Crops Analysis (VIP) -- March 1, 2013

March 1, 2013 08:57 AM


Price action: Corn futures closed 1 1/2 to 5 cents higher through the September contract. New-crop futures were steady to fractionally lower today. For the week, old-crop contracts posted solid corrective gains, while new-crop futures were modestly firmer.

5-day outlook: Tight supplies and signs of a pickup in demand supported the price recovery in old-crop corn futures this week. But there are questions about how far futures can rally before demand slows again. As a result, the upside is likely limited. Improved moisture conditions and expectations for a strong rebound in production this year will continue to limit the upside new-crop corn futures and could trigger a fresh wave of selling if corrective buying dries up in old-crop contracts.

30-day outlook: With the calendar flipped to March, focus will be on planting intentions ahead of USDA's Prospective Plantings Report at the end of the month. Corn will pick up acres in the South, but may lose some acres in the eastern Corn Belt (crop rotations) and in drier areas of the northwestern Belt.

90-day outlook: Old-crop corn supplies will remain very tight through summer. Unless there is a serious threat of another major drought, however, it will be mostly a cash market issue. And if production looks to rebound sharply this year, new-crop futures will weaken despite tight old-crop supplies.

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: Soybeans finished mixed today with old-crop contracts roughly 3 to 9 cents lower and new-crop futures around a penny higher. Soybean futures -- old- and new-crop -- endured a choppy week of trade and in the end, saw very little net price movement.

5-day outlook: Market bulls were unable to gain much traction this week in a "risk-off" trading environment created by economic concerns surrounding the "great sequestration." The U.S. dollar index rose sharply, and while this has yet to dramatically slow export demand, it made it hard to finding more than brief short-covering. Traders will continue to sort through economic impacts of government cutbacks, but will also turn their attention to positioning for the March 8 Supply & Demand Report, although few, if any, changes to demand projections are likely.

30-day outlook: Old-crop soybean supplies are tight and the U.S. export window is open a bit longer than usual due to shipping delays at Brazilian ports. While workers have promised not to strike through mid-month, much-longer-than-anticipated wait times at the ports have shifted some old-crop demand back to the United States.

90-day outlook: But keeping the export window open longer for the U.S. means Brazil's export season will have a long tail. The focus during this period will shift to new-crop production prospects. Recent moisture has improved soil moisture conditions.

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 futures settled in the mid- to upper part of their daily trading ranges. Chicago wheat was 2 1/4 to 6 cents higher, Kansas City wheat was fractionally to 9 1/2 cents higher through the September contract and slightly lower in far-deferred contracts, and Minneapolis wheat 20 cents higher in the front-month contracts and mixed in deferred months. Chicago wheat futures were little changed for the week.

5-day outlook: Wheat futures benefited from some late-week short-covering amid ideas the downside has been overdone. Key to whether wheat attracts any additional buying interest next week will be whether U.S. wheat prices continue to attract export demand. There have been some signs of this in recent weeks.

30-day outlook: Weekly crop condition reports will start up again April 1. While HRW crop conditions improved over the past month, crop ratings are still poor. These weekly reminders of the poor state of the HRW crop could give the wheat market a boost.

90-day outlook: While the weather pattern of late has been favorably wet, this is not expected to be a permanent shift and substantial precip deficits remain through the Plains. The extended forecast points to above-normal temps and below-normal precip through key production areas of the Plains through May.

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 some light profit-taking to wrap up the week and futures ended narrowly mixed. The market posted strong gains for the week.

5-day outlook: Risk-aversion limited both buying and selling interest in the cotton market today. The same may well be true next week as the true impact of the sequester becomes more clear. USDA has said little about the possibility of cuts affecting cotton inspectors.

30-day outlook: Cotton futures posted a major breakout to the upside this week as recent high prices have failed to stem export demand. Key will be whether that holds true going forward, especially if the U.S. dollar index continues to strengthen. China is a major buyer of U.S. cotton. For this reason, traders will remain watchful for the well being of its economy as well as that of its major export market, Europe. Recent data from both have signaled some cause for caution -- if not concern.

90-day outlook: But even if export demand does slow, the market's downside is likely limited as U.S. 2013 cotton plantings are expected to be down sharply from year-ago as southern growers switch to corn and beans. Considering lower cotton acreage, drought relief to the South, especially Texas will be key. Long-term forecasts are not favorable; most point to above-normal temps and below-normal precip for Texas (and the Southwest).

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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