Crops Analysis (VIP) -- March 28, 2014

March 28, 2014 09:55 AM


Price action:
Corn futures closed narrowly mixed in light and choppy trade. For the week, corn futures posted solid gains.

5-day outlook: USDA's Prospective Plantings and Quarterly Grain Stocks Reports will set the price tone Monday following the 11 a.m. CT release. Both reports have the ability to move the market sharply -- up or down. Barring a surprise on the acreage side, however, March 1 stocks are likely to be more market-moving as traders have consistently missed USDA's quarterly corn stocks numbers by a wide margin for several years.

30-day outlook: There's still a lot of frost in the ground following a long, cold winter across the Corn Belt. As a result, it won't be an early start to the planting season. But it's also unlikely plantings will be as late as last year's record-slow pace. Traders will use Monday's March planting intentions as a baseline from which to add or subtract acres based on spring weather and price action.

90-day outlook: Export corn demand remains very strong, signaling the rally off the winter lows hasn't deterred foreign end-users from seeking U.S. corn. The strong export pace suggests USDA will raise its export forecast, though feed and residual use may also be trimmed amid less corn-for-feed demand due to porcine epidemic diarrhea virus (PEDV).

Hedgers: 70% sold on old-crop. 30% of expected 2014-crop is sold via forward contract for harvest delivery.

Cash-only marketers: 60% sold on old-crop. 30% of expected 2014-crop is sold via forward contract for harvest delivery.



Price action: Soybean futures ended the day mixed, with nearbys steady to 4 cents higher and new-crop 1 to 2 cents lower. For the week, May soybeans were around 27 cents higher than last week's close, with November beans up around 13 cents.

5-day outlook: The long-awaited Prospective Plantings and Grain Stocks Reports will be released Monday morning. The acreage data is trend-setting as it provides a solid figure for traders to add and subtract acres from as we move into and through the planting season. The stocks data will remind the market of the tight supply situation and provide an indication of how tight carryin stocks for 2014-15 will be.

30-day outlook: With the window on U.S. soybean exports open longer than usual and no major cancellations from China, traders expect USDA to raise its export forecast again next month and further trim carryover. But an increase in soybean imports from South America will likely offset most of an increase to exports.

90-day outlook: Weather will be closely monitored as we move into the growing season. Conversations with meteorologists this week provide little concern about the growing season overall, which leads to expectations for at least trendline yields. See "Evening Report" for more on the weather.

Hedgers: 25% of expected 2014-crop is sold via forward contract for harvest delivery. 100% sold in the cash market on 2013-crop production.

Cash-only marketers: 25% of expected 2014-crop is sold via forward contract for harvest delivery. 90% priced on old-crop.



Price action: Wheat futures faced heavy pressure throughout the day and ended low-range; HRW led the decline with losses around 18 to 21 cents. SRW wheat ended mostly 15 cents lower and HRS wheat closed around 14 cents lower. Despite volatile trade this week, wheat futures posted very little net change.

5-day outlook: Improved rain chances for the Southern Plains next week pressured the wheat market today. Key will be whether these showers develop, and rainfall totals and coverage if they do. And of course, any surprises in USDA's Prospective Plantings or Quarterly Grain Stocks Report would garner a market reaction. Traders expect winter wheat acreage to decline from year-ago while other spring wheat plantings are expected to rise versus 2013.

30-day outlook: USDA's weekly winter wheat condition updates start back up April 7, but a drop in crop ratings shouldn't come as a surprise as traders have been monitoring winter wheat crop deterioration via state updates. Meanwhile, if tensions continue to escalate in the Black Sea region or Russian forces move into Ukraine, traders will build fear premium into prices as this could disrupt grain shipments.

90-day outlook: The winter wheat crop has been hit with drought and untimely freeze events. But wheat is a resilient crop with the ability to surprise crop watchers. Spring weather, as always, will be key.

Hedgers: 50% of expected 2014-crop is sold via forward contract for harvest delivery. 100% sold on 2013-crop.

Cash-only marketers: 90% sold on old-crop. 50% of expected 2014-crop is sold via forward contract for harvest delivery.



Price action:
Cotton futures saw volatile trade to start the week, but the wild price swings moderated the latter half of the week. Today, futures closed 8 to 124 points higher, with nearby contracts leading the move higher. Old-crop futures posted solid weekly gains.

5-day outlook: Attention will be on USDA's Prospective Plantings Report Monday. Traders expect an increase in cotton planting intentions from 2013 as row crop prices have dropped from year-ago and Southern producers don't anticipate a strong corn basis pull this summer like recent years.

30-day outlook: The market took news China will cut the price of its state cotton reserves in a move to lift sales in stride this week. The same can be said for the country's decision to raise the amount of state-owned reserves mills must buy to get import quotas to 4:1 versus 3:1 last year. But if this spurs a major increase in mills' purchases of domestic supplies and/or a decline in their U.S. cotton buys, cotton traders could respond negatively.

90-day outlook: Much of the attention will be on the growing season and the need for a rebound in production following last year's small crop. Drought that is entrenched in Texas raises some concern, as do extended forecasts calling for above-normal temps in the months ahead.

Hedgers: 75% of 2013-crop is sold in the cash market. 25% of expected 2014-crop production is sold via cash forward contract for harvest delivery.

Cash-only marketers: 75% of 2013-crop is sold. 25% of expected 2014-crop production is forward sold for harvest delivery.

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