Corn, soybean and wheat prices are down and cotton prices are mixed for the week. The March U.S. Dollar Index was trading mid day at 76.76, up .34 for the week. The Dow Jones Industrial Average traded before the close at 12,080; down 90 points for the week. Crude Oil was trading mid day at 100.89 a barrel, down 3.15 a barrel for the week. USDA released the monthly supply and demand report March 10. Comments on that report are posted at http://economics.ag.utk.edu/outlook.html. The report was mostly neutral as few changes were made from February; the exception being a bearish wheat report. The lack of additional bullish news contributed to overall weakness, although cotton and soybeans were higher on report day. The market quickly dismissed the USDA report as news of a massive 8.9 earthquake hitting Japan and triggered a huge tsunami and aftershocks have created turmoil in the financial and commodity markets. Japan is the third largest economy in the world and imports 630 million bushels of corn and 184 million bushels of wheat. The extent of damage and loss of lives is unknown and this uncertainty has fed into the overall market selloff. Fundamentally, the selloff appears overdone as stocks of corn, cotton and soybeans are still tight, but managed funds seem to be limiting some of their risk in these markets. Tensions in the Middle East and North Africa also contribute to the risk in the markets.
Corn:
Nearby:May futures closed today at $6.59 ¼ a bushel, down $0.69 since Friday. Support is at $6.34 with resistance at $6.98 a bushel. Technical indicators have a sell bias. Weekly exports were at the low end of expectations at 30.6 million bushels (18.8 million bushels for 2010/1, and 11.8 million bushels for 2011/12). USDA left U.S. ending stocks at 675 million bushels in the March 10 report compared to the pre report guess of 667 million bushels. World ending stocks increased 24.8 million bushels from last month. The March 31 Quarterly Grain Stocks report will give a good indication of available corn and how usage has been. The selloff appears overdone, but we will have to see whether end users step back in and buy. If they do, then prices should stabilize and trend sideways to up.
New Crop: September closed at $6.22 ¾ a bushel, down $0.37 since Friday. Support is at $5.89 with resistance at $6.50 a bushel. Technical indicators have changed to a sell bias. It appears that this recent selloff has taken the weather premium out of the market. It is a little too early for that with stocks so tight and uncertain acreage and yields. Regardless if we think the selloff is overdone or not, producers still need a marketing plan in place. Corn prices on Thursday hit the trailing stop of $6.35, pricing another 5% of the crop to 35% overall. I would move the stop to $5.89 bushel, before pricing more. If the market is going to recover in the short term, that should give it some room. If the selloff continues, I would look at buying call option to go along with previously forward priced contracts. Put options would set a floor and buying a December $5.80 Put option would cost $0.78 and set a $5.02 floor on the December market while keeping an upside.
Cotton:
Nearby:May futures contract closed Friday at 204.94 cents/lb., down 7.76 cents/lb. for the week. Support is at 192.11 cents per pound, with resistance at 214.87 cents per pound. Technical indicators have a strong buy bias. All cotton weekly export sales were above expectations at 486,500 bales (82,800 bales of upland cotton for 10/11; 394,100 bales of upland cotton for 11/12; 5,400 bales of Pima for 2010/11 and 4,200 bales of Pima for 2011/12. The Adjusted World Price for March 11 – March 17 is 219.48 cents/lb., up 15.83 cents/lb. USDA in the March 10 Supply & Demand report left U.S. stocks unchanged at 1.9 million bales and reduced World stocks 480,000 bales to 42.3 million bales.
New Crop: December closed at 128.32 cents per pound, up 5.01 cents for the week. Support is at 121.18 cents per pound, with resistance at 131.20 cents per pound. Technical indicators have a strong buy bias. Equity quotes are in the 63 cent range. Keep in contact with your cotton buyer for current quotes on loan equities. I would currently be priced up to 40% with a trailing stop of 120.41cents. If that is too tight a stop, 115.50 cents would be the next level, then 104.11. The market is volatile, so more room may be needed before pulling the trigger. Buying a December 129 Put Option would cost 20.10 cents and set a 108.90 futures floor. Buying an out of the money December 109 Put would cost 9 cents and set a 100 cent futures floor. December 2012 prices closed at 98.12 cents/lb.
Soybeans:
Nearby: The May contract closed at $13.34 ½ a bushel, down $0.80 for the week. Support is at $12.78 with resistance at $13.87 a bushel. Technical indicators have a strong sell bias. Weekly exports were at the high end of expectations at 17.2 million bushels (15.1 million bushels for 2010/11 and 2.1 million bushels for 2011/12). USDA left U.S. soybean ending stocks unchanged at 140 million bushels. World stocks were virtually left unchanged at 2.143 billion bushels. With a record Brazilian crop, world stocks were expected to increase.
New Crop:November soybeans closed at $13.00 a bushel, down $0.61 this week. Support is at $12.44 with resistance at $13.50 a bushel. Technical indicators have changed to a sell bias. I think the selloff is overdone, but it may take a friendly acreage report on March 31 to create a substantial rally. I am currently priced 50% for 2011 and would wait until late spring-early summer before forward pricing more. On additional price weakness, I would look at buying a November Call Option to cover soybeans forward priced. On rallies, I would evaluate buying a November Put Option to set a floor price for un- priced soybeans. Currently, buying a November $13.00 Put would cost $1.15 and set an $11.85 futures floor.
Wheat:
Nearby: May futures contract closed at $7.18 ¾ a bushel, down $1.14 a bushel since Friday. Support is at $6.84 with resistance at $7.57 a bushel. Technical indicators have changed to a strong sell bias. Weekly exports were below expectations at 24.1 million bushels (21.1 million bushels for 2010/11 and 3 million bushels for 2011/12). USDA increased wheat ending stocks 25 million bushels in the March 10 report to 843 million bushels. The trade was expecting a 9 million bushel decrease. World ending stocks increased 152 million bushels to 6.684 billion bushels. The selloff in wheat is more justified at least from a fundamental standpoint as there is plenty of wheat.
New Crop: July wheat closed at $7.50 3/4 a bushel Friday, down $1.09 since last week. Support is at $7.16 with resistance at $7.89 a bushel. Technical indicators have changed to a strong sell bias. At this point, I would hesitate to price more until we get on into spring. Producers with a buy up crop insurance policy may feel comfortable pricing more. Prices may have an opportunity to rally, but it most likely will take a rally in corn and soybeans to pull wheat up. Condition of the wheat crop in the Plains could also be a positive factor. On a rally, put options may be worth considering. Buying a July $7.50 Put would cost $0.63 and set a $6.87 futures floor.
