook: Winter wheat harvest is rapidly progressing, which means seasonal pressure is easing. But with the spring wheat crop quickly catching up following a late start and crop conditions relatively strong, buying interest will be limited short-term.

90-day outlook: Global demand for wheat is perking up. Unless global end-users are willing to pay for quality, the U.S. will likely be undercut on price, especially from Black Sea exporters. Still, China has shown a recent liking for U.S. SRW wheat as it works to cover domestic crop shortfalls and restock state reserves. Demand is the long-term price key for wheat.

Hedgers: 50% of 2013-crop is sold in the cash market. 100% sold on of 2012-crop.

 

Cotton

Price action: Cotton futures finished 63 to 153 points higher through the July 2014 contract today to lock in solid gains for the week.

5-day outlook: Cotton traders are showing no willingness to push cotton futures outside of the broad, choppy range. By finishing the week near the middle of the range, it's a guessing game on which way futures will trend to start next week. But odds favor futures ending the week near the middle of the range again.

30-day outlook: Crop concerns in the Southwest are being countered by a slowdown in Chinese demand for U.S. cotton. As long as these fundamental factors continue to counter the other, price action will remain choppy within the established range.

90-day outlook: The long-term weather outlook through October calls for above-normal temps and equal chances for normal, above-normal and below-normal precip for Texas. Given the likelihood for hotter-than-normal temps, the condition of the Texas cotton crop could deteriorate into harvest.

Hedgers: 50% of expected 2013-crop production is hedged in December cotton futures at 83.87 cents. 50% of expected 2013-crop production is also sold via cash forward contract for harvest delivery. 100% sold on old-crop in the cash market.

Cash-only marketers: 85% sold on old-crop. 50% of expected 2013-crop production is sold via cash forward contract for harvest delivery.

Cash-only marketers: 25% of 2013-crop sale is sold. 100% sold on 2012-crop.

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