Price action: Corn futures favored a firmer tone amid short-covering today, but faded into the close and posted sharp losses for the week.
5-day outlook: Today's low-range close was largely due to the release of Informa Economics' 2012 and 2013 acreage and crop estimates (see "Evening Report" for more). This has spurred ideas the smallest crop estimate of the season has been seen, although disappointing harvest results continue to be reported. Stepped-up harvest progress has given bears the near-term advantage.
30-day outlook: Once harvest crosses the halfway point, the bulk of hedge-related pressure should be seen and basis should begin to recover as supplies will remain tight. There have also been improved demand signals, which if continued, could help support futures in a post-harvest recovery. The discount December corn holds to Chicago December wheat has encouraged some Asian feed buyers to return as corn buyers. Ethanol production also improved last week on the availability of new-crop supplies.
90-day outlook: The extended weather outlook calls for drought conditions to persist. If realized, this would increase concern about the 2013 crop. But talk of an increase in planted 2013 corn acreage from this year will also be front-and-center, raising hope we'll have plentiful supplies to rebuild demand next year.
Hedgers: 60% sold on 2012-crop in the cash market -- 50% for harvest delivery; 10% for March 2013 delivery. Also, 40% of expected 2012-crop production is covered in Dec. $6.50 put options for 31 1/2 cents.
Cash-only marketers: 60% sold on 2012-crop production -- 35% for harvest delivery; 10% for March 2013 delivery; and 15% for May 2013 delivery.
Price action: Corrective short-covering helped soybean futures end mid-range for the day with slight gains in most contracts, but the market finished sharply lower for the week. Soymeal posted gains for the day, while soyoil posted losses, but both markets were sharply lower for the week.
5-day outlook: With harvest underway, soybeans will struggle to find buyers next week, despite the tightening supply situation, especially considering that the current bull spread structure of the market gives producers little reason to store soybeans. Traders will also have USDA's Quarterly Grain Stocks Report to digest on Friday that sets 2011-12 carryover.
30-day outlook: Once half the crop is in the bin, attention will shift to finding a price that rations the very small crop. This has not yet occurred. Already, importers of U.S. beans have booked 75% of USDA's total export projection for the 2012-13 marketing year that began September 1.
90-day outlook: Tight U.S. supplies puts even more importance on the South American growing season. Rains have started to fall in northern production regions so planting is underway, but the bulk of the growing season lies ahead. The market will also begin bidding for U.S. acres. Many farmers plan to carry more "swing acres" into spring, and recent poor yields on corn-on-corn fields could give producers incentive to move closer to a 50-50 corn/soybean rotation.
Hedgers: 100% sold on 2012-crop in the cash market for harvest delivery. The Nov. $14.00 put options purchased for 42 3/8 cents on 25% of 2012-crop should be held as a crop insurance hedge.
Cash-only marketers: 75% sold on 2012-crop production for harvest delivery.
Price action: Wheat futures were the upside leader today and nearby contracts ended with gains in the teens at all three locations. Nevertheless, Chicago wheat futures ended moderately lower for the week and near the midway point of their extended sideways trading range.
5-day outlook: Next week, attention will be on Friday's Small Grains Summary, in which USDA will set final 2012 wheat production estimates. It most recently pegged the all wheat crop at 2.268 billion bushels. Informa Economics today reportedly pegged all wheat production at 2.273 billion bushels. Otherwise, harvest pressure on corn will likely limit upside potential.
30-day outlook: Planting efforts in the U.S. Southern Plains will gain more attention as widespread drought has already delayed winter wheat seedings and given rise to establishment concerns. The Climate Prediction Center's 30- and 90-day temp and precip outlooks provide little hope for relief with drought expected to persist.
90-day outlook: Adding to ideas the global wheat stocks are tightening are conflicting reports out of Russia regarding export restrictions. But regardless of whether these are enacted, exports from the Black Sea region will slow because aggressive exports earlier this year have made a big dent in a crop already diminished by a stressful growing season.
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 ended with moderate losses for the day and the week, but the market remains in a gradual uptrending consolidation trading range that has been in place since June.
5-day outlook: Barring any market surprises, cotton will likely continue to chop sideways, with daily direction determined by dollar strength and general risk appetite. Supplies are sufficient and demand has been consistent.
30-day outlook: However, China's government has said it will not issue any more cotton import quotas this year. This limits the markets' upside potential. Plus, hopes a move to stimulate the weakening Chinese economy could provide cotton a boost have faded as the country's finance minister this week said guarding against inflation is a greater concern.
90-day outlook: Cotton may receive a boost in the months ahead, however, as attention shifts to the 2013 crops and the need to bid for acres in the mid-South. Informa Economics reportedly projects 2013 cotton planting will be down 19% from 2012 as soybeans are a more fiscally attractive crop.
Hedgers: 50% priced on expected 2012-crop production via cash forward contract for harvest delivery.
Cash-only marketers: 50% priced on expected 2012-crop production via forward contract for harvest delivery.