Corn, soybean and wheat prices are up with cotton prices down for the week. The Pro Farmer Midwest Tour reports came in after the market closed with shocking corn results and soybean potential that will need a strong finish to achieve yields. November soybean prices blasted through the $14 sticking point. The September U.S. Dollar Index was trading before the close at 73.85, down 0.25 since last Friday. The Dow Jones Industrial Average was trading up 448 points for the week at 11,266. Crude Oil was trading before the close at 85.43 a barrel, up 2.72 a barrel since last Friday. Federal Reserve Chairman Ben Bernanke indicated that the U.S. economy is on the right track for long term economic growth, but left open the possibility of more action by the Fed if another recession looks likely. The 2nd quarter Gross Domestic Product (GDP) was revised down to 1% from 1.3%. Moisture conditions as evidenced by the U.S. Drought Monitor (http://drought.unl.edu/dm/monitor.html) continue to show the dryness that has the market and analysts concerned on yields. Several analysts this week downgraded yields, particularly corn. A forecast that has a return to hotter and dryer than normal condition has the soybean market on edge as soybeans need a strong finish to the growing season. The expectations of La Nina developing in South America and affecting their crop are also on the mind of traders as they look to the 2011/12 marketing year.
Corn:
Current Crop: September closed today at $7.52 ½ a bushel, up $0.42 a bushel since last Friday. Support is at $7.20 with resistance at $7.71 a bushel. Technical indicators have a strong buy bias. Weekly exports were at the low end of expectations at 21.6 million bushels (15.1 million bushels for 2010/11 and 6 million bushels for 2011/12). USDA did report a 14.4 million sale this morning that will be reflected next week. The corn crop has 73% in the dough stage compared to 52% last week, 86% last year and the five year average of 73%. Corn dented is 33% compared to 17% last week, 51% last year and the five year average of 37%. Corn crop condition ratings as of August 21 were 57% good to excellent compared to 60% last week, and 70% last year. Poor to very poor ratings were 17% compared to 15% last week and 10% a year ago. The trade was looking for 58% – 59% good to excellent rating. Iowa’s good to excellent rating dropped another 4% while the poor to very poor increased 4%. Good to excellent ratings also dropped in Illinois (8%), Minnesota (5%) and Indiana (2%) while Nebraska increased 1%. Analyst are starting to peg the 2011 corn crop at less than 150 bushels per acre which would indicate that price rationing would need to occur to have a bare minimum of corn stocks in 2011/12. The Pro Farmer Midwest crop tour reported projected corn yields at 147.9 bushels per acre in a range of 146.45 to 149.4 bushels. Using USDAs August report acres puts corn production at 12.484 billion bushels in a range of 12.36 to 12.61 billion bushels. It is expected that harvested corn acres will be revised downward which will put additional pressure on stocks. Prices could peak early to mid-harvest before price rationing starts to affect demand. 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 $7.70 Put option today would cost $0.58 and set a $7.12 floor on the December market while keeping an upside. With the corn futures daily limit having increased to 40 cents, there can be quite a bit of price movement in a short time. Overall, the corn market is strong to bullish based on fundamentals, but other influences or events could derail the market.
Deferred: March closed at $7.78 ¼ a bushel, up $0.40 bushel since last Friday. Technical indicators have a strong buy bias. Support is at $7.43 with resistance at $7.97 a bushel. Producers with un-priced storage may want to look at March or May Put options to protect corn as it is put into storage. September 2012 corn closed at $7.15 a bushel. Consider a pricing program for 2012 especially if inputs like fertilizer can be locked in.
Cotton:
Current Crop: December closed at 104.32 cents per pound, down 1.90 cents since last week. Prices are up 1.33 cents today as cotton follows grains up. Support is at 101.05 cents per pound, with resistance at 106.51 cents per pound. Technical indicators have a sell bias. All cotton weekly export sales were a net reduction of 617,400 bales (net reduction of 230,300 bales of upland cotton for 2011/12; net reduction of 387,200 bales of upland cotton for 2012/13; sales of 100 bales of Pima cotton for 2011/12. The Adjusted World Price for August 26 – September 1 is 91.96 cents/lb.; up 2.02 cents/lb. from last week. Quotes on 2011 loan equities are in the 45.25 cent range. Keep in contact with your cotton buyer for current quotes on loan equities and pricing alternatives. The U.S Census Bureau reports cotton stocks ending the 2010/11 marketing year at 200,000 bales higher than previously thought. Look for an upward adjustment in the September USDA report. As of August 21, cotton setting bolls was rated at 94% compared to 88% last week, 93% last year and the five year average of 90%. Cotton bolls opening were at 16% compared to 11% last week, 20% last year and the five year average of 16%. Cotton crop condition ratings as of August 21 were 31% good to excellent compared to 31% last week and 62% last year. Poor to very poor ratings are 41% compared to 40% last week and 11% a year ago. Cotton prices continue to suffer the effects of high prices earlier in the year that caused some usage to switch to synthetic fibers. China is expected to build their cotton reserves and that should add support to the market, but it has not happened yet. With weaker demand forecast for 2011/12, a more than expected cut in production will be needed to offset the drop in usage. I am currently at 45% priced and would hold at that level.
