Crops Analysis (VIP) -- October 11, 2013

October 11, 2013 09:52 AM


Price action: Corn futures faced pressure throughout the day session and ended where they spent most of it -- 4 to 5 cents lower. For the week, most contracts posted slight losses and finished at either multiyear or contract lows.

5-day outlook: Harvest pressure will likely continue to weigh on the corn market, though weekend or early week rains could keep farmers out of fields. The market will not have USDA's weekly crop progress data with which to gauge progress and our sources indicate USDA is unlikely to go back and fill in the blanks since the Sept. 30 report when the government does reopen. Basis and price spread analysis will continue to take on more importance in the absence of government data.

30-day outlook: We expect lawmakers to eventually make a baby (not grand) bargain to reopen the government and allow it to pay its bills. When that occurs, the market will have its hands full sorting through eventual report data and filling in holes left by the government closure. Whenever USDA starts releasing information again, data signaling whether exporters took advantage of USDA going dark by booking supplies "under the radar" will be key.

90-day outlook: Typically the size of the U.S crop would be well in hand by the end of harvest. But given the shutdown, we may not have a true handle on crop size until the Annual Production Summary in January -- if then. There's also uncertainty on the demand side as reports indicate EPA is proposing to lower the corn-based ethanol mandate for 2014.

Hedgers: 25% of expected 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 ended 15 1/2 to 21 1/4 cents lower through the August 2014 contract, with the November contract leading those declines. Futures closed on weekly lows and just above key support at the early October lows.

5-day outlook: With harvest picking up steam and given an absence of USDA data amid the government shutdown, soybean futures appear poised to move the next leg lower on the pullback from the August highs. If support at the early October lows is violated, there's risk funds will actively liquidate long positions. Unless some positive demand news surfaces, the market will struggle to find buying interest. If USDA offices remain closed, demand news must come from private sources.

30-day outlook: We expect USDA to eventually release its October Crop Production and Supply & Demand Reports -- after the shutdown ends -- as some of the data for that report was collected prior to the government shutdown. We just don't have any idea on when that will be. As for the November crop reports, our biggest concern is that harvest data is being lost while the government is shut down -- data that would not be recoverable.

90-day outlook: Once harvest is mostly complete, attention will shift to demand and the South American crop. Expectations for record South American production could act as a wet blanket, but the lower prices go, the more appealing U.S. beans will be to China. And we already know China will aggressively buy U.S. beans at least through winter.

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

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



Price action: Wheat futures trended higher during pit trading after working slightly lower during the overnight session. Futures closed near their daily highs with SRW up 2 to 6 cents and December leading gains. HRW finished mixed from 1 1/2 cents lower in deferred contracts to 4 3/4 cents higher in the December. HRS closed fractionally weaker to 3 3/4 cents higher with December pacing gains. Futures closed slightly higher for the week.

5-day outlook: Key next week will be if prices take out resistance at the recent high. Doing so would be a positive technical clue there's more near-term upside potential. But closes above that level could be difficult to muster in the face of rising harvest pressure on corn futures. Traders will continue to keep an eye on seeding problems in the Black Sea Region and the condition of the growing crop in Argentina.

30-day outlook: The market needs demand news to continue its rally. Confirmation of that business will be lacking as long as the government shutdown continues. Without a fresh round of bullish export news, wheat prices will find it difficult to move higher in the face of harvest pressure from corn and soybeans.

90-day outlook: U.S. wheat is becoming more competitive on the global market. But ample corn supplies could mean less domestic wheat feeding putting more pressure on exports to lift prices. Meanwhile, relatively favorable seeding conditions in the Plains should stimulate a positive start of the 2014 crop.

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

Cash-only marketers: 25% of 2013-crop is sold.



Price action: Cotton futures closed slightly higher but in the lower third of today's trading range. Despite today's small gain, December futures slumped more than 200 points versus a week earlier and finished at their lowest weekly close since the week of Sept. 6.

5-day outlook: Some of the concerns over late-season rains in the southeast have past but a new round of showers forecast for midweek may get traders' attention. But the steep loss this week suggests traders are becoming more comfortable with yield prospects.

30-day outlook: Quality concerns could develop if weather patterns remain on the rainy side. The market will watch for signs the setback in prices triggers some exporter interest. The last time futures were near current levels, export orders rose. But those orders declined as December futures moved to 87.00 cents. Without any government data due to the shutdown, traders will have to rely on trade rumors and changes in basis to detect any uptick in demand.

90-day outlook: Export demand will drive cotton prices following the usual weakness in prices seen during harvest. Data out of China hints at some slowdown in that country's growth due to the slow U.S. and European recovery.

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.

Cash-only marketers: 50% of expected 2013-crop production is sold via cash forward contract for harvest delivery.

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