Corn, soybeans, and wheat prices are down with cotton prices mixed for the week. The December U.S. Dollar Index was trading before the close at 77.09, down 0.07 since last Friday. The Dow Jones Industrial Average before the close was trading up 270 points for the day and 182 points for the week at 12,165. Crude Oil was trading before the close at 99.01 a barrel, up 4.72 a barrel since last Friday. USDA released their monthly supply and demand reports on November 9. Normally, the focus for at least that day would have been on the fundamental data released in those reports. However, this week including report day, the focus has been on the European financial situation and to a lesser degree, the fallout from the MF Global bankruptcy. Italy joined Greece as another country in dire financial straits and may not be the last European country to have financial troubles. As mentioned before, this situation has generally caused the U.S. Dollar to strengthen and as a result commodity prices have weakened. Some calm has occurred today in the European markets, but there is still uncertainty that will take time to see what actually gets worked out. A post-harvest rally of any magnitude will most likely need the dollar to weaken. Fallout continues with the bankruptcy of MF Global as it does appear that what should have been segregated funds were comingled with company funds and used in investments. Accounts with MF Global have been or are in the process of being transferred to other brokerages. It is difficult to estimate the effects this has had on the commodity market. It has shook the confidence that producers, grain elevators, and other agricultural firms that used the futures market have had in the system and may take time to restore.
Corn:
Current Crop: December closed today at $6.38 ½ a bushel, down 17 ¼ cents a bushel since last Friday. Support is at $6.28 with resistance at $6.56 a bushel. Technical indicators have a strong sell bias. Weekly exports were below expectations at 9.9 million bushels for the 2011/12 marketing year. Corn harvested as of November 6 was at 87% compared to 78% last week, 95% last year and the five year average of 73%. Ohio is at 34% harvested lagging their five year average of 67%. Production was reduced 123 million bushels in the November 9 USDA report as yields were reduced 1.4 bushels from last month to 146.7 bushels per acre nationwide ( lowest since 2003). Offsetting the majority of that reduction was a 100 million bushel cut in feed use resulting in ending stocks of 843 million bushels. This compares to 866 million bushels in October and the average pre report trade guesses of 843 million bushels. Global corn stocks are estimated to decrease 64 million bushels from the October report to 4.786 billion bushels on mainly a drop in production in the U.S and Mexico. This was considered a neutral to slightly bullish report as the trade seems to think that USDA is underestimating usage. I am currently 50% forward priced for 2011 and 25% priced using a December $6.90 Put option that has been offset with a 42 cent profit. I would hold the remaining 25% of production in storage, but be ready to price on any rallies back up to the $6.80 – $7.00 range.
Deferred: March closed at $6.47 ¾ a bushel, down 18 ½ cents a bushel since last Friday. Technical indicators have a strong sell bias. Support is at $6.36 with resistance at $6.65 a bushel. September 2012 corn closed at $6.03 ¼ a bushel. Watch closely over the next few months for opportunities to price the 2012 crop.
Cotton:
Current Crop: December closed at 99.24 cents per pound, up 0.50 cents since last week. Support is at 97.65 cents per pound, with resistance at 100.79 cents per pound. Technical indicators have a strong sell bias. All cotton weekly export sales were 1,024,800 bales (net sales of 998,000 bales of upland cotton for 2011/12; sales of 24,900 bales of upland cotton for 2012/13 and sales of 1,900 bales of Pima cotton for 2011/12). This was the highest weekly sales since October 2003. China accounted for 996,100 bales of upland cotton sales. The Adjusted World Price for November 11 – November 17 is 86.59 cents/lb.; down 3.48 cents/lb. from last week. Quotes on 2011 loan equities are in the 39 – 43 cent range. Keep in contact with your cotton buyer for current quotes on loan equities and pricing alternatives. Cotton harvested is