Crops Analysis (VIP) -- May 3, 2013

May 3, 2013 09:57 AM
 

Corn

Price action: May corn futures settled 2 cents higher today, while the July contract was 3/4 cent lower and new-crop contracts were mostly around 5 cents lower. For the week, corn futures posted sharp gains thanks to Monday's sharply higher to limit-up performance.

5-day outlook: Monday's Crop Progress Report will show corn planting even further behind the average pace. But if forecasts signal a window of warmer, drier weather, traders will assume rapid progress will be made. As a result, the weather forecast is likely to have more to do with price action next week than planting progress as of Sunday. USDA will release its first official look at the 2013-14 corn balance sheet next Friday. Based on past history, USDA should downwardly adjust its yield projection due to the very slow planting pace.

30-day outlook: The "optimal" planting window for corn closes around mid-May for much of the Corn Belt. After that, yield potential starts to theoretically decline. Very likely, a majority of the corn crop will not be planted by that time. Traders' urgency to build weather premium into the market would likely increase if severe corn planting delays last into late May.

90-day outlook: Much of the reason traders haven't gotten more concerned with corn planting delays thus far is that they still believe the long-term benefits of heavy spring rains outweigh the negatives of planting delays. But even with the soil moisture recharge, weather during the key pollination and grain-fill stages will be a key determinant of yield.

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: Soybean futures finished 14 to 19 cents higher today, which was mid-range for old-crop contracts, but near the top of today's trading range for new-crop contracts. For the week, soybean futures posted slight gains.

5-day outlook: Tight old-crop supplies and a strong cash market are supportive for soybean futures. Unless this triggers sustained buying interest, however, the recent choppy price action is likely to continue next week. USDA's May Supply & Demand Report Friday morning will be the first official look at the 2013-14 soybean balance sheet.

30-day outlook: Despite corn planting delays, there hasn't been sharp pressure on new-crop soybean futures. That's an indication traders currently don't feel there will be an aggressive switching of corn acres to soybeans. Still, November soybean futures remain in a downtrend as traders believe soybean planting intentions were understated in March. And the attitude on soybeans picking up acres from corn could change if severe corn planting delays extend into late May or early June.

90-day outlook: It took Brazil a while to get its new-crop exports rolling, but they should dominate the export market this summer. As export demand for U.S. soybeans slows, it may alleviate some of the pull on tight old-crop supplies. Still, the tight supply situation isn't going to go away and basis should remain very strong through summer.

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

Wheat

Price action: Bears had the upper hand in the wheat market most of the day. Chicago wheat ended around 7 cents lower for the day; Kansas City finished 7 1/4 to 12 1/4 cents lower and Minneapolis closed 5 1/2 to 9 1/2 cents lower in all but the front-month contract, which was 13 3/4 cents higher. For the week, futures at all exchanges posted solid gains.

5-day outlook: On Monday, the market will again be reminded of the poor state of the winter wheat crop that has suffered due to both drought and frequent frosts this spring, including this morning. The report should also remind the market of ongoing spring wheat planting delays. Then on Friday, the market will get USDA's first survey-based winter wheat crop estimate.

30-day outlook: Action in the wheat market this week signals traders are not overly concerned about diminished U.S. production potential due to expectations for sufficient world supplies. This signals the market may again need spillover support from corn or a steady stream of demand news to rally.

90-day outlook: But the global supply outlook could certainly change as the growing season progresses (key wheat production areas of Australia are very dry, for instance) and additional weather scare rallies in corn are likely. Either would likely give wheat a boost.

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.

Cotton

Price action: Cotton futures finished 19 to 89 points higher through the May 2014 contract today and solidly higher for the week.

5-day outlook: Price volatility increased this week, suggesting more of the same can be expected next week. Speculative money flow will be the key to price action in the cotton market next week as funds decide whether to continue the long liquidation or to start pumping money back into long positions. USDA's first official look at the 2013-14 cotton balance sheet next Friday should help set the price tone the remainder of spring.

30-day outlook: Given corn planting delays in areas of the South, there's talk cotton could pick up some acres. But Members in the South we've talked to say many producers are committed to planting intended corn acres -- even at a late date.

90-day outlook: Traders continue to keep a very close watch on the Chinese economy because of the demand implications for cotton demand. Recent data signals China's vast manufacturing sector slowed in April. If that continues in the months ahead, it would not be a positive for cotton demand.

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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