Corn, cotton, and wheat prices are all down with soybean prices mixed for the week. The June U.S. Dollar Index was trading mid day at 75.93, up 0.84 for the week. The Dow Jones Industrial Average traded mid day at 12,580; down 59 points for the week. Crude Oil was trading mid day at 99.22 a barrel, up 1.65 a barrel for the week. USDA’s monthly Supply & Demand report was released May 11 with comments on this report posted at http://economics.ag.utk.edu/outlook.html . Initial reaction to this report has been bearish. Hard numbers on flooded acres are difficult to get a handle on, but one report suggests 3 million acres nationwide will not be planted this year due to floods. Estimates will depend on whether levees in the South will hold and whether floodways will be needed to protect cities. I will continue to mention to please keep producers in this area in your thoughts as this is a devastating flood. Some of this farmland will be unable to get planted into the intended crop that was forward priced. Producers with a forward priced crop that will be unable to fill their contracts need to be proactive and if not already, contact their grain or cotton buyer and discuss the situation. There may be a few alternatives such as buying a contract out at a cost, buying or offsetting a contract at no cost (current price is less than booked price), substituting a crop such as milo for corn, or rolling a contract to 2012. Alternatives may vary between crops and buyers, but the discussion needs to be going on now rather than later. Crop insurance agents and lenders also need to be kept abreast of the situation.
Corn:
Nearby: July futures closed today at $6.82 a bushel, down $0.04 for the week. Support is at $6.69 with resistance at $6.96 a bushel. Technical indicators have a sell bias. Weekly exports were at the high end of expectations at 18.0 million bushels (17.1 million bushels for 2010/11 and 0.9 million bushels for 2011/12). A rumor that China was buying corn gave support to the corn market and USDA announced Friday a 10.6 million bushel sale of new crop corn to an unknown destination. Corn buyers do seem to be stepping in and buying on dips. USDA cut old crop exports in the May 11 report raising ending stocks to 730 million bushels, the trade was expecting 665 million bushels.
New Crop: September closed at $6.53 ¾ a bushel, down $0.15 bushel for the week. Support is at $6.46 with resistance at $7.68 a bushel. Technical indicators have a sell bias. As of May 8, 40% of the corn crop was planted compared to 13% last week, 80% last year and the 5 year average of 59%. Nationwide, corn emergence is 7% compared to 5% last week, 36% last year and the five year average of 21%. USDA’s first glance at the 2011/12 marketing year estimates ending stocks at 900 million bushels compared to the average trade guess of 811 million bushels. I would stress that this far in advance, this is really a guess, maybe an educated guess but still a guess. There are many variables for this crop year including planted acres, yield, and demand. There should be plenty volatility in the market during the growing season and I would look for any weather scares or growing concerns as opportunities for additional pricing. The fundamentals are still tight for corn and there are already concerns on getting enough planted acres and how the yield will turn out. Keep in mind that we did nationwide have a late planted crop in 2009 that produced a record yield. I am currently 50% priced and would hold at this level until we get further along in the growing season. Put options would set a floor and buying a December $6.30 Put option would cost $0.65 and set a $5.65 floor on the December market while keeping an upside.
Cotton:
Nearby: July futures contract closed at 145.15 cents/lb., down 0.41 cents/lb. for the week. Support is at 138.80 cents per pound, with resistance at 151.66 cents per pound. Technical indicators have a strong sell bias. All cotton weekly export sales were about expectations at 74,400 bales (a reduction of 1,200 bales of upland cotton for 10/11; sales of 72,000 bales of upland cotton for 11/12; reduction of 400 bales of Pima for 2010/11 and sales of 4,000 bales of Pima for 2011/12. The Adjusted World Price for May 13 – May 19 is 145.75 cents/lb.; down 7.43 cents/lb. USDA projects old crop ending stocks at 1.75 million bales, 150,000 bales higher than April. This is on a 100,000 bale increase in domestic use and a 250,000 bales reduction in exports, reflecting export cancellations. World ending stocks were raised 1 million bales to 42.52 million bales.
