Evening Report -- Advice -- (VIP) -- April 24, 2013

April 24, 2013 09:52 AM
 

COTTON HEDGERS: HEDGE 50% OF 2013-CROP... December cotton futures are signaling a major technical top is in place, which opens sharp downside price risk. As a result, cotton hedgers were advised at midday to hedge 50% of expected 2013-crop production in December cotton futures. Our fill on the position was 83.87 cents. Combined with previous 50% cash forward contract sales, hedgers now have 100% of downside price risk covered for new-crop production.

 

CANADIAN PRODUCERS PLAN TO SHARPLY INCREASE WHEAT ACRES... Statistics Canada says based on its survey conducted between March 25 and April 3, Canadian producers plan to increase wheat acres by 2.912 million (12.2%) from last year to 26.618 million. Pro Farmer Canada Editor Mike Jubinville says spring wheat intentions of 19.375 million acres (up 2.436 million from last year) and intended canola acres of 19.133 million (down 2.398 million from last year) will likely serve as the highest wheat and smallest canola estimates of the year.

Jubinville tells us: "It feels like February up here. There's no planting for weeks yet... I'll be surprised if we get going before mid-May. Some scratching around in the far corner of southern Alberta and maybe southwestern Saskatchewan, but the bulk of the Canadian Prairies remains stalled with a lot of snow on the ground, frozen soil, then it will take time for the ground to dry up as we have received about 200% of normal precip this winter.

"Soil moisture looks good. April up here ranks amongst the top-10, perhaps the top-5 coldest for the Prairie region. And until the snowpack melts, weather conditions will remain below normal. Once that occurs, excess moisture may be a greater problem. It takes much higher daytime temperatures and thermal energy to warm cold, wet soils compared to drier soils."

Commenting on the acreage estimates, Jubinville says while the all-wheat acreage estimate came in above expectations, the trend of more wheat and less canola is not surprising. "Canada is doing what virtually everyone else in world is doing...expanding wheat area. Wheat acres gained mainly at the expense of canola. I suspect though, as long as Mother Nature cooperates and allows Canadian farmers to seed this year's crops in a somewhat timely fashion, these numbers could be the largest wheat/durum and smallest canola acreage estimates from StatsCan of the year. The trade is of the opinion (assuming again weather permits) that canola acreage will yet exceed 20 million acres in the final analysis, with wheat being trimmed by a like amount. The timeliness of seeding reigns paramount in final crop choices," he says. Click here to view the full acreage projections.

 

ETHANOL PRODUCTION UP FROM PREVIOUS WEEK... The Energy Information Administration (EIA) reports ethanol production the week ended April 19 of 853,000 barrels per day (bpd) rose by 21,000 bpd from the previous week and was the second highest weekly average of the year. The increase in ethanol production is a reflection of more idled plants coming back on line. Ethanol stocks increased marginally to 17.6 million barrels.

 

MISSISSIPPI RIVER UPDATE: TRAFFIC TO BE IMPEDED UNTIL NEXT WEEK... Barge shipping on parts of the Mississippi River and the Illinois River is expected to be hindered until at least early next week due to the flooding in the region that will take time to recede from near-record crests, according to the U.S. Coast Guard and the Army Corps of Engineers. But these groups warn that a return to normal shipping may be pushed back even further due to another storm in the Midwest Tuesday. Last week, the Army Corps closed 10 locks on the Mississippi River (16 through 25) and four on the Illinois River; most of these remain closed, though the rivers have already crested at most locations. An estimated 60% of U.S. grain exports are shipped via the Mississippi River.

 

AGRONOMIST: VARIED DAMAGE TO TEXAS HRW WHEAT CROP... Temps have dropped below freezing several times including last night in Texas. The resulting damage to the wheat crop has not been uniform, but losses have been "significant," according to Dr. Travis Miller, AgriLife Extension agronomist and Texas A&M University soil and crop sciences associate department head. Miller also noted in his 35 years as an agronomist for AgriLife Extension, he has never seen freezes this late in the year.

Miller says irrigated wheat in the High Plains region saw more damage than dryland wheat, but again, he notes wide variability in the freeze damage between counties and even fields. He adds that dryland wheat farmers with extensive damage have few options as they get only one shot at the crop, and then they're done due to the very dry soils. "They had a marginal crop to begin with because of the drought, but some may at least hay it or graze it," Miller says. Irrigated fields, on the other hand, still have time to plant if they "kill this wheat and get it off the field, and plant right into it with cotton, sunflowers, sesame, sorghum or another crop."

 

PF MIDWEEK MARKETING GAME PLAN UPDATE...

CORN: Hedgers are 100% sold in the cash market, with cash-only marketers 75% priced on 2012-crop. Cash-only marketers should be prepared to trim old-crop stocks if basis unexpectedly weakens and/or futures indicate sharp downside risk. For 2013-crop, hedgers and cash-only marketers have 10% of expected 2013-crop production sold via cash forward contract for harvest delivery. December corn futures are signaling there's more near-term downside price risk, though we are hesitant to chase the market lower. But be prepared to hedge a corrective recovery.

BEANS: Hedgers are 100% sold in the cash market, with cash-only marketers 75% priced on 2012-crop. Cash-only marketers must continue to hold some old-crop in the bin given tight supplies and the strong cash market. But be prepared to trim old-crop inventories if futures return to the top of the extended, choppy range. For 2013-crop, hedgers and cash-only marketers have 10% of expected 2013-crop production sold via cash forward contract for harvest delivery and 50% of expected production hedged in November soybean futures at $12.19. Maintain the hedge coverage until there are indications selling interest is drying up.

WHEAT: Hedgers and cash-only marketers have 75% of 2012-crop sold in the cash market. Wait to get current. For 2013-crop, we still have hopes of a strong spring rally given HRW crop struggles as we feel the market is out of touch with reality of crop problems.

COTTON: Hedgers are 100% sold on 2012-crop in the cash market, with cash-only marketers 85% sold on old-crop. Get current with recommended old-crop sales as futures are signaling a top is in place. Hedgers and cash-only marketers have 50% of expected 2013-crop production sold via cash forward contract for harvest delivery. Hedgers also have 50% of expected production hedged in December cotton futures at 83.87 cents.

CATTLE: Fed cattle producers should continue to carry all risk in the cash market as there are hopes beef demand could improve as temps finally start to warm. Feeder cattle buyers should also continue to carry risk in the cash market until there are clear indications of a low.

HOGS: Hog producers should carry all risk in the cash market for now as supplies are tightening seasonally. If demand concerns ease, we expect a strong corrective recovery as pork holds a competitive price advantage to beef.

FEED: There will eventually be an opportunity to extend feed coverage, but carry all risk in the cash market until there are solid signs the downside has been exhausted in corn and soybean meal futures.

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