Corn, cotton, and wheat prices are down with soybean prices up since last Friday. Markets will be closed Monday in observance of 4th of July. The September U.S. Dollar Index was trading before the close at 74.68, down 1.44 since last Friday. The Dow Jones Industrial Average before the close was 12,557; up 623 points for the week. Crude Oil was trading before the close at 95.25 a barrel, up 4.09 a barrel since last Friday. Comments on the June 30 USDA Acreage and Grain Stocks report have been posted at http://economics.ag.utk.edu/report.html . The reports triggered an overall bearish market reaction but have since gained some composure and are trading the information from the reports. Corn is still down today with cotton and wheat mixed and soybeans up. There are still many questions that we just don’t have the answers to yet as yesterday’s acreage report was based on what producers had planted or intended to plant on June 1. This year has been later than normal and actual relative to intended may have changed for unplanted acres since the June 1 survey. USDA did announce that at the time of the acreage survey, a large percentage of acres remained unplanted in Minnesota, Montana, North Dakota, and South Dakota. To better assess planted acres, NASS will resurvey these states in July and if the collected data justifies any changes, updated estimates will be in the Crop Production report released on August 11. North Dakota FSA reported this week that state would have 6.3 million acres prevented planted. It may be the September USDA report before we get a good handle on acres as that report should have FSA certified acres figured in. Regardless, this is the information we have for how and what the markets will be trading until convinced changes need to be made. With this report out of the way, the markets will focus more on weather and demand.
Corn:
Current Crop: September closed at $6.06 ¾ a bushel, down $0.50 bushel since last Friday. Support is at $5.91 with resistance at $6.30 a bushel. Technical indicators have changed to a strong sell bias. Weekly exports were above expectations at 36.8 million bushels (27.2 million bushels for 2010/11 and 9.6 million bushels for 2011/12). USDA did confirm a 45 million bushel sale to an unknown destination, thought to be China. Also reported this morning was a 63 million bushel sale of new crop corn to China (this has not as of yet been confirmed by USDA). Corn crop condition ratings as of June 26 were 68% good to excellent compared to 70% last week, and 73% last year. Poor to very poor ratings were 9% compared to 7% last week and 8% a year ago. Key production states of Iowa and Illinois saw a 4% drop in their ratings while Minnesota dropped 5%. USDA’s report stunned the corn market that grain stocks were 370 million bushels higher than thought and that planted acreage was 92.3 million acres. The combination of these numbers should put ending stocks for the current marketing year around a billion bushels and if the acreage is correct allow stocks to increase in the next marketing year. Certainly, weather’s affect on yields will influence the outcome. There is uncertainty on the acreage and if end users step in and buy this price break, stability or support should return to corn prices. Producers needing to price corn should look at any rallies on weather concerns as opportunities. I am currently 50% priced and would hold at this level. Put options would set a floor and buying a December $6.00 Put option would cost $0.52 and set a $5.48 floor on the December market while keeping an upside. This price break may allow producers with forward priced corn the opportunity to buy call options for any upside. A out of the money December $6.50 call would cost $0.32 a bushel and let a producer with forward priced grain participate to some extent in any rallies.
Deferred: March closed at $6.10 ¾ a bushel, down $0.34 bushel since last Friday. Support is at $5.78 with resistance at $6.33 a bushel. Technical indicators have changed to a strong sell bias.
Cotton:
Current Crop: December closed at 117.81 cents per pound, down 4.11 cents since last week. Support is at 114.57 cents per pound, with resistance at 121.33 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. All cotton weekly export sales were below expectations at an overall reduction of 96,200 bales (a reduction of 135,300 bales of upland cotton for 10/11; sales of 35,200 bales of upland cotton for 11/12; sales of 3,400 bales of Pima cotton for 2010/11 and sales of 500 bales of Pima cotton for 2011/12). The Adjusted World Price for July 1 – July 7 is 112.84 cents/lb.; down 2.80 cents/lb. As of June 26, 32% of the cotton crop is squaring compared to 21% last week, 45% last year and the five year average of 39%. Cotton setting bolls was rated at 9% compared to 7% last year and the five year average of 9%. Cotton crop condition ratings as of June 26 were 27% good to excellent compared to 26% last week and 62% last year. Poor to very poor ratings are 41% compared to 39% last week and 6% a year ago. Cotton acreage in USDA’s report came in at 13.7 million acres, 440,000 acres higher than the average trade guess. The increase in acreage came in Texas where cotton was planted in failed or abandoned wheat. The number to watch will be abandoned acres with the devastating drought in Texas and Georgia. There are some estimates that 50% of the dryland crop in Texas will be abandoned and that the irrigated crop will be below average as well. Keep up to date on the drought situation by looking at the U.S. Drought Monitor released on Thursdays at http://drought.unl.edu/dm/monitor.html . Cotton appears to be in a market with dwindling U.S. supplies and weakening demand. Production concerns should offer support, but demand needs to response to the recent price break for any rallies to occur. I am currently at 45% priced and would hold at that level. Evaluate the option market as a good tool to set a floor price and still leave an upside. A December 118 Put Option would cost 11.45 cents and set a 106.55 futures floor.
