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 75.52, about even since last Friday. The Dow Jones Industrial Average before the close was 12,476; down 128 points for the week. Crude Oil was trading before the close at 97.31 a barrel, up 1.00 a barrel since last Friday. Comments on the USDA monthly Supply & Demand report released July 12 have been posted at http://economics.ag.utk.edu/outlook.html . In this report, USDA reconciled the numbers from the June 30 Acreage & Grain Stocks report into the supply and demand report. Overall, it was friendly to grains and soybeans and neutral to bearish for cotton. Since then, market focus has shifted to the weather for corn, somewhat soybeans, and demand issues for cotton. I look for the possibility of wide swings up or down as trade direction hinges on weather forecasts. Near term weather will mostly affect corn while August weather will be watched for soybeans. Also on the horizon is how Congress and the President will handle the deficit and will a plan be put in place to avert a government default. If a debt default takes place, it could send shockwaves through the global financial community and would most likely be bearish or negative on commodity prices.
Corn:
Current Crop: September closed at $7.01 ¼ a bushel, up $0.59 a bushel since last Friday. Support is at $6.76 with resistance at $7.25 a bushel. Technical indicators have changed to a buy bias. Weekly exports were within expectations at 66.1 million bushels (18.9 million bushels for 2010/11 and 47.2 million bushels for 2011/12). China accounted for 24.2 million bushels of sales with 2.9 million bushels of old crop and 21.3 million bushels of new crop. Corn silking is at 14% compared to 6% last week, 36% last year and the five year average of 26%. Corn crop condition ratings as of July 10 were 69% good to excellent compared to 69% last week, and 73% last year. Poor to very poor ratings were 9% compared to 9% last week and 9% a year ago. USDA reported old crop stocks at 880 million bushels compared to 730 million bushels last month but less than the average trade guess. New crop stocks were estimated at 870 million bushels compared to 695 million bushels last month and less than the trade expected. We are in a weather market as forecasts call for a heat dome to build over the Corn Belt as a high pressure ridge moves from the Plains into the Corn Belt. Corn in the Midwest is entering into the critical pollination period where extended high temperatures could rob yields. The market is closely watching the weather forecasts each day as to the extent of high pressure ridge. I am currently 50% priced and would look closely at adding to that level or using an option strategy. Put options would set a floor and buying a December $6.80 Put option would cost $0.59 and set a $6.21 floor on the December market while keeping an upside.
Deferred: March closed at $6.95 ¼ a bushel, up $0.46 bushel since last Friday. Support is at $6.74 with resistance at $7.17 a bushel. Technical indicators have changed to a strong buy bias. September 2012 corn closed at $6.44 a bushel.
Cotton:
Current Crop: December closed at 99.46 cents per pound, down 14.42 cents since last week. Support is at 96.80 cents per pound, with resistance at 104.78 cents per pound. Technical indicators have a strong sell bias. Current quotes for loan equities are in the 39.50 cent range. Keep in contact with your cotton buyer for current quotes on loan equities and pricing alternatives. All cotton weekly export sales were below expectations with overall reductions of 47,600 bales (a reduction of 91,400 bales of upland cotton for 10/11; sales of 43,200 bales of upland cotton for 11/12; sales of 200 bales of Pima cotton for 2010/11 and sales of 400 bales of Pima cotton for 2011/12). The Adjusted World Price for July 15 – July 21 is 103.91 cents/lb.; down 4.95 cents/lb. from last week. As of July 10, 60% of the cotton crop is squaring compared to 49% last week, 77% last year and the five year average of 70%. Cotton setting bolls was rated at 20% compared to 14% last week, 25% last year and the five year average of 23%. Cotton crop condition ratings as of July 10 were 28% good to excellent compared to 28% last week and 67% last year. Poor to very poor ratings are 42% compared to 41% last week and 7% a year ago. USDA reduced old crop export demand resulting in ending stocks of 2.75 million bales, up 500,000 bales from June. New crop stocks reflected the June 30 acreage report, but also figured in an historic abandonment percentage of 30% resulting in production being lowered 1 million bales from June. However, that was offset by a 1 million bale reduction in exports and ending stocks were raised 500,000 bales to 3.0 million bales. Production could be cut further as the drought takes its toll in the Southwest, South, and Southeast. For prices to rebound, demand will have to respond to these lower prices. If it doesn’t, we could be in for a slide back to the 85 – 90 cent level. 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 100 Put Option would cost 10.50 cents and set an 89.50 futures floor. With this drop in prices the last few weeks, producers with forward priced cotton may want to consider buying December Call Options to enhance the booked price. An out of the money December 110 Call Option would cost 4.75 cents and could increase in value if demand gets back on track and if we were to see positive world economic news.
