Crops Analysis (VIP) -- September 20, 2013

September 20, 2013 10:03 AM


Price action: Corn futures finished 6 1/4 to 8 1/2 cents lower through the May 2015 contract, which was near daily and weekly lows.

5-day outlook: Bears have momentum, suggesting more price pressure will be felt next week, especially if soybean futures extend this week's losses. Key support lies at the August low. If that support is violated, increased chart-based selling could be seen. Unless the soybean market signals this week's price action was a bear trap, the upside is limited to modest corrective buying in corn.

30-day outlook: Harvest activity will be in full swing across much of the Corn Belt during October. That will put seasonal pressure on futures and will also pressure basis. Until that seasonal pressure eases, it will be hard for the corn market to find sustained buying interest.

90-day outlook: For corn to find sustained buying, export demand must signal prices have fallen far enough. The problem corn faces is that the market is having to rebuild its demand base that was dramatically slashed by last summer's runup to record prices. To rebuild demand, it takes relatively low prices for an extended period or a very sharp spike down.

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: Pressure built as the day progressed and the soybean market ended 23 to 24 1/2 cents lower for the day through the July contract. For the week, the bean market posted sharp losses.

5-day outlook: This week saw a shift in money flow as traders exited long soybean positions and worked to correct the soybean to corn ratio that heavily favors beans. Midwest rains this week that should help some of the soybean crop finish added pressure. These factors will likely weigh on the market next week, too.

30-day outlook: We do expect soybean prices to rise, but there is uncertainty as to when. While we expect harvest to reveal a disappointing bean crop, harvest pressure will nonetheless make it difficult for the market to put in a low and recent responses to confimation of strong demand signals this is seen as factored into prices.

90-day outlook: Generally poor conditions this year on the heels of last year's drought-decimated crop means rationing will likely push prices higher again this marketing year. Last year's lofty price levels failed to significantly slow soybean export demand, opening the door for much speculation as to what sort of prices will be needed to make supplies last this year.

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 slumped today on spillover selling from corn and profit-taking following Thursday's gains. Futures closed near their daily lows but many SRW and HRW contracts ended slightly higher versus a week earlier.

5-day outlook: Wheat prices will continue to follow the lead of corn futures as supplies are seen as plentiful and U.S. prices viewed as uncompetitive versus global supplies. In addition, recent precipitation in the Southern Plains is seen as positive for new-crop seeding and, therefore, price-negative.

30-day outlook: The weaker dollar prompted by the Federal Reserve's decision to leave its bond-purchase program fully intact is seen as a positive for U.S. wheat exports. The recent pickup in export sales came prior to the decline in the value of the dollar, so traders will watch to see if the dollar decline triggers additional export business.

90-day outlook: U.S. where stocks are among their tightest in six years. But it will take strong exports to rally U.S. wheat prices significantly. With U.S. wheat viewed as uncompetitively priced on the global market, a sharp upswing in U.S. wheat exports is not likely.

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 narrowly mixed in the December and later contracts but fell 201 points in the lead-month October contract. October futures closed lower for the week but December futures finished about unchanged.

5-day outlook: December cotton futures rallied after testing support at 81.72 cents early this month, but export demand has declined on the price advance. If weekly export sales are disappointing again next week, cotton futures could retest key support at the summer low.

30-day outlook: Recent precipitation in southern cotton regions is lifting harvest expectations. The trade had been expecting USDA to lower its yield estimate in October following its reduction in the September update. That expectation may be on hold for the moment, which puts the onus on demand to provide price support.

90-day outlook: Demand will be the key longer-term driver for prices as global ending stocks are expected to be record-large. With China holding 50% to 60% of world cotton supplies, demand from that country is expected to decline. Just how much Chinese imports drop off will be key in the price-discovery process.

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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