Crops Analysis (VIP) -- November 27, 2013

November 27, 2013 08:10 AM


Price action:
Corn futures enjoyed slight gains for most of the session and finished mildly higher in all but the December contract, which goes into delivery Friday. Nevertheless, most contracts are working on slight losses for the week.

5-day outlook: Corn futures have consolidated in a narrow range for much of the month with bears having a slight advantage. The market has had a hard time shaking persistently bearish attitudes. It will likely take consistent, strong export demand news for the market to definitively put in a harvest low and move higher.

30-day outlook: While demand is being rebuilt, there are concerns that any price rise could slow export demand. Therefore, traders will keep a close eye on weekly export sales and inspections data.

90-day outlook: Attention will be on the South American growing season (which thus far is off to a favorable start) and the acreage battle between corn and soybeans in the United States. Most expect a shift closer to a 50-50 corn-soybean crop mix for the growing season ahead, but action in new-crop futures will be key as farmer make their decisions.

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 were unable to hold onto earlier price gains as buying gave way to profit-taking ahead of Thanksgiving. Futures ended roughly 2 to 10 cents lower today.

5-day outlook: Traders' focus is on demand as China and "unknown destinations" have been active buyers recently. With futures at the top of the two-plus month choppy trading range, fresh demand news is needed to fuel an upside breakout. Otherwise, futures are at risk of slipping back toward the bottom of the choppy range.

30-day outlook: The South American growing season is off to a favorable start and record production is forecast. If that remains the case, it would be a limiting factor for the soybean market. But if weather and/or pest/disease problems cause South American crop estimates to decline, it could provide soybean futures with price support.

90-day outlook: If Brazilian production comes in anywhere near where currently projected, there are likely to be problems getting the record crop from the field to port for export in a timely manner. After all, this year's crop is forecast to be around 8 MMT bigger than the 2012-13 crop and Brazil had all kinds of logistical problems last year. Shipping delays out of Brazil would keep the window for U.S. bean exports open longer than currently expected.

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: Winter wheat markets finished mostly 4 to 8 cents higher today, while spring wheat futures closed mostly 3 to 4 cents higher with the exception of the lead-month contract.

5-day outlook: Wheat futures got support today from the arctic blast that hit winter wheat country. If concerns over potential winterkill damage ease, wheat futures will struggle to find buying interest as other supportive news is lacking.

30-day outlook: U.S. wheat is competitively priced, but export demand for U.S. wheat isn't overly strong due to higher freight rates than some of the competitors. Plus, the U.S. has missed out on the big tenders, while the bulk of export business has been little purchases. Unless that changes, it will be difficult for export demand to be overly price-supportive.

90-day outlook: Export competition from the Black Sea region is expected to ease the second half of the 2013-14 marketing year. But Ukraine and Russia are showing no signs of slowing wheat sales, partly because winter wheat seedings didn't decline as much as once feared. The level of Black Sea wheat shipments will be key in setting the price tone for U.S. wheat in 2014.

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 posted strong gains to start the week, but this gave way to profit-taking today and futures ended 110 points lower in the front-month contract and 49 to 53 points lower in deferred months. Nevertheless, the market is working on gains for the week.

5-day outlook: Traders reduced risk exposure today in anticipation of the results of China's auction of some of its large stockpiles on Thursday. The quality of the fiber is not expected to be great since it is from the 2011 crop and the minimum price is high. Therefore, the U.S. is not expected to see a major hit in export demand. Traders will have these results along with a weekly export sales report to digest next week.

30-day outlook: Recent weekly export sales reports have revealed highly impressive cotton sales. This must continue for the cotton market to definitively put in a low. While the U.S. cotton crop is relatively tight, global supplies are plentiful.

90-day outlook: Attention will begin to shift to the upcoming growing season and the acreage battle in the South. Lower corn and soybean prices this marketing year could mean an increase in cotton acres next year.

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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