Corn, soybean, and wheat prices are up with cotton prices down since last Friday. The September U.S. Dollar Index was trading before the close at 75.51, up 0.93 since last Friday. The Dow Jones Industrial Average before the close was 12,620; down 100 points today but up 37 points for the week. Crude Oil was trading before the close at 96.31 a barrel, up 1.54 a barrel since last Friday. Weak jobs data showing a 0.10% increase in unemployment to 9.2% has been a drag on the Dow today, but it has rebounded from earlier lows. Grain markets have held up well this week considering the June 30 reports as traders no doubt are looking at export demand from China, questions on USDA’s acreage, and the potential for a hotter and drier July. Above normal temperatures and below normal rainfall are projected for the Midwest over the next 8 to 14 days. USDA will release their monthly Supply & Demand report on July 12. This will be the first report since the surprises in the June 30 Acreage and Grain Stocks reports. This report should update the supply and demand numbers based on the June 30 reports. Look for comments on this report to be posted at http://economics.ag.utk.edu/outlook.html the afternoon of July 12.
Corn:
Current Crop: September closed at $6.42 ¼ a bushel, up $0.36 bushel since last Friday. Support is at $6.18 with resistance at $6.59 a bushel. Technical indicators have a strong sell bias. Weekly exports were above expectations at 58.7 million bushels (24.5 million bushels for 2010/11 and 34.2 million bushels for 2011/12). The sharp decline in prices over the last month does seem to have spurred buying interest from importers. China does appear to be buying more corn than earlier estimated by USDA to most likely build up reserves. Ethanol production reported this week was up 11,000 barrels per day from last week to 904,000 barrels. The corn market has had a mostly muted reaction to the news that Congress will most likely end the ethanol blenders credit and import tariff on ethanol. Ethanol is currently priced at a $0.39 discount to gasoline, which favors blending. Eliminating the import tariff on ethanol may have long term consequences, but little to no effect in the short term as Brazil has been itself importing ethanol due to high sugar prices which has reduced their feedstock for ethanol. The proposal that eliminates the blender’s credit and import tariff would put some funds into ethanol infrastructure improvements. Corn crop condition ratings as of July 3 were 69% good to excellent compared to 68% last week, and 71% last year. Poor to very poor ratings were 9% compared to 9% last week and 10% a year ago. The average trade guess for the July 12 USDA report is for old crop ending stocks of 905 million bushels, up from 730 million bushels last month. New crop ending stocks on the average are estimated by the trade to be 994 million bushels. I am currently 50% priced and would hold at this level. Put options would set a floor and buying a December $6.40 Put option would cost $0.59 and set a $5.81 floor on the December market while keeping an upside.
Deferred: March closed at $6.49 ¾ a bushel, up $0.39 bushel since last Friday. Support is at $6.21 with resistance at $6.64 a bushel. Technical indicators have changed to a sell bias. September 2012 corn closed at $6.44 a bushel.
Cotton:
Current Crop: December closed at 113.88 cents per pound, down 3.93 cents since last week. Support is at 111.47 cents per pound, with resistance at 117.21 cents per pound. Technical indicators have a strong sell bias. Current quotes for loan equities are in the 51 cent range. Keep in contact with your cotton buyer for current quotes on loan equities and pricing alternatives. All cotton weekly export sales were above expectations with sales of 353,000 bales (a reduction of 72,600 bales of upland cotton for 10/11; sales of 425,500 bales of upland cotton for 11/12; reduction of 4,900 bales of Pima cotton for 2010/11 and sales of 5000 bales of Pima cotton for 2011/12). The Adjusted World Price for July 8 – July 14 is 108.86 cents/lb.; down 3.98 cents/lb. from last week. As of July 3, 49% of the cotton crop is squaring compared to 32% last week, 62% last year and the five year average of 55%. Cotton setting bolls was rated at 14% compared to 9% last week, 14% last year and the five year average of 9%. Cotton crop condition ratings as of July 3 were 28% good to excellent compared to 27% last week and 65% last year. Poor to very poor ratings are 40% compared to 41% last week and 9% a year ago. 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 . Old crop stocks could rise by 500,000 bales in next week’s report. Analyst estimate this year’s U.S. crop in next week’s report to be in the 15.75 – 16.5 million bale range compared to last month’s USDA estimate of 17 million bales. Demand also appears to be weakening, probably as a result of high prices but also from increased foreign competition. I think production cuts will ultimately overshadow cuts in demand resulting in carryover for 2011/12 lower than 2010/11. However, the world economy must show stable growth. 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 114 Put Option would cost 11.10 cents and set a 102.90 futures floor.
Deferred: March cotton closed at 108.44 cents per pound, down 3.98 cents for the week. Support is at 105.97 cents per pound, with resistance at 111.61 cents per pound. Technical indicators have a strong sell bias. December 2012 prices closed at 97.70 cents/lb.
Soybeans:
Nearby: The August contract closed at $13.46 ¾ a bushel, up $0.34 since last Friday. Support is at $13.29 with resistance at $13.59 a bushel. Technical indicators have changed to a sell bias. Weekly exports were within expectations at 15.9 million bushels (sales of 11.2 million bushels for 2010/11 and sales of 4.7 million bushels for 2011/12). Market analysts expect USDA on the average to raise old crop stocks to 198 million bushels from 180 million bushels last month.
Current Crop: November soybeans closed at $13.46 ½ a bushel, up $0.34 a bushel since last week. Support is at $13.25 with resistance at $13.59 a bushel. Technical indicators have changed to a buy bias. As of July 3, 96% of the soybean crop has emerged compared to 92% last week, 97% last year and the five year average of 96%. Nationwide, 8% of the soybean crop is blooming compared to 21% last year and the five year average of 18%. Soybean crop condition ratings as of July 3 were 66% good to excellent compared to 65% last week, and 66% last year. With a later developing crop, the market is working in a weather premium. The average trade estimate for new crop stocks in next week’s report is pegged at 169 million bushels compared to 190 million bushels last month. I am currently priced 50% for 2011 and would hold off pricing more. Currently, buying a November $13.60 Put option would cost $0.72 a bushel and set a $12.88 futures floor.
Wheat:
Nearby: September futures contract closed at $6.51 ¼ a bushel, up $0.39 a bushel since Friday. Support is at $6.22 with resistance at $6.72 a bushel. Technical indicators have a strong sell bias. Weekly exports were slightly below expectations at 15.6 million bushels for 2011/12. Nationwide, 56% of the winter wheat crop has been harvested compared to 44% last week, 52% last year and the five year average of 52%. 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 $6.90 Put would cost $0.58 a bushel and set a $6.32 futures floor.
Deferred: December wheat closed at $6.90 ½ a bushel, up $0.31 since last week. Support is at $6.63 with resistance at $7.10 a bushel. Technical indicators have a strong sell bias. Spring wheat as of July 3 is 94% emerged as compared to 89% last week, 100% last year and the five year average of 100%. Spring wheat crop condition ratings as of July 3 were 70% good to excellent compared to 69% last week, and 83% last year. The average trade guess for the July 12 USDA report is 702 million bushels for 2011/12 ending stocks compared to the June estimate of 687 million bushels. July 2012 wheat closed at $7.57 ¼ a bushel.
