Corn, cotton, soybeans, and wheat prices are all down for the week as a broad based commodity selloff led by metals and oil were accelerated by strength in the Dollar. The June U.S. Dollar Index was trading mid day at 75.09, up 1.99 for the week as influenced by the European Central Bank decision to leave interest rates at their current level. The Dow Jones Industrial Average traded mid day at 12,639; down 171 points for the week. Crude Oil was trading mid day at 97.57 a barrel, down 16.36 a barrel for the week. The Dow has rebounded Friday as nonfarm payrolls had a solid rise in April. Grain and cotton markets will be closely watching the weather for planting delays or planting windows over the next few weeks as well as the continued drought in Texas. USDA’s monthly Supply & Demand report will be released May 11 with comments on this report posted at http://economics.ag.utk.edu/outlook.html . This will be the first official USDA look at the new crop marketing year of 2011/12. One private estimate on acreage was released today and reported corn acres at 91.9 million acres, soybeans at 76 million acres and cotton at 13.1 million acres. Corn and soybeans would be under USDA’s March 31 estimate with cotton slightly higher. Wheat acreage abandonment in Texas and the Plains from drought would feed into increased cotton acres and possibly higher soybean acres. Flooded acres throughout the heartland of America are difficult to estimate at this time on when and if they will get planted to crops. At this time, the affected area looks to hope for a late crop of soybeans. Please keep producers in this area in your thoughts as this is a devastating flood.
Corn:
Nearby: July futures closed today at $6.86 ¼ a bushel, down $0.70 for the week. Support is at $6.56 with resistance at $7.35 a bushel. Technical indicators have changed to a sell bias. Weekly exports were below expectations at 11.1 million bushels 2010/11. Weekly ethanol production was reported this week at 875,000 barrels per day slightly lower than the previous week. It is still on track to meet or exceed USDA projections, however the gap is closing. USDA is not expected to make major changes in old crop stocks.
New Crop: September closed at $6.68 ¼ a bushel, down $0.48 bushel for the week. Support is at $6.39 with resistance at $7.14 a bushel. Technical indicators have changed to a sell bias. As of May 1, 13% of the corn crop was planted compared to 9% last week, 66% last year and the 5 year average of 40%. Nationwide, corn emergence is 5% compared to 18% last year and the five year average of 9%. Corn planting progress has advanced this week in the western Cornbelt and is expected to be reported as such Monday. With the lateness in planting, USDA is expected to trend a little off their trend line yield in the May 11 report on the new crop. Certainly, a lot of volatility in the market this week as producers are concerned on getting their corn acres planted. During the week, the market hit my trailing stop of $6.86 and I would increase sales 5% to 50% overall, depending on producers comfort level. Fundamentally, old crop stocks are tight and new crop stocks will need almost perfect growing conditions for stocks to rebuild to more comfortable levels. Put options would set a floor and buying a December $6.40 Put option would cost $0.75 and set a $5.65 floor on the December market while keeping an upside.
Cotton:
Nearby: July futures contract closed at 145.56 cents/lb., down 12.46 cents/lb. for the week. Support is at 141.10 cents per pound, with resistance at 151.70 cents per pound. Technical indicators have a strong sell bias. All cotton weekly export sales were slightly below expectations at 69,500 bales (a reduction of 6,500 bales of upland cotton for 10/11; 74,200 bales of upland cotton for 11/12; 1,400 bales of Pima for 2010/11 and 400 bales of Pima for 2011/12. The Adjusted World Price for May 6 – May 12 is 153.18 cents/lb.; down 10.05 cents/lb.
New Crop: December closed at 122.29 cents per pound, down 8.64 cents for the week. Support is at 120.10 cents per pound, with resistance at 125.60 cents per pound. Technical indicators have changed to a hold bias. Equities for 2011 have been quoted in the 55 – 58 cent range. Keep in contact with your cotton buyer for current quotes on loan equities. As of May 1, 18% of the cotton crop was planted compared to 13% last week, 24% last year and the 5 year average of 24%. I am currently at 45% priced and would hold at that level until more of the crop is planted. Evaluate the option market as a good tool to set a floor price and still leave an upside. A December 123 Put option would cost 17.53 cents and set a 105.47 futures floor. An out of the money December 105 Put would cost 9 cents and set a 96 futures floor. December 2012 prices closed at 97.98 cents/lb.
Soybeans:
Nearby: The July contract closed at $13.26 a bushel, down $0.68 for the week. Support is at $12.91 with resistance at $13.60 a bushel. Technical indicators have a changed to a strong sell bias. Weekly exports were below expectations at 772,000 bushels for 2010/11. USDA is expected make adjustments in the crush projection in next week’s report and maybe in exports. Early analyst’s estimate put ending stocks in a 150 – 180 million bushel range compared to last month’s 140 million bushels.
New Crop: November soybeans closed at $13.08 ½ a bushel, down $0.65 a bushel this week. Support is at $12.71 with resistance at $13.45 a bushel. Technical indicators have changed to a sell bias. USDA has delayed the soybean planting process report which usually has started by now. It should be reported within the next two weeks. I am currently priced 50% for 2011 and would wait until early summer before forward pricing more. Currently, buying a November $13.20 Put option would cost $0.96 a bushel and set a $12.24 futures floor.
Wheat:
Current Crop: July futures contract closed at $7.59 ½ a bushel, down $0.42 a bushel this week. Support is at $7.19 with resistance at $7.96 a bushel. Technical indicators have changed to a strong sell bias. Weekly exports were above expectations at 20.1 million bushels (10 million bushels for 2010/11 and 10.1million bushels for 2011/12). Nationwide, 33% of the winter wheat crop has headed compared to 23% last week, 26% last year and the five year average of 29%. Winter wheat crop condition ratings as of May 1 were 34% good to excellent compared to 35% last week and 68% last year. Poor to very poor ratings are 41% compared to 40% last week and 7% a year ago. I am currently at 50% priced. In options, buying a July $7.60 Put would cost $0.44 and set a $7.16 futures floor. This option expires June 24, 2011.
Deferred: September wheat closed at $8.03 a bushel Friday, down $0.44 since last week. Support is at $7.63 with resistance at $8.38 a bushel. Technical indicators have changed to a strong sell bias. Spring wheat as of May 1 is 10% planted compared to 6% last week, 57% a year ago and the five year average of 43%. July 2012 wheat closed at $8.99 a bushel.
