Evening Report -- Advice (VIP) -- April 17, 2013

April 17, 2013 09:38 AM
 

 

SOYBEAN HEDGERS: HEDGE 50% OF 2013-CROP PRODUCTION... November soybean futures have violated key levels of support recently, opening sharp downside price risk on the daily chart. At the same time, it appears March planting intentions were the low-water mark for the year given corn planting delays. Plus, macro-economic concerns are building. As a result, soybean hedgers were advised at midday to hedge 50% of expected 2013-crop production in November soybean futures. Our entry on this position was $12.19. This is a defensive hedge, meaning we will exit the position if bullish momentum rebuilds.

 

COTTON PRODUCERS: MAKE A 25% 2013-CROP SALE... While the uptrend from the November low remains intact, December cotton futures are looking increasingly top heavy. Plus, there's talk cotton won't lose as many acres to corn as indicated in the March planting intentions. Cotton hedgers and cash-only marketers are advised to sell another 25% of expected 2013-crop production via cash forward contract for harvest delivery to get to 50% forward sold on new-crop.

 

CROP TOUR SCOUTS ANXIOUS TO BEGIN PLANTING SEASON... We talked to seasoned past and present Pro Farmer Midwest Crop Tour scouts to get their outlook for the planting season. Click here to read what these producers from Minnesota, Iowa, Nebraska and Illinois have to say.

 

COOL, WET CONDITIONS TO LINGER... Meteorologist Gail Martell of MartellCropProjections.com says while temps in the eastern Corn Belt are more seasonal after a cool start to the spring, cooler-than-usual conditions are hanging around in the western Corn Belt. Additionally, she says HRW wheat could be hit by another hard freeze Friday morning with temps expected to dip into the upper 20s in Oklahoma.

For the Midwest, Martell says a wave of strong showers is making its way across the central Corn Belt today and a second wave of thunderstorms is expected to begin later today in eastern Kansas, Missouri and central Illinois. "The forecast tomorrow continues very wet in the Mississippi Valley as a deep trough of low pressure moves slowly east. A couple of rain-free days would follow, but the Midwest weekend forecast is very wet, once again," she adds.

 

WEEKLY ETHANOL PRODUCTION EASES... The Energy Information Administration reports ethanol production the week ended April 12 slid 2.5% (-22,000 barrels) from the previous week to 832,000 barrels per day (bpd) after posting back-to-back weeks of improvement. But production was still above the 5-week average of 814,400 bpd. Ethanol stocks tightened by 1.6% (-290,000 barrels) from the previous week to 17.5 million barrels.

 

CROP INSURANCE PAYOUTS ON THE RISE, LOSS RATIO HOLDS STEADY... U.S. crop insurance indemnities for 2012 crops have reached $16.235 billion as of April 15, with the loss ratio for the program holding at 1.46, according to Risk Management Agency (RMA) data. Payouts for corn have now reached $10.830 billion, nearly the same as the indemnity level paid out for all 2011 crops -- $10.858 billion. The rise in indemnities on 2012 corn pushed the loss ratio for corn to 2.51.

This marks the first crop year since 2002 that the loss ratio for the program as a whole has been above 1.0 -- even the prior $10.858-billion record payout crop year of 2011 had a loss ratio of 0.91. For 2013, USDA notes that 86.128 million net acres are insured, ahead of the pace seen for 2012 crops at this point last year of 84.267 million net acres.

Payouts for corn are expected to rise soon as the indemnities for Group Risk Income Protection (GRIP) coverage are expected to start showing up in the crop insurance system, with talk of sizable payouts for corn in Illinois in particular. Final GRIP revenues are released following the crop year by April 16 for corn and soybeans. Get more details.

 

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. Hedgers should be prepared to add hedge coverage if December futures drop through the April 1 low as that would open risk to at least the $5.11 area -- and possibly to under $5.00.

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 violate key support. 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.

WHEAT: Hedgers and cash-only marketers have 75% of 2012-crop sold in the cash market. Wait to get current. For 2013-crop, a solid corrective rebound will be used to make initial sales. We still have hopes of a strong spring rally given HRW crop struggles.

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 now have 50% of expected 2013-crop production sold via cash forward contract for harvest delivery.

CATTLE: Demand concerns continue to overshadow tight supplies. As long as that's the case, the upside is limited, but we see limited downside risk as well. Fed cattle producers should continue to carry all risk in the cash market. Feeder cattle buyers should also continue to carry risk in the cash market until there are clear signs 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.

FEED: The sharp price break will eventually give us an opportunity to extend feed coverage, but carry all risk in the cash market until there are solid signs the downside has been exhausted.

 

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