Crops Analysis (VIP) -- September 13, 2013

September 13, 2013 09:50 AM


Price action: Corn futures traded lower through most of the day, finishing near their daily lows and closing at their lowest level since Aug. 14.

5-day outlook: Cooler temperatures and precipitation, if it materializes as forecast, over the dry western Corn Belt will likely keep pressure on prices though the improved weather will likely have a limited benefit for much of the crop. Futures will also struggle as basis levels continue to widen in the face of an advancing harvest.

30-day outlook: Prospects of a record corn harvest will keep prices under pressure, but the downside may be limited as the bulk of bearish news has been factored into the market. Unless there's a bullish catalyst, rallies will be limited to mild short-covering as demand remains curtailed after being slashed by last summer's runup to record prices.

90-day outlook: Harvest-related hedge pressure will likely keep the lid on prices until this year' harvest passes the 50% mark. The recent heat has pulled forward harvest by shutting down crop development prematurely, but the halfway mark in this year's harvest is still a long ways off. Meanwhile, continuing low prices will eventually trigger increased demand but that won't occur until the market is convinced prices are low enough. Traders will become more sensitive to surges in demand once harvest is completed.

Hedgers: 100% sold on 2012-crop in the cash market. 25% of expected 2013-crop production is sold via cash forward contract for harvest delivery.

Cash-only marketers: 100% sold on old-crop. 25% of expected 2013-crop production is sold via forward contract for harvest delivery.




Price action: September beans expired 46 3/4 cents higher at $14.88 3/4, while new-crop futures finished 13 3/4 to 19 cents lower amid end-of-the-week profit-taking. November beans still finished the week with gains of around 14 cents.

5-day outlook: Futures reacted to USDA's September crop estimate with sharp gains yesterday, leaving contracts vulnerable to profit-taking today. Additional pressure came from a softening of country basis levels on expectations new-crop supplies will soon be available. Widespread weekend rains are expected, but for the bulk of the soybean crop, rains will come too late to be of great benefit. But if rains are as widespread as forecast, it could weigh on futures to start next week.

30-day outlook: Traders expect the October crop report to continue the trend of a decline in yield. USDA will also adjust acreage based on FSA data, which provides the wildcard as to how much USDA adjusts the size of the crop. Expectations for another downward revision to crop size should limit price pressure during this period, but if corn remains an anchor, buying will be limited in soybeans.

90-day outlook: A strong demand base means the soybean market could surge at any time if late-season crop concerns build. But expectations Brazil's acreage base will expand this year could secure a major high in bean prices.

Hedgers: 50% of expected 2013-crop production is sold via a forward-price cash contract for harvest delivery. 100% sold on 2012-crop in the cash market.

Cash-only marketers: 50% of expected 2013-crop production is sold via a forward-price cash contract for harvest delivery. 100% sold on 2012-crop in the cash market.




Price action: Wheat futures finished the week on a negative note today with SRW contracts roughly 10 to 12 cents lower, HRW 9 to 11 cents lower and HRS 6 to 9 cents lower. For the week, wheat futures ended near last Friday's closing levels.

5-day outlook: With the low-range close for the week, bears maintain momentum heading into next week. Barring an unexpected push to the upside by corn, buying interest will be limited in the wheat market. And if futures drop to new contract lows, it could encourage fresh chart-based selling interest in the wheat market.

30-day outlook: Drought continues to encompass much of the key production areas in the Plains, but recent rains have improved soil moisture conditions and there are more near-term rains in the forecast. Therefore, the HRW crop should be seeded into the best field conditions in years. Plus, sources tell us wheat seed sales were strong in the region. As a result, it will be hard for the wheat market to muster sustained buying interest this fall.

90-day outlook: USDA forecasts global wheat production to be record-large in 2013-14 and world wheat ending stocks are now projected higher than 2012-13. That sums up the struggles in the wheat market. Strong competition on the global market will make it difficult for wheat to put in a low even though the domestic supply situation is the tightest it has been since 2007-08.

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 lower today, but finished higher for the week.

5-day outlook: After recently testing support at the bottom of the broad range, cotton futures are in the process of a corrective bounce. To move above the midpoint of the range, however, there will need to be some fresh, supportive news. Without that, buying interest will be limited.

30-day outlook: USDA unexpectedly lowered its cotton crop and yield estimates from last month. As a result, traders are now wondering whether the crop estimate will get even smaller in October. A very inactive hurricane season so far has not brought beneficial rains to cotton regions and Texas continues to suffer from drought.

90-day outlook: With global 2013-14 cotton ending stocks forecast to be record-large, strong demand is needed, and therefore, China is a key. But USDA forecasts Chinese cotton imports to fall by nearly 46% in 2013-14 as the country is already sitting on over half of the world's cotton supplies.

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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