Deferred: March cotton closed at 101.88 cents per pound, down 1.01 cents for the week. Support is at 98.74 cents per pound, with resistance at 103.82 cents per pound. Technical indicators have a sell bias. December 2012 prices closed at 96.60 cents/lb.
Soybeans:
Nearby: The September contract closed at $14.14 ¾ a bushel, up $0.55 since last Friday. Support is at $13.65 with resistance at $14.43 a bushel. Technical indicators have changed to a strong buy bias. Weekly exports were slightly below expectations at 24.2 million bushels (sales of 4 million bushels for 2010/11 and sales of 20.2 million bushels for 2011/12). The U.S. Census Bureau reported the July crush at 129.6 million bushels, which was about expected. Due to budget cuts, this was the last monthly crush report from the Census Bureau.
Current Crop: November soybeans closed at $14.23 ½ a bushel, up $0.55 a bushel since last week. Support is at $13.72 with resistance at $14.51 a bushel. Technical indicators have changed to a strong buy bias. As of August 21, 97% of the soybean crop is blooming compared to 94% last week, 98% last year and the five year average of 97%. Soybeans setting pods were 83% compared to 70% last week, 90% last year and the five year average of 88%. Soybean crop condition ratings as of August 21 were 59% good to excellent compared to 61% last week, and 64% last year. This was about expected. Poor to very poor were rated at 14% compared to 13% last week and 13% a year ago. Iowa’s good to excellent ratings dropped 4% with their poor to very poor increasing 4%. Good to excellent ratings also dropped in Illinois (4%), Minnesota (5%) and Indiana (2%) while Nebraska increased 1%. The Pro Farmer Midwest Tour estimates the soybean crop at 3.083 billion bushels with 41.8 bushels per acre average. The range of production is 3.02 – 3.083 billion bushels with yields ranging from 40.96 to 42.64 bushels per acre. Production estimates are based on the August USDA report harvested acres, which most likely will be reduced in further USDA reports. Soybean yields are based on pod counts which will need favorable weather to fulfill potential. Currently, a return to hot and dry is forecast so look for weather forecasts to have an impact on the soybean market. 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 $14.20 Put option would cost $0.50 a bushel and set a $13.70 futures floor. This option expires on October 21, 2011 so producers need protection longer than that may want to consider a January, 2012 Put option. A January $14.40 Put would cost $0.83 and set a $13.57 futures floor. It expires December 23.
Wheat:
Nearby: September futures contract closed at $7.62 ¼ a bushel, up $0.32 a bushel since Friday. Support is at $7.38 with resistance at $7.80 a bushel. Technical indicators have changed to a strong buy bias. Weekly exports were below expectations at 12.8 million bushels for 2011/12. Nationwide, 94% of the winter wheat crop has been harvested compared to 91% last week, 94% last year and the five year average of 97%. Spring wheat as of August 21 is 29% harvested as compared to 13% last week, 49% last year and the five year average of 56%. Spring wheat crop condition ratings as of August 21 were 62% good to excellent compared to 66% last week, and 82% last year. Stats Canada released their estimate this week and pegged Canadian wheat production 22 million bushels above earlier estimates and 92 million bushels above USDA latest projections for Canada. Disappointing spring wheat yields have supported the market along with the uptick in corn and soybean prices.
Deferred: December wheat closed at $7.97 a bushel, up $0.36 since last week. Support is at $7.69 with resistance at $8.17 a bushel. Technical indicators have a buy bias. July 2012 wheat closed at $8.35 ¾ a bushel, up $0.31 a bushel for the week. Continued dry and drought condition in the Southern Plains have started creating concerns on the amount of winter wheat that will be seeded.