Deferred: March cotton closed at 109.41 cents per pound, down 4.41cents for the week. Support is at 106.44 cents per pound, with resistance at 111.82 cents per pound. Technical indicators have changed to a strong sell bias. December 2012 prices closed at 96.66 cents/lb.
Soybeans:
Nearby: The August contract closed at $13.12 ¾ a bushel, up $0.02 since last Friday. Support is at $12.89 with resistance at $13.33 a bushel. Technical indicators have a strong sell bias. Weekly exports were below expectations at 4.5 million bushels (a reduction of 12.3 million bushels for 2010/11 and sales of 16.8 million bushels for 2011/12). Soybean stocks in storage in USDA’s report were 29 million bushels higher than expected implying that demand has slowed and that ending stocks will be above 200 million bushels.
Current Crop: November soybeans closed at $13.12 ½ a bushel, up $0.03 a bushel since last week. Support is at $12.80 with resistance at $13.38 a bushel. Technical indicators have a strong sell bias. As of June 26, 97% of the soybean crop was planted compared to 94% last week, 96% last year and the 5 year average of 96%. Nationwide, soybean emergence is 92% compared to 82% last week, 92% last year and the five year average of 92%. Soybean crop condition ratings as of June 26 were 65% good to excellent compared to 68% last week, and 67% last year. It stands to reason that if corn acreage was higher than expected in USDA’s report that the increase came at the expense of soybean acres. As mentioned earlier there are many questions on the actual acreage but for now it is what we have to work with and the soybean acreage number is 75.2 million acres. This is 1.3 million acres lower than the average trade guess and less than the lowest trade guess. Soybeans have at least for now switched to being a crop that does not need to drop below trend line yields to insure adequate stocks for the new crop year. The acreage report was bullish for soybeans and should provide support in the market at least until acreage adjustments if any are made. I am currently priced 50% for 2011 and would hold off pricing more. Currently, buying a November $13.20 Put option would cost $0.78 a bushel and set a $12.42 futures floor.
Wheat:
Current Crop: September futures contract closed at $6.12 ¼ a bushel, down $0.49 a bushel since Friday. Support is at $5.78 with resistance at $6.40 a bushel. Technical indicators have a strong sell bias. Weekly exports were at the low end of expectations at 20 million bushels for 2011/12. Nationwide, 44% of the winter wheat crop has been harvested compared to 31% last week, 36% last year and the five year average of 37%. Wheat stocks were reported at 861 million bushels, 52 million bushels higher than in USDA’s June report and 35 million bushels than the average trade guess. Producers with un-priced wheat in storage who want to set a floor under their wheat price may want to look at December Put options. A December $6.60 Put would cost $0.56 a bushel and set a $6.04 futures floor.
Deferred: December wheat closed at $6.60 a bushel, down $0.46 since last week. Support is at $6.27 with resistance at $6.84 a bushel. Technical indicators have a strong sell bias. Spring wheat as of June 26 is 95% planted compared to 91% last week, 100% a year ago and the five year average of 100%. Spring wheat emergence is 89% compared to 83% last week, 100% last year and the five year average of 100%. Spring wheat crop condition ratings as of June 26 were 69% good to excellent compared to 72% last week, and 84% last year. All wheat acreage yesterday came in at 56.4 million acres, 300,000 higher than the average trade guess. Some adjustments may be made in the spring wheat acreage when USDA resurveys Minnesota, Montana, North Dakota, and South Dakota. July 2012 wheat closed at $7.37 ¾ a bushel.
