Crops Analysis (VIP) -- November 22, 2013

November 22, 2013 09:00 AM


Price action:
Corn futures ended the day mixed and posted little net price change for the week.

5-day outlook: Trade volume typically declines Thanksgiving and New Year's which means traders' focus will likely be on position squaring next week. The corn market has had plenty of demand news given to it recently, and yet it hasn't been able to post a harvest low. This signals traders are concerned a rise in futures would slow demand during this critical demand-rebuilding period.

30-day outlook: Funds have eased their record net short position, but still have a lot of short-covering ahead in order to improve the price outlook. During the holidays, outside markets typically have more influence on price action. Given the current deflationary environment, outside market influence is bearish for the commodity sector over the near-term.

90-day outlook: As the calendar flips to 2014, more attention will be on acreage. Current expectations are that more competitive soybean prices and rotational considerations will take some acres from corn next year. But even if corn acreage is down slightly next year, more favorable weather still supports ideas of a large crop in the year ahead to boost carryover.

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.



Price action: Soybean futures posted sharp gains of 18 to 28 cents through the August contract, with the front-month leading gains. Most contract months finished at or near the day's highs. January futures closed 39 cents higher on the week and at their highest level since Sept. 27.

5-day outlook: Strong export news coupled with a lack of farmer selling has traders thinking the harvest lows are posted. However, futures finished the week at the top of the two-month trading range, which leaves them vulnerable to a setback at the start of next week. The $12.90 area now looks like a solid support zone for January futures. A bounce off this support would add further confirmation that the harvest low is behind us.

30-day outlook: This year's harvest is nearly in the books and farmers have slammed the doors on their bins. This means merchandisers will have to lift bids to pry those bin doors open again to meet continuing strong export demand. With traders accustomed to a steady dose of Chinese soybean purchases, price setbacks could occur if rumors of a sales cancellation surface.

90-day outlook: Soybean futures should work steadily higher now that harvest is completed and available stocks are locked into storage. The market will be wary of a surge in sales at the turn of the calendar year as some farmers have postponed sales for tax purposes. In addition, the market could become vulnerable to a price setback in February in anticipation of a record Brazilian harvest.

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.



Price action: Wheat futures closed slightly higher today, led by gains in the HRW market. The recent downturn in prices paused this week and some contracts are working on what appears to be a rounded bottom on the daily charts.

5-day outlook: Crop quality concerns are building in Australia amid unfavorable late-season weather. That's spurring hopes demand for U.S. wheat will build. But that's only enough to spark mild short-covering at this point.

30-day outlook: While export demand for U.S. wheat has been very solid recently, the Black Sea region continues to dominate a fair portion of the global export business. For traders to start actively buying wheat futures, a confirmed pickup in demand is needed.

90-day outlook: Exports from the Black Sea region are expected to ease the second half of the marketing year. That will be especially true if there are any issues with winter wheat crops in Ukraine or Russia. If their crops escape winter without major problems, both countries would likely be more willing to continue actively exporting wheat.

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.



Price action: Cotton futures faced heavy pressure today and ended 67 to 125 points lower, which was well off the market's lows for the day. The front-month was the exception as it closed 42 points higher on the day. For the week, the market posted moderate to sharp losses.

5-day outlook: Cotton futures posted a downside breakout today. Followthrough selling next week could signal the market is headed for a test of last year's lows. However, some contracts are nearing oversold territory, which could spur some light short-covering.

30-day outlook: Concerns China will slow its buys of U.S. cotton when it begins to release its reserve stocks will remain a limiting factor for the cotton market, as has been the case in recent weeks. This has limited the impact of recent strong export sales reports.

90-day outlook: While the U.S. cotton crop is on the "small" side this year, global production is expected to more than make up for this shortfall. This means U.S. cotton prices will struggle to rally for fear of pricing the U.S. out of export business.

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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