Crops Analysis (VIP) -- June 7, 2013

June 7, 2013 09:31 AM
 

 

Corn

Price action: July corn futures closed 3 cents higher, while the 'tweener September contract ended 13 1/2 cents higher and new-crop futures were mostly 9 to 10 cents higher. For the week, July corn posted slight gains, while new-crop futures ended lower.

5-day outlook: Weather, crop conditions and USDA's June Supply & Demand Report will be the focal points next week. As a result, the recent pickup in price volatility in new-crop corn futures is likely to continue. If forecasts calling for additional rains next week pan out, concerns over severe planting delays and slowed crop development would increase. Because of these conditions, USDA may further lower its yield projection in the Supply & Demand Report, but we don't anticipate any drop in planted acreage.

30-day outlook: The update on planted acreage will come on June 28 via the Acreage Report. Unfortunately, that won't be the final answer on the situation as producers are still making planting decisions as USDA is surveying for the report. As a result, we are anticipating USDA will resurvey some areas for planted acreage later this summer -- likely in August.

90-day outlook: After a delayed and soggy start, the corn crop needs favorable weather from here forward. If there are additional hiccups, it will further cut into yield potential. Forecasts signal ENSO-neutral conditions are most likely through summer, but cooler equatorial Pacific sea surface temps suggest La Nina may be reforming.

Hedgers: 100% sold on 2012-crop in the cash market. 10% of expected 2013-crop production is sold via cash forward contract for harvest delivery

Cash-only marketers: 75% sold on 2012-crop production. 10% of expected 2013-crop production is sold via cash forward contract for harvest delivery.

 

 

Soybeans

Price action: July soybean futures finished 1 cent higher and the August contract was 6 1/2 cents higher. New-crop futures closed 18 to 24 cents higher, with the November contract posting the highest close since February 6.

5-day outlook: Today's strong close is impressive and suggests trader concerns over delayed planting are rising despite prospects of some switching of unplanted corn acres to soybeans. This makes weather the key driver for next week. A continuation of the current pattern of frequent rains would further support prices. A shift to drier and warmer weather would dampen prices. In addition, the trade could take some direction from USDA's Supply & Demand Report Wednesday. Traders are anticipating USDA will lower its projection for the 2013-crop soybean yield due to the slow start to the planting season.

30-day outlook: USDA's Acreage Report June 28 will be the first key indicator of total planted soybean acres. But it is unlikely to be the last as only 57% of intended soybean acreage was planted at the start of the survey period and progress was limited again this week. In addition, crop watchers will be inclined to adjust yield estimates down the longer planting completion is delayed.

90-day outlook: Despite the difficulties getting this year's crop in the ground, August weather will prove the ultimate arbiter of final soybean yield. Crop watchers have their eye on pacific sea surface temperatures for clues as to whether or not a La Nina pattern resurfaces. If that pattern develops early this summer, it could negatively impact soybean yields. If it does not, trader concerns over yield will diminish.

Hedgers: 100% sold on 2012-crop in the cash market. 20% forward priced on expected 2013-crop production for harvest delivery. 50% of expected 2013-crop production is hedged in November soybean futures at $12.19.

Cash-only marketers: 90% sold on 2012-crop. 20% forward priced on expected 2013-crop production for harvest delivery.

 

 

Wheat

Price action: Wheat futures saw choppy trade to wrap up the day after similar action for most of the week. Chicago wheat ended mostly around a penny lower today, while Kansas City posted losses of 2 to 3 cents. Minneapolis wheat ended narrowly mixed. All three markets ended with minimal losses for the week.

5-day outlook: USDA reports will be the focus next week. Traders will get another look at spring wheat planting progress and the condition of the HRW wheat crop on Monday. Then on Wednesday, USDA will update its supply/demand estimates for 2012-13 and 2013-14. Traders expect USDA to raise its old-crop carryover peg 3 MMT to 734 million bu. and to lower its new-crop carryover forecast by the same amount to 637 million bushels.

30-day outlook: Harvest of the HRW wheat crop will limit upside potential, even if results are poor (likely). Meanwhile, delayed spring wheat development and the likelihood that some acres will not be seeded should keep the Minneapolis market supported. Otherwise, wheat will likely remain a cautious follower of corn.

90-day outlook: So far, testing after the discovery of GMO wheat in Oregon has signaled this was an isolated incident. If that changes, it could be a lag on export demand for U.S. wheat, especially as the world wheat crop is expected to be record-large.

Hedgers: 100% sold on 2012-crop in the cash market. No 2013-crop sales advised yet.

Cash-only marketers: 100% sold on 2012-crop. No 2013-crop sales advised yet.

 

 

Cotton

Price action: Cotton futures faced light profit-taking to wrap up the week, but the market ended with strong weekly gains.

5-day outlook: Strong export sales data for the week ended May 30 signals there is solid demand under the market. Key is whether demand dries up as prices strengthen. Traders will be given the first cotton condition rating of the season on Monday. With much of Texas in severe to exceptional drought, the initial rating may not be favorable.

30-day outlook: Droughts are broken with floods and NOAA is forecasting an active hurricane season this year. Timely rains will be key, as far fewer acres are expected to have been seeded to cotton this year.

90-day outlook: While China is trying to actively sell state reserves, demand for domestic supplies has been relatively light as mills can import cotton at a more affordable price. Plus, the China Cotton Association expects the country's cotton production to slide 5% this year. All of this points to ongoing solid export demand that should keep the U.S. cotton market supported.

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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