Cotton prices are up and corn, soybean and wheat prices are down for the week. The September U.S. Dollar Index was trading before the close at 77.24, up 2.42 since last Friday. The Dow Jones Industrial Average was trading down 293 points for the week at 10,947. It was down 349 points today before the close. Crude Oil was trading before the close at 87.26 a barrel, up 0.69 a barrel since last Friday. Europe’s debt crisis continues to weigh heavy on the stock market and has led to a stronger dollar which generally has a negative effect on commodity prices. The resignation of a key official of the European Central Bank signaled a deepening disagreement over how to solve Europe’s economic problems and overshadowed President Obama’s plan to revive the U.S. job’s market. USDA releases its monthly supply and demand report September 12. Look for comments on this report to be posted at http://economics.ag.utk.edu/outlook.html . Adjustments from the August report are expected, but could also be overshadowed by economic news either in the U.S. or abroad.
Corn:
Current Crop: December closed today at $7.36 ½ a bushel, down $0.24 a bushel since last Friday. Support is at $7.25 with resistance at $7.46 a bushel. Technical indicators have changed to a buy bias. Weekly exports were within expectations at 34.3 million bushels (32.3 million bushels for 2011/12 which began September 1 and 2 million bushels for 2012/13). A 5 million bushel sale overnight was reported this morning. Accumulated exports for the just ended 2010/11 marketing year were 43.4 million bushels lower than USDA’s August projection. Adjustments may be made in the September 12 report. Corn dented is 71% compared to 53% last week, 84% last year and the five year average of 70%. The corn crop has 18% in the mature stage compared to 9% last week, 31% last year and the five year average of 20%. Corn crop condition ratings as of September 4 were 52% good to excellent compared to 54% last week, and 69% last year. Poor to very poor ratings were 21% compared to 19% last week and 11% a year ago. Iowa’s good to excellent rating continues to drop at a 4% clip while the poor to very poor increased 2%. Good to excellent ratings also dropped in Illinois (1%), Minnesota (3%), and Indiana (3%) and Nebraska 2%. The September 12 USDA report is expected to show slightly higher ending stocks for 2010/11 at 956 million bushels. The average trade estimate puts 2011 production at 12.491 billion bushels on an average corn yield of 149.1 bushels per acre, compared to USDA’s August report of 12.914 billion bushels on a yield of 153 bushels per acre. The range is 1 billion bushels from high to low and depends on whether analyst think harvested acreage will also be lowered. USDA typically does not make adjustments to harvested acreage until the October report, but it is a possibility. Although production is expected to be lowered on the average 423 million bushels, ending stocks for 2011/12 on the average is expected to be lowered only 78 million bushels to 636 million bushels as demand projections are reduced and beginning stocks increased. There is no clear consensus which way prices will move based on the September 12 report, but the production picture will start to be clearer as harvest progresses. Usage numbers may continue to be murky as it will take a while to see if prices above $7 have caused demand destruction. I am currently 50% forward priced and 25% price using a December Put option locking in a futures floor of $6.34. I would look to sell the remainder 25% across the scales. Harvest level prices above $7 a bushel are hard to turn down, so un-priced storage needs to be evaluated carefully.
Deferred: March closed at $7.49 ½ a bushel, down $0.23 bushel since last Friday. Technical indicators have changed to a buy bias. Support is at $7.38 with resistance at $7.58 a bushel. September 2012 corn closed at $6.99 ½ a bushel. Consider a pricing program for 2012 especially if inputs like fertilizer can be locked in.