Deferred: March cotton closed at 96.25 cents per pound, down 12.19 cents for the week. Support is at 92.87 cents per pound, with resistance at 101.31 cents per pound. Technical indicators have a strong sell bias. December 2012 prices closed at 92.60 cents/lb.
Soybeans:
Nearby: The August contract closed at $13.85 ¾ a bushel, up $0.39 since last Friday. Support is at $13.65 with resistance at $14.06 a bushel. Technical indicators have changed to a buy bias. Weekly exports were at the high end of expectations at 24.1 million bushels (sales of 158,000 bushels for 2010/11 and sales of 23.9 million bushels for 2011/12). USDA as expected raised soybean old crop ending stocks 20 million bushels from last month to 200 million bushels. Exports were lowered 20 million bushels reflecting lower projected imports for China.
Current Crop: November soybeans closed at $13.87 a bushel, up $0.41 a bushel since last week. Support is at $13.67 with resistance at $14.08 a bushel. Technical indicators have changed to a strong buy bias. As of July 10, 21% of the soybean crop is blooming compared to 8% last week, 38% last year and the five year average of 33%. Soybean crop condition ratings as of July 10 were 66% good to excellent compared to 66% last week, and 65% last year. Ending stocks for new crop are decreased 15 million bushels from last month to 175 million bushels on a 60 million bushel cut in production based on the acreage report, a 20 million bushel increase in beginning stocks, and a 25 million bushel decrease in exports. The season average price for 2011/12 is estimated to range from $12.00 to $14.00 a bushel, a decrease of a dollar on both ends. World ending stocks for 2011/12 are projected to increase 14 million bushels from the June estimate to 2.277 billion bushels. As in corn, the market is now more focused on weather conditions, particularly in August. Any hints of above normal temperatures and /or below normal rainfall during the August pod filling period could result in a continued up move. Conversely, ideal weather would result in price weakness. I am currently priced 50% for 2011 and would look at an option strategy on 25% of anticipated production. Currently, buying a November $14.00 Put option would cost $0.79 a bushel and set a $13.21 futures floor.
Wheat:
Nearby: September futures contract closed at $6.94 ¾ a bushel, up $0.44 a bushel since Friday. Support is at $6.77 with resistance at $7.25 a bushel. Technical indicators have changed to a sell bias. Weekly exports were within expectations at 19.1 million bushels for 2011/12. Nationwide, 63% of the winter wheat crop has been harvested compared to 56% last week, 62% last year and the five year average of 63%. USDA reconciled the 2010/11 wheat ending stocks with the June 30 Grain Stocks report by increasing stocks 52 million bushels this month to 861 million bushels as the 2010/11 wheat marketing year ended May 31. Global wheat supplies were raised 105 million bushels to 6.980 billion bushels.
Deferred: December wheat closed at $7.23 ¼ a bushel, up $0.33 since last week. Support is at $7.04 with resistance at $7.56 a bushel. Technical indicators have changed to a sell bias. Spring wheat as of July 10 is 27% headed as compared to 13% last week, 68% last year and the five year average of 73%. Spring wheat crop condition ratings as of July 10 were 73% good to excellent compared to 70% last week, and 83% last year. USDA projected ending stocks for 2011/12 at 670 million bushels compared to 687 million bushels last month. July 2012 wheat closed at $7.84 ¼ a bushel.