New Crop: December closed at 115.61 cents per pound, down 6.68 cents for the week. Support is at 109.81 cents per pound, with resistance at 123.51 cents per pound. Technical indicators have changed to a strong sell bias. Keep in contact with your cotton buyer for current quotes on loan equities and pricing alternatives. As of May 8, 26% of the cotton crop was planted compared to 18% last week, 34% last year and the 5 year average of 33%. USDA projects the 2011/12 marketing year to end with 2.5 million bales. Production was estimated at 18 million bales, 100,000 bales less than last year on higher planted acres. A higher than average abandonment is estimated based on the drought in Texas. Acreage in the Mid-South and South will most likely not meet planting intentions due to wet weather and floods. We may not have a good handle on cotton acreage until the USDA June 30 Acreage Report, if then. As in corn, the supply side of the fundamentals in cotton should provide volatility in the cotton market. 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 116 Put option would cost 15.20 cents and set a 100.80 futures floor. An out of the money December 105 Put would cost 10 cents and set a 95 futures floor. December 2012 prices closed at 95.75 cents/lb.
Soybeans:
Nearby: The July contract closed at $13.29 ½ a bushel, down $0.04 for the week. Support is at $13.04 with resistance at $13.66 a bushel. Technical indicators have a strong sell bias. Weekly exports were below expectations at 2.3 million bushels (2.2 million bushels for 2010/11 and 0.1 million bushels for 2011/12). USDA in the May 11 report did raise ending stocks 30 million bushels to 170 million bushels on a reduction of 30 million bushels in exports. The record South America crop is projected to provide stiff competition for U.S. soybeans. The trade was looking for ending stocks of 153 million bushels.
New Crop: November soybeans closed at $13.10 ¾ a bushel, up $0.02 a bushel this week. Support is at $12.89 with resistance at $13.47 a bushel. Technical indicators have a sell bias. As of May 8, 7% of the soybean crop was planted compared to 28% last year and the 5 year average of 17%. USDA’s estimate for 2011/12 projects ending stocks at 160 million bushels compared to the average trade guess of 176 million bushels. As in other crops, I stress that this is really a first guess as adjustments will be made monthly as we go through the year. It is probably assumed that what acreage doesn’t go into corn, cotton, or spring wheat will go into soybeans, but that will have to tempered with the lack of or lateness of soybean acres in flooded areas. That won’t be known until we see the time frame of when the water recedes and the shape of the ground. I am currently priced 50% for 2011 and would wait until early summer before forward pricing more, again depending on your acreage situation. Currently, buying a November $13.20 Put option would cost $0.91 a bushel and set a $12.29 futures floor.
Wheat:
Current Crop: July futures contract closed at $7.27 ¾ a bushel, down $0.32 a bushel this week. Support is at $7.06 with resistance at $7.60 a bushel. Technical indicators have a strong sell bias. Weekly exports were at the high end of expectations at 20.2 million bushels (11.8 million bushels for 2010/11 and 8.4 million bushels for 2011/12). Nationwide, 42% of the winter wheat crop has headed compared to 33% last week, 39% last year and the five year average of 40%. Winter wheat crop condition ratings as of May 8 were 33% good to excellent compared to 34% last week and 66% last year. Poor to very poor ratings are 42% compared to 41% last week and 8% a year ago. Wheat ending stocks for this marketing that ends this month were estimated at 839 million bushels, unchanged from April. I am currently at 50% priced. In options, buying a July $7.30 Put would cost $0.40 and set a $6.90 futures floor. This option expires June 24, 2011.
Deferred: September wheat closed at $7.77 a bushel Friday, down $0.26 since last week. Support is at $7.59 with resistance at $8.03 a bushel. Technical indicators have a strong sell bias. Spring wheat as of May 8 is 22% planted compared to 10% last week, 65% a year ago and the five year average of 61%. USDA projects ending stocks for the 2011/12 year at 702 million bushels, compared to the average trade guess of 674 million bushels. Production was estimated at 2.043 billion bushels, but some in the trade think that is 200 – 300 million bushels too high. The market will continue to be sensitive to reports out of Texas and the Plains state as well as spring seeded wheat areas. World production is expected to rebound this year, assuming the weather cooperates, which is not a given. July 2012 wheat closed at $8.91 a bushel.
