Crops Analysis (VIP) -- May 31, 2013

May 31, 2013 09:54 AM
 

Corn

Price action: Bulls had the advantage in the corn market as traders readied for month-end. July and September futures ended high-range with gains of 7 3/4 and 5 1/2 cents, respectively, and new-crop contracts ended roughly 2 to 4 cents higher. Old-crop posted slight gains for the week, while new-crop posted sharp week-over-week gains.

5-day outlook: Pre-report expectations are that Monday's Crop Progress Report will show around 92% of the corn has been planted. But this does not include acres that will need to be replanted due to flooding and ponding. With more rain in the forecast next week and the final plant date here or already past, this signals some acres will be claimed as prevent plant or switched to beans, which should keep new-crop supported.

30-day outlook: Fewer corn acres and reduced yield expectations due to soggy weather point to lower production prospects. Still, carryover would be projected to rise in 2013-14. We feel near-term price strength in new-crop corn futures is a selling opportunity.

90-day outlook: Attention will be squarely on the weather through summer given the late start to the growing season. Late planting means a good portion of the crop will pollinate during what is typically the hottest point of the summer. It also pushes back the date when new-crop supplies will likely come available, upping the odds of a weather scare and keeping supplies thin into fall.

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 gained strength after opening about steady with Thursday's close and finished the day with a gain of 14 1/4 cents -- a mid-range close. November soybean futures opened steady and then surged to take out the mid-February high. November beans also closed mid-range and at their highest closing price since February 7.

5-day outlook: The strong finish to close out the week and the month is impressive. It suggests trader concerns over delayed planting of this year's soybean crop outweigh concerns over how many previously intended corn acres make the switch to soybeans. But talk of corn acres switching to soybeans could pick up next week if planting delays persist.

30-day outlook: Once the crop is in the ground, it will have plenty of moisture to get established. The question then becomes how many acres were planted to soybeans. USDA's Acreage Report at the end of June will give traders a better idea of planted acreage, though planting delays mean final acreage numbers won't be fully known by the end of June.

90-day outlook: Planting date isn't nearly as important for soybeans as for corn. The soybean crop can overcome a late start if weather in August is favorable. Supplies are projected to increase in 2013-14. That remains as an eventual bearish factor on new-crop prices.

Hedgers: 100% sold on 2012-crop in the cash market. 50% of expected 2013-crop production is hedged in November soybean futures at $12.19. 10% of expected 2013-crop production is sold via cash forward contract for harvest delivery.

Cash-only marketers: 90% sold on 2012-crop. 10% of expected 2013-crop production is sold via forward contract for harvest delivery.

 

Wheat

Price action: Wheat futures finished mostly 5 to 7 cents higher in Chicago, 4 to 6 cents higher in Kansas City and mostly 2 to 5 cents higher in Minneapolis. That resulted in mild corrective gains for the week.

5-day outlook: Traders covered short positions in wheat today to finish the week and to close out the month. But for followthrough buying to occur, corn and soybeans must lead the way. With the GMO wheat situation unsettled, it will be hard for wheat to generate buying interest.

30-day outlook: Harvest activity will move into full swing soon across winter wheat country. While HRW production is down this year, harvest pressure is still likely. Harvest likely must push past the halfway point before seasonal pressure will ease.

90-day outlook: The longer the GMO issue lingers, the harder it will be for wheat to find sustained buying interest. While this situation is very likely much ado about nothing, it will be a market issue as long as U.S. trading partners halt shipments of wheat.

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 closed 71 to 94 points lower today. Futures extended the price slide this week and ended on weekly lows.

5-day outlook: Momentum is clearly with bears, suggesting followthrough selling is possible -- if not probable -- next week. Unless fresh bullish news surfaces to change the momentum, the upside will be limited to corrective buying, while there's further downside risk.

30-day outlook: To change momentum, bullish demand news is needed as that would tell traders prices have fallen far enough. China will be key on the demand front. If China's manufacturing sector continues to slump, demand from Chinese textile mills will be reduced and it would likely take a lower price to attract value buying.

90-day outlook: The cotton crop is off to a slow start and there are some concerns with lingering drought in Texas. But the hurricane season is expected to be active, which suggests there should eventually be plenty of moisture through cotton country.

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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