Cotton:
Current Crop: December closed at 111.87 cents per pound, up 5.98 cents since last week. Support is at 108.38 cents per pound, with resistance at 116.00 cents per pound. Technical indicators have changed to a buy bias. All cotton weekly export sales were 46,700 bales (sales of 43,700 bales of upland cotton for 2011/12; sales of 2,000 bales of upland cotton for 2012/13; sales of 1,000 bales of Pima cotton for 2011/12. The Adjusted World Price for September 9 – September 15 is 92.80 cents/lb.; up 1.60 cents/lb. from last week. Quotes on 2011 loan equities are in the 50.50 cent range. Keep in contact with your cotton buyer for current quotes on loan equities and pricing alternatives. As of September 4, cotton bolls opening were at 42% compared to 27% last week, 40% last year and the five year average of 32%. Cotton harvested is at 7% compared to 6% last year and the five year average of 6%.Cotton crop condition ratings as of September 4 were 28% good to excellent compared to 30% last week and 60% last year. Poor to very poor ratings are 44% compared to 41% last week and 12% a year ago. Texas cotton is rated 63% poor to very poor an increase of 3% from last week. Some damage may have occurred to open cotton in the South and Southeast from recent tropical storms/hurricanes. The up move in cotton prices this week has been attributed to not only damage in the U.S. but also damage to the cotton crop in Pakistan and China from excessive rains and floods. Planted acres may increase either in the September 12 USDA report or October report, but harvested acres will be the number to watch as FSA certified failed acreage in Texas is high along with additional abandoned acreage. Per acre yields will most likely be lowered also. As in the grains, usage numbers may drop along with production leaving ending stocks unchanged. On the bull side, there have been reports of mill business picking up and China is buying cotton for its reserve. I am currently at 45% priced and would hold at that level.
Deferred: March cotton closed at 108.62 cents per pound, up 5.96 cents for the week. Support is at 105.21 cents per pound, with resistance at 112.21 cents per pound. Technical indicators have changed to a buy bias. December 2012 prices closed at 98.88 cents/lb.
Soybeans:
Current Crop: The November contract closed at $14.26 ¾ a bushel, down $0.19 since last Friday. Support is at $14.06 with resistance at $14.39 a bushel. Technical indicators have a strong buy bias. Weekly exports were within expectations at 16.3 million bushels for the 2011/12 marketing year which began September 1. Overnight an 8.8 million bushel cancellation to China was reported. Accumulated exports for the just ended 2010/11 marketing year were 25.6 million bushels lower than the August USDA projection. As of September 4, soybeans dropping leaves were 6% compared to 2% last week, 17% last year and the five year average of 13%. Soybean crop condition ratings as of September 4 were 56% good to excellent compared to 57% last week, and 64% last year. Poor to very poor were rated at 16% compared to 15% last week and 12% a year ago. Since last week, Iowa’s good to excellent ratings dropped 2%; Illinois was even, Minnesota down 2%, Indiana down 5% and Nebraska dropping 3%. Average trade estimates for 2010/11 ending stocks are for 226 million bushels, slightly lower than the August report. Production in the September 12 report is expected to be lowered on the average to just over 3 billion bushels on an average yield of 41.04 bushels per acre. Demand is expected to also be lowered with the end result of ending stocks lowered only 3 million bushels to 152 million bushels. Ending stocks less than this expected number would be bullish to the market. However, with soybean a little later maturing this year, even a higher bearish ending stock number from USDA would quickly be dismissed by the market if an early frost is forecast. So again, weather will continue to influence prices. 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. If prices stay above $14 a bushel, I would look to sell the remainder at harvest. Producers with a late soybean crop and who want price protection may want to consider a January, 2012 Put option. A January $14.40 Put would cost $0.69 and set a $13.71 futures floor. It expires December 23 and could give some partial protection for a stored crop.
Deferred: May soybeans closed today at $14.44 ¼ a bushel, down $0.11 since last week. Support is at $14.21 with resistance at $14.57 a bushel. Technical indicators have a strong buy bias.
Wheat:
Nearby: December futures contract closed at $7.29 ¾ a bushel, down $0.46 a bushel since Friday. Support is at $7.17 with resistance at $7.48 a bushel. Technical indicators have changed to a strong sell bias. Weekly exports were better than expected at 18.8 million bushels for 2011/12. Spring wheat as of September 4 is 68% harvested as compared to 50% last week, 74% last year and the five year average of 81%. The trade is looking for a slight reduction in ending wheat stocks to 667 million bushels from the August USDA projection of 671 million bushels. With a stronger dollar, wheat prices have not been competitive in the world market.
New Crop: July 2012 wheat closed at $7.89 ½ a bushel, down $0.33 since last week. Support is at $7.79 with resistance at $8.08 a bushel. Technical indicators have a sell bias. Drought condition persists in the Plains and in the key winter wheat growing areas of Kansas (24% of winter wheat production) and Oklahoma (9% of winter wheat production). Lack of moisture in these areas as winter wheat planting time starts should offer some support to the market, but wheat will continue to trade the direction of corn.
