Price action: Corn futures faced a highly volatile day of trade. Traders' initial reaction to USDA's higher-than-expected crop peg was negative, but news Japan has booked U.S. corn due to shipping delays at Brazil's ports led to fresh buying interest. But in the end, futures remained well within the boundaries of the extended consolidation range, closing 1 1/4 to 6 1/2 cents lower today and slightly lower for the week.
5-day outlook: Gulf corn basis firmed late in the week to reflect the Japanese corn demand. Key will be if other countries follow Japan's lead, as that could help the market secure a near-term low. But if this proves to be a temporary or isolated demand event, the price impact will be limited and corn will remain within its established choppy trading range.
30-day outlook: USDA pegs global corn carryover at 117.99 MMT, which is up slightly from last month, but still 10.7% tighter than last season. Still-tight domestic and global stocks will continue to limit near-term downside price risk.
90-day outlook: Traders' focus will shift to acreage as the calendar flips to 2013. Informa Economics updated its acreage pegs this morning and sees the potential for planted acreage to climb by 800,000 acres from this year to 97.7 million acres. Adding more acres than that will be difficult as producers say they will return to a more normal soybean-corn rotation due to disappointing corn-on-corn yield results this year.
Hedgers: 100% sold on 2012-crop in the cash market -- 90% for harvest delivery; 10% for March 2013 delivery. Also, Dec. $6.50 put options, which were purchased on 40% of 2012-crop for 31 1/2 cents, are held as a crop insurance hedge.
Cash-only marketers: 75% sold on 2012-crop -- 50% for harvest delivery; 10% for March 2013 delivery; and 15% for May 2013 delivery.
Price action: Soybean futures ran into heavy selling pressure to close out the week as USDA's crop estimate and 2012-13 carryover projection were both higher than expected. Technical-based selling also weighed on the market as key support was violated. Soybean futures closed 31 to 47 1/4 cents lower through the August contract with slightly lesser declines in far-deferred contracts to finish sharply lower for the week.
5-day outlook: Traders' primary fundamental focus next week will be on South American crop conditions. Argentina remains very soggy, while weather in Brazil improved slightly this week. Aside from fundamentals, macro-economics could come into play.
30-day outlook: China's appetite for soybeans is strong and the U.S. is the only legitimate source of supplies until the South American crop is harvested. It's not a matter of if China buys soybeans on the sharp price break, but when. Signs of "value" buying by China would signal prices have dropped "far enough."
90-day outlook: Traders are counting on the South American crop to appease China's robust appetite for soybeans as U.S. supplies will be tight through 2012-13 even with the U.S. crop coming in bigger than anticipated. If unfavorable weather continues in South America and cuts crop size, traders would have a reason to build premium into prices.
Hedgers: 100% sold on 2012-crop in the cash market. No futures/options positions at this time. No 2013-crop sales advised yet.
Cash-only marketers: 75% sold on 2012-crop production for harvest delivery.
Price action: Wheat futures faced pressure from USDA's report data as the U.S. and global ending stocks projections were increased from last month. Macro-economic concerns also weighed on the market. Wheat futures closed mostly 6 to 16 cents lower in Chicago, 9 to 14 cents lower in Kansas City and 5 to 8 cents lower in Minneapolis.
5-day outlook: Ongoing drought issues in the Plains are expected to result in further crop deterioration in Monday's crop condition ratings. That may attract some fresh buying, but given the macro-economic concerns, this is not an environment where traders are likely to aggressively pump money into the long side of the market.
30-day outlook: Getting the HRW wheat crop fully established prior to dormancy is an issue with the drought problems in the Plains. But it's hard to get traders too concerned about crop prospects in the fall -- no matter how bad conditions appear.
90-day outlook: If global crop problems expand, however, it could trigger a rally in wheat futures. The other catalyst which could spur buying interest is demand. While U.S. wheat is currently not competitively priced, tightening global supplies, especially for high-protein wheat, could ramp up demand for U.S. wheat the second half of the 2012-13 marketing year.
Hedgers: 75% cash sold on 2012-crop in the cash market.
Cash-only marketers: 75% of 2012-crop production is sold.
Price action: Cotton futures saw light short-covering today, but still posted losses for the week and did some near-term technical outlook.
5-day outlook: USDA didn't make any major changes to its supply and demand balance sheets today, although the carryover projection was increased. Traders will remain focused on outside markets and the plentiful supply situation next week. Continued strength in the U.S. dollar index would weigh on cotton futures. Further pressure on cotton next week would considerably weaken the technical outlook as initial support levels were violated this week.
30-day outlook: Demand bases are typically strengthened during times of abundant supplies and so far this marketing year export sales of cotton have been solid. This week's tally shows the market has found value again but there needs to be a constant dose of demand news to limit downside risk.
90-day outlook: General expectations are for cotton to lose acres to more competitively priced crops in the South next year. Informa Economics reportedly expects 2013 cotton acreage to be down 2.36 million from this year to 10 million. If realized, that would tighten the supply situation and build a floor for prices.
Hedgers: 50% priced on expected 2012-crop production via cash forward contract for harvest delivery. A breakout from that range is needed to spark a trending move.
Cash-only marketers: 50% priced on expected 2012-crop production via forward contract for harvest delivery.