Crops Analysis (VIP) -- July 26, 2013

July 26, 2013 09:29 AM


Price action: September corn futures closed 4 cents lower today, while new-crop contracts ended 2 to 3 cents lower. For the week, corn futures extended the recent price decline.

5-day outlook: Bears have momentum on their side and the forecast calls for cool temps and scattered rainfall next week. As a result, corn futures are at risk of further price pressure. It's hard to get traders excited about the long side of the market when weather conditions are non-threatening during pollination.

30-day outlook: While traders don't have many crop concerns, there are plenty of holes in the western Corn Belt. USDA's first survey-based look at the corn crop in the Aug. 12 Crop Production Report should uncover some of those holes. We'll get a first-hand look at this year's crop Aug. 18-22 on the Pro Farmer Midwest Crop Tour.

90-day outlook: While much of traders' focus is on this year's crop, it's the demand side of the market that will tell them when prices have dropped far enough. We expect export demand to rebound sharply in 2013-14 as supplies increase, especially in the eastern Corn Belt.

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.




Price action: August soybean futures closed 5 1/2 cents lower to finish a week of very heavy liquidation pressure. The September contract forward also posted hefty weekly declines, but finished roughly 4 to 8 cents higher today.

5-day outlook: Forecasts call for normal to below-normal temps and normal to above-normal precip for the Corn Belt into early August. Traders feel that's a favorable forecast for soybeans. But given the late maturity of this year's crop, warmer and sunnier conditions may be the best thing this year.

30-day outlook: USDA's first survey-based soybean crop estimate will come Aug. 12 via the Crop Production Report. That will give traders a much better indication of production potential, but it will be far from the final word on this year's crop. We highly suspect USDA will lower its yield forecast from the current record projection. There are simply too many holes and too many short beans to produce a record yield this year.

90-day outlook: When the growing season comes to an end with a killing freeze/frost will be key this year. Because of the late maturity of the crop, it will take an extended growing season for soybeans to maximize whatever yield potential is built up through the growing season.

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.




Price action: SRW futures closed narrowly mixed today, while HRW and HRS futures ended slightly lower. All three flavors ended slightly lower for the week.

5-day outlook: Price action in the corn market will remain the key "fundamental" for wheat next week. Wheat proved this week it doesn't have the strength to separate from corn even though seasonal pressure has eased and export demand is perking up.

30-day outlook: While export demand for U.S. wheat is strengthening, much of the global business is going to competitors as their prices are under U.S. wheat. The primary competition has, and will be, the Black Sea region as new-crop supplies are becoming available for export.

90-day outlook: With U.S. and global carryover pointed lower year-over-year, we eventually expect prices to make a recovery. But because of corn's strong influence on wheat, it may take until after traders realize there are some issues with the corn crop in the western Corn Belt before that happens. Therefore, a fall/winter price rally seems most likely at this time.

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

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




Price action: Cotton futures closed 62 to 86 points lower today. Price action was choppy this week, but futures ended moderately lower and near weekly lows.

5-day outlook: More choppy price action is likely next week as traders are showing no interest in sharply extending positions in either direction. To get an extended price move, fresh export demand news or a serious crop concern likely needs to develop.

30-day outlook: Texas has gotten some relief from hot, dry conditions recently, but drought is maintaining its grip on the state and the rest of the Southwest. Given the drought concerns and forecasts for a significant drop in production, sharp downside risk should be avoided.

90-day outlook: China's vast manufacturing sector continues to struggle, which raises questions about Chinese demand for cotton. Those demand concerns limit the upside and could open fresh downside risk if they intensify.

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.


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