Crops Analysis (VIP) -- November 15, 2013

November 15, 2013 08:53 AM
 

Corn

Price action:
Corn futures settled at or near session lows with losses of mostly 6 to 7 cents. The market posted slight losses for the week.

5-day outlook: Corn futures softened as the week progressed, which gives bears the technical advantage heading into next week. However, once funds decide to begin lightening their record short position, it would open significant upside potential and help the market set a harvest low. Improvement in Gulf basis is encouraging, but country basis levels need to improve to suggest a low is in place. EPA proposed lowering its corn for ethanol mandate today, but this was largely expected.

30-day outlook: With farmers saying they will hold onto new-crop supplies until an overdue corrective bounce occurs, country basis levels are likely to improve in the near-term. This would be especially true if importers continue to book corn at an aggressive pace -- as seen throughout October and to begin November -- and ethanol production continues to build.

90-day outlook: There is already building speculation that corn acres will be down in 2014 from this year's lofty level due to the current price ratio that is more favorable to adding soybean acres. If realized, it would help to build a price floor that is above current levels. But larger yields in 2014 would also build carryover, which has us looking carefully at 2014-crop contracts for hedging opportunities.

Hedgers: 25% of 2013-crop production is sold via cash forward contract for harvest delivery.

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

 

Soybeans

Price action: Soybean futures saw profit-taking pressure mount as the day progressed. January through July futures saw losses of 30 to 33 cents, while deferred contracts saw losses in the 20s. Today's losses erased all of this week's gains and then some.

5-day outlook: The failed attempt to remain above the key $13.00 level in January beans could be met with followthrough pressure next week. November has brought a widening of the trading range, which simply means more volatile price action lies ahead.

30-day outlook: With harvest winding down, more focus is being put on the South American crop. Favorable weather is encouraging planting and helping to establish the crop, raising expectations for a record crop. As acreage expectations build over the next month, it could limit rally attempts even if demand improves.

90-day outlook: Expectations are already beginning to build for higher U.S. soybean acres at the expense of corn as producers return to rotations. This will especially be the case if the price ratio continues to favor soybeans.

Hedgers: Get to 100% sold in the cash market on 2013-crop production. We'll manage risk on the board the remainder of the marketing year.

Cash-only marketers: Get to 75% sold on 2013-crop production.

 

Wheat

Price action: Wheat futures traded in a narrow range today and for most of the week. Most contracts for all three flavors posted slight losses for the day and for the week.

5-day outlook: Wheat futures remained in a follower's role to the corn market this week and more of the same is likely ahead as traders search for a price that lifts wheat demand. Traders need fresh demand news to lift futures, but if support levels are violated next week, it would set the stage for the next push lower in prices.

30-day outlook: With winter wheat crop condition ratings improving week-to-week, traders expect the crop to enter dormancy in much better shape than last year. Unless a global weather scare develops, it will be difficult for the wheat market to rally unless corn finally secures a harvest low.

90-day outlook: A large Canadian wheat crop is causing bottlenecks and weighing on the cash markets. While Canadian spring wheat protein is generally lower than normal, the same can be said about the quality of the U.S. spring wheat crop.

Hedgers: 75% sold on 2013-crop in the cash market. No 2014-crop sales are advised.

Cash-only marketers: 50% sold on 2013-crop. No 2014-crop sales are advised at this time.

 

Cotton

Price action: Cotton futures ended high-range today with solid gains of 27 to 74 points, with nearbys leading to the upside. Nevertheless, most contracts posted slight losses for the week.

5-day outlook: Cotton futures received limited help from an impressive weekly export sales number to suggest traders don't believe the recent uptick in demand is part of a lasting trend. Weekly sales of 472,700 bales came in well above expectations, with China the lead buyer. Next week's export sales report will be closely watched.

30-day outlook: The market will likely remain on edge about the negative demand implications regarding Chinese plans to soon dump excess supplies onto the domestic market. This would likely diminish demand for U.S. cotton, though the supplies are not expected to be of good quality.

90-day outlook: While U.S. cotton carryover supplies are expected to relatively tight for 2013-14, this is countered by expectations for a large global crop. USDA last week forecast global cotton production at a lofty 95.71 million bales. This will likely continue to limit the market's upside going forward.

Hedgers: 50% of expected 2013-crop is sold in the cash market.

Cash-only marketers: 50% sold on 2013-crop production.

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