Corn and wheat prices are up while cotton and soybean prices are down for the week. The September U.S. Dollar Index was trading before the close at 74.82, up 0.78 since last Friday but down 0.54 for the day. The Dow Jones Industrial Average traded before the close at 11,410; down 733 points for the week but up for the day. Crude Oil was trading before the close at 86.56 a barrel, down 9.14 a barrel since last Friday. Grains rallied early in the week on a corn weather market, but are struggling to hang on as overall fear and uncertainty have gripped the financial and commodity markets. The markets obviously aren’t enamored with the solution Congress and the President came up with on the debt crisis, but this is just the first step. A positive employment report today has offered some support as unemployment is reported at 9.1%, down .1%. Many analysts say as so go oil goes the rest of the commodity market and that adage seems to be in place this week as weakness in the oil market has started spilling over. A stronger dollar has also been negative for commodity prices. Dryness in the Midwest has expanded as indicated by the U.S. Drought Monitor at http://drought.unl.edu/dm/monitor.html .
USDA will report its monthly Supply & Demand report on Thursday, August 11. Look for comments on this report to be posted at http://economics.ag.utk.edu/outlook.html . I will also start the transition to looking at 2012 crop profitability at that site. This August report has been known to contain surprises and this month’s is expected to continue the trend. It will contain yield guesses from survey based results as of August 1 and may have a revision of planted acres. As was found in this report last year, yields are difficult to estimate as you may recall the corn yield in August last year went from 165 bushels per acre to the final 152.8 bushels per acre.
Corn:
Current Crop: September closed today at $6.93 a bushel, up $0.28 a bushel since last Friday. Support is at $6.72 with resistance at $7.08 a bushel. Technical indicators have a buy bias. Weekly exports were below expectations at 29.9 million bushels (11.7 million bushels for 2010/11 and 18.2 million bushels for 2011/12). Corn silking is at 83% compared to 65% last week, 92% last year and the five year average of 84%. The corn crop has 18% in the dough stage compared to 9% last week, 30% last year and the five year average of 23%. Corn dented is 4% compared to 6% last year and the five year average of 5%. Corn crop condition ratings as of July 31 were 62% good to excellent compared to 62% last week, and 71% last year. Poor to very poor ratings were 14% compared to 14% last week and 10% a year ago. Four of the top five corn producing states saw the following changes in their good to excellent ratings: Iowa -5%, Illinois -6%, Nebraska -3%, Minnesota +2%, and Indiana -5%. Iowa had the hottest July since 1955 and night time temperatures averaged 6 degrees above normal causing concerns on yield potential in the top corn producing state. Analyst corn yield guesses for next week’s USDA report range from 150 – 158 bushels per acre with the average around 155. If demand is unchanged from last month, then stocks will tighten. I am currently 50% forward priced and 25% priced using a December Put option locking in a futures floor of $6.34. Put options would set a floor and buying a December $7.00 Put option today would cost $0.54 and set a $6.46 floor on the December market while keeping an upside.
Deferred: March closed at $7.16 a bushel, up $0.35 bushel since last Friday. Technical indicators have a strong buy bias. Support is at $6.93 with resistance at $7.31 a bushel. September 2012 corn closed at $6.77 ½ a bushel.
Cotton:
Current Crop: December closed at 101.58 cents per pound, down 0.19 cents since last week. Support is at 99.19 cents per pound, with resistance at 106.99 cents per pound. Technical indicators have a strong sell bias. All cotton weekly export sales were 12,000 bales (sales of 8,500 bales of upland cotton for 10/11; sales of 3,100 bales of upland cotton for 11/12; sales of 300 bales of Pima cotton for 2010/11and sales of 100 bales of Pima for 2011/12. The Adjusted World Price for August 5 – 11 is 90.85 cents/lb.; down 2.66 cents/lb. from last week. Current quotes for 2011 loan equities are in the 42 cent range. Keep in contact with your cotton buyer for current quotes on loan equities and pricing alternatives. As of July 31, 90% of the cotton crop is squaring compared to 79% last week, 96% last year and the five year average of 92%. Cotton setting bolls was rated at 62% compared to 46% last week, 68% last year and the five year average of 62%. Cotton crop condition ratings as of July 31 were 30% good to excellent compared to 29% last week and 66% last year. Poor to very poor ratings are 40% compared to 41% last week and 9% a year ago. The cotton market continues to struggle with U.S. production concerns versus increased world production and lagging demand from higher prices early in the year. 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 102 Put Option would cost 7.80 cents and set a 94.20 futures floor.
Deferred: March cotton closed at 99.12 cents per pound, down 0.24 cents for the week. Support is at 96.68 cents per pound, with resistance at 103.56 cents per pound. Technical indicators have a strong sell bias. December 2012 prices closed at 92.69 cents/lb.
Soybeans:
Nearby: The September contract closed at $13.28 a bushel, down $0.21 since last Friday. Support is at $13.04 with resistance at $13.50 a bushel. Technical indicators have changed to a sell bias. Weekly exports were at the high end of expectations at 25 million bushels (reductions of 14.9 million bushels for 2010/11 and sales of 39.9 million bushels for 2011/12).
Current Crop: November soybeans closed at $13.36 a bushel, down $0.21 a bushel since last week. Support is at $13.11 with resistance at $13.59 a bushel. Technical indicators have changed to a sell bias. As of July 31, 77% of the soybean crop is blooming compared to 60% last week, 84% last year and the five year average of 81%. Soybeans setting pods were 34% compared to 16% last week, 50% last year and the five year average of 27%. Soybean crop condition ratings as of July 31 were 60% good to excellent compared to 62% last week, and 66% last year. Poor to very poor were rated at 12% compared to 11% last week and 11% a year ago. Yield estimates from analysts for the August 11 USDA report are in the 42 – 43.5 bushel per acre range with the average close to 43 bushels. This compares to the July USDA estimate of 43.4 bushels per acre. If demand is held constant to July estimates, stocks will tighten. August is generally the month the market looks at the weather for influencing soybean yields and recent forecast have favorable growing conditions in the Midwest for the next 10 -14 days. After that it is uncertain. In these comments, I am currently priced 50% for 2011 and have locked in a $13.21 futures floor with a November $14 put option on 25% of production. Currently, buying a November $13.40 Put option would cost $0.60 a bushel and set a $12.80 futures floor.
Wheat:
Nearby: September futures contract closed at $6.79 a bushel, up $0.07 a bushel since Friday. Support is at $6.59 with resistance at $6.94 a bushel. Technical indicators have changed to a strong sell bias. Weekly exports were at the high end expectations at 18.5 million bushels (18.3 million bushels for 2011/12 and 165,350 bushels for 2012/13). Nationwide, 81% of the winter wheat crop has been harvested compared to 75% last week, 83% last year and the five year average of 86%. Spring wheat as of July 31 is 90% headed as compared to 83% last week, 97% last year and the five year average of 98%. Spring wheat crop condition ratings as of July 31 were 70% good to excellent compared to 74% last week, and 82% last year. U.S. wheat is still not competitively priced compared to Russian wheat and is depending on the corn market for support.
Deferred: December wheat closed at $7.23 a bushel, up $0.07 since last week. Support is at $7.03 with resistance at $7.37 a bushel. Technical indicators have a sell bias. July 2012 wheat closed at $7.84 ¾ a bushel.
