Evening Report (VIP) -- October 31, 2012

October 31, 2012 10:26 AM

WINTER WHEAT CONDITION WORSE THAN YEAR-AGO... USDA's first winter wheat crop condition ratings of the season reflect a crop that is in worse shape than last year at this time. USDA reports 40% of the crop in "good" to "excellent" shape compared to 46% last year. USDA rates 15% in "poor" to "very poor" shape compared to 13% last year. The report should be viewed as price-friendly for the market.

Winter Wheat

very poor





This week













As of Sunday, USDA reports 88% of the winter wheat crop had been planted compared to 81% last week and 85% on average. USDA reports 63% has emerged, up from 49% last week, but four percentage points behind average. Kansas has 76% emerged (73% on average); Oklahoma is at 71% (69% on average); and Texas is at 62% (54% on average).



CORN AND SOYBEAN HARVEST WRAPPING UP... USDA reports 91% of the nation's corn crop has been harvested compared to 87% last week and 60% on average. Soybean harvest stands at 87% complete compared to 80% last week and 78% on average.



COTTON HARVEST HALF COMPLETE... USDA reports as of Sunday that 50% of the nation's cotton crop was harvested compared to 38% last week and 47% on average. Leading the way is Louisiana at 98% (82% last week). Next is Arkansas at 90% (72% on average), followed by Mississippi at 80% (72% on average).



ATTACHE: CHINA'S APPETITE FOR SOYBEANS INCREASING... The U.S. ag attache in China lowered its 2012-13 total oilseed production forecast slightly on lower planted acreage and says due to strong demand for protein meals, it sees higher soybean imports from last season. The attache estimates 2012-13 total oilseed production at 54.5 MMT, down from its previous forecast of 55 MMT.

The attache projects China will import 61 MMT of soybeans in 2012-13, up from 58.5 MMT in 2011-12. The attache notes a significant drop in planted area in Heilongjiang province dampened soybean production forecasts to between 10 and 12.5 MMT. "Disappointing soybean profits in 2011-12 influenced many northeastern farmers to substitute more profitable corn and rice crops in 2012-13," it states.



UKRAINE'S WHEAT EXPORT BAN UNCERTAIN... Ukraine's First Deputy Ag Minister Ivan Bisyuk today said the necessarily official documents for the Nov. 15 wheat export ban that was announced last week have not been prepared. He says the government will consider all "necessary measures" if the country's wheat stocks fall to a critical level, but currently "we see no critical state with food grains." In other words... its ban on wheat exports is up in the air, but exportable supplies are still tight.



DECLINE IN RESTAURANT INDEX COULD BE TROUBLESOME FOR MEAT DEMAND... The National Restaurant Association's (NRA) comprehensive index of restaurant activity -- the Restaurant Performance Index (RPI) -- declined in September by 0.3 points from the previous month to stand at 100.4 due to softer sales and traffic. Despite the decline, September represented the 11th consecutive month the RPI stood above 100, which signifies continued expansion in the index of key industry indicators.

The concern is further declines could be ahead as consumers make holiday gift purchases, thus lowering disposable income. But the fact the RPI remains above 100 is important as a drop below that level would point a downturn in red meat demand from the restaurant sector. Click here for more.




CORN: Hedgers and cash-only marketers should get current with advised cash sales. While futures appear to have put in a short-term low, price action is likely to remain choppy near-term. With hedgers 100% sold on 2012-crop production in the cash market -- 90% for harvest delivery; 10% for March 2013 delivery -- we are watching for buyback signals. Hedgers should hold the Dec. $6.50 put options purchased on 40% of 2012-crop for 31 1/2 cents (which are virtually worthless) in case the market plunges. Cash-only marketers are 75% priced on 2012-crop production -- 50% for harvest delivery; 10% for March 2013 delivery; and 15% for May 2013 delivery.

BEANS: Hedgers and cash-only marketers should get current with advised cash sales. With hedgers 100% sold on 2012-crop production for harvest delivery, we are watching for signs to reown a portion of 2012-crop. Cash-only marketers have 75% of expected 2012-crop forward sold for harvest delivery.

WHEAT: Hedgers and cash-only marketers have 75% of 2012-crop sold in the cash market. Get current with those sales levels, but there's no urgency to increase cash sales with long-term fundamentals improving and so much time left in the marketing year.

COTTON: Hedgers and cash-only marketers have 50% of expected 2012-crop production sold for harvest delivery. Get current with recommended sales as futures are signaling a move into the lower end of the extended, choppy range is likely.

CATTLE: The boxed beef and cash cattle markets remain resilient despite signs of a short-term top. Fed cattle producers should continue to carry all risk in the cash market as the downside is limited by tightening supplies. Feeder cattle buyers and sellers carry all risk in the cash market for now.

HOGS: Lean hog futures have rebounded sharply after showing signs of topping. Be prepared to hedge a challenge of the summer highs. As a worst-case scenario, Monday's lows are a line in the sand for adding hedge coverage.

FEED: Remain hand-to-mouth on feed needs for now, but be prepared to extend coverage as supplies are tight. While fundamentals are bullish and traders are willing to buy weakness, there are enough macro-economic uncertainties to slow buying interest on rallies.


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