Corn
Price action: Corn futures posted slight losses for the week but remained within the boundaries of the August consolidation range. Today, traders were focused on evening positions ahead of the holiday weekend and closing their books for the month.
5-day outlook: Traders will closely watch the track remnants of Hurricane Isaac take over the weekend. If damage is worse than feared because weak stalks are more susceptible to late-season stress, traders will return on Tuesday to add some more weather premium into prices.
30-day outlook: While harvest results will be disappointing, early harvest-related hedge pressure should limit near-term buying in the corn market. The national average corn basis has also begun to deteriorate due to the availability of new-crop supplies in the South and demand destruction that is ongoing.
90-day outlook: “Short crop, long tail” refers to demand destruction. The longer corn prices remain at elevated levels the longer it will take to bring that demand back as other countries will look to “cash in” on record corn prices.
Hedgers: 100% sold on 2011-crop in the cash market. 40% of expected 2012-crop production is covered in Dec. $6.50 put options for 31 1/2 cents. 35% cash forward sold on expected 2012-crop production -- 25% for harvest delivery; 10% for March 2013 delivery.
Cash-only marketers: 100% sold on 2011-crop. 35% forward priced on expected 2012-crop production -- 10% for harvest delivery; 10% for March 2013 delivery; and 15% for May 2013 delivery.
Soybeans
Price action: Soybean futures were under pressure most of the day, but the market moved well off its lows into the close to settle slightly lower in the September through January contract, while deferred months saw slight gains. Beans ended with gains for the week.
5-day outlook: Some attention will be placed on Tuesday’s Crop Condition Report from USDA. Traders will watch to see how much yield potential heat and dryness this week shaved off the crop as well as whether Hurricane Isaac did more good or harm. But attention will also remain on demand -- specifically, finding a price that rations use.
30-day outlook: Harvest pressure opens some downside risk for soybeans, but the extent of losses will likely be relatively limited due to the small crop size and still-strong demand. In South America, Brazilian producers are able to begin planting beans Sept. 15. But while soybean acres are expected to increase, it is unlikely farmers will be able to meet their fertilizer needs due to extensive backlog at ports and new trucking regulations, which will delay some seedings.
90-day outlook: Record-high soybeans have yet to slow export demand. This means even higher prices will likely be needed to make this very small crop last until 2012-13 South American supplies come to market. The very tight supply situation will increase the significance of any production troubles in the Southern Hemisphere or elsewhere this year.
Hedgers: 100% sold on old-crop in the cash market. 25% of expected 2012-crop production is covered in Nov. $14.00 put options for 42 3/8 cents. 50% of expected 2012-crop production is sold via cash forward contract for harvest delivery.
Cash-only marketers: 100% sold on old-crop. 50% sold on expected 2012-crop production for harvest delivery.
Wheat
Price action: Wheat futures faced pressure today, but finished well off daily lows. For the week, wheat futures showed little net change in Chicago, while Kansas City and Minneapolis futures posted mild gains.
5-day outlook: Wheat traders will continue to look primarily to the corn market for price direction next week. While corn fundamentals are strong, seasonal price pressure can’t be ruled out as combines are actively rolling.
30-day outlook: Remnant rains from Hurricane Isaac (and any other storm that may develop) are needed to recharge soil moisture in winter wheat country ahead of planting. Without heavy fall rainfall, the winter wheat crop will struggle to get established.
90-day outlook: Russia won’t restrict grain exports for now, but hasn’t ruled out the possibility of some market intervention down the road. Even if Russia doesn’t make a move, they’ve already exported roughly one-third to one-half of their exportable surplus for 2012-13. That opens the door for the U.S. to pick up some export business.
Hedgers: 75% cash sold on 2012-crop for harvest delivery. 100% sold on 2011-crop in the cash market.
Cash-only marketers: 75% of 2012-crop production is sold for harvest delivery. 100% sold on 2011-crop.
Cotton
Price action: Cotton futures posted slight gains today to end higher for the week and near weekly highs.
5-day outlook: USDA’s crop condition ratings Tuesday will be watched a little closer than normal after heavy rains and high winds associated with Hurricane Isaac pounded the Delta this week. Since the storm’s aftermath largely skirted the heaviest production areas of the South, traders aren’t expecting USDA’s crop condition ratings to show much impact.
30-day outlook: With the hurricane season in full force, there’s risk additional storms will bring late-season rains into cotton country. In fact, Tropical Storm Leslie in building in the Atlantic, although her path as she approaches the U.S. is still uncertain. As more bolls are opened, the cotton crop is at greater risk of quality and yield damage.
90-day outlook: China is the key from the demand side of the market. While China recently issued new import quotas, sluggish demand for textiles, especially from Europe is likely to limit China’s appetite for U.S. cotton. If that’s the case, it will be hard for cotton futures to find sustained buying interest.
Hedgers: 100% sold on old-crop in the cash market. 50% priced on expected new-crop production via cash forward contract for harvest delivery.
Cash-only marketers: 100% sold on old-crop. 50% priced on expected new-crop production via forward contract for harvest delivery.
