Evening Report (VIP) -- October 2, 2013

October 2, 2013 09:47 AM

AERIAL TRIP SHOWS EARLY HARVEST, MIX OF CONDITIONS... Pro Farmer Editor Chip Flory took to the sky earlier this week to get a late-season look at the crops. He flew from Waterloo, Iowa, to Charles City and then diagonally southwest to Marshalltown, east to Vinton and to Independence before returning to Waterloo. "North to Charles City is a weird mix of harvest activity -- variable maturity within fields and whole corn and soybean fields that still need 10 frost-free days to make maturity. Harvest activity ramped-up significantly as we flew south toward Marshalltown and was consistent eastward to Independence," noted Chip. Make sure you watch AgDay tomorrow morning for a full report. Click here to view clips from Chip's trip.


WEEKLY ETHANOL PRODUCTION IMPROVES... The Energy Information Administration reports ethanol production the week ending Sept. 27 rose by 43,000 barrels per day (bpd) from the previous week to 875,000 bpd -- a 12-week high. Ethanol stocks declined by 0.7% to 15.5 million barrels. This all came despite gasoline demand declining to its lowest level since early May.


BRAZIL PLANS TO WIDEN 'SOYBEAN HIGHWAY'... The current two-land highway that runs north and south through the middle of Mato Grosso, Brazil, will be converted to a four-lane road, with the project expected to be completed in five years. South American crop consultant Dr. Michael says grain companies have already constructed export facilities at the Port of Santarem in anticipation of the highway's completion. But he says challenges remain for the country's infrastructure, as it only spends around 1.5% of its GDP on such projects, which is below the global average of 3.8%. "To catch up with the rest of the world, Brazil would need to triple its infrastructure spending for the next 20 years," he adds. Click here for more.



CORN: Hedgers and cash-only marketers have 25% of expected 2013-crop production sold via cash forward contracts for harvest delivery. Corn runs the risk of additional harvest-related pressure -- especially with the technicals bearish -- but we will wait for an overdue corrective rebound to increase cash sales.

BEANS: Hedgers now have 100% of expected 2013-crop production sold via cash forward contract for harvest delivery, while cash-only marketers are 75% sold on 2013-crop. Given impressive demand prospects, we will look to reown a portion of cash sales in long futures or call options on signs the market has posted a seasonal low. Cash-only marketers can't be as aggressive since futures and/or basis could rally sharply over the next 11 months.

WHEAT: Recent price action in wheat futures strongly suggests a low has been posted. The ability of wheat to rally in the face of price pressure in the corn and soybean markets is also a sign a low has been posted. Be prepared to increase cash sales on an extended corrective rally as global supplies remain plentiful.

COTTON: December cotton futures have moved to a five-week high and could be in the midst of posting a bearish head-and-shoulders formation. Unless the contract moves above the June high, we will be willing to maintain hedges covering 50% of expected production in December futures at 83.87 cents. Hedgers and cash-only marketers have 50% of expected 2013-crop production sold via cash forward contract for harvest delivery.

CATTLE: Live cattle futures are reacting to bullish fundamentals and are trading at the top of the uptrending channel. We will remain unhedged unless there are signs a major high is in place. Feeder cattle futures have taken the next step up as November and January futures posted fresh contract highs this week. Feeder cattle buyers should stay in touch for advice to cover purchases.

HOGS: Hog producers have 50% of expected 4th-qtr. production hedged in Dec. lean hog futures at an average price of $82.12 1/2. Stay in touch for advice to heavy up 4th-qtr. coverage and to add 1st-qtr. 2014 hedges in Feb. lean hog futures as those markets are seeing increased price volatility at high prices, which suggests highs are in place.

FEED: Twenty-five percent of 4th-qtr. protein needs are covered in long Dec. soybean meal futures and 25% of 1st-qtr. needs are covered in long March meal futures. Be prepared to extend coverage on an extended price pullback as we feel prices are ultimately headed higher. We're also looking to add long corn coverage after the market signals a low is in place.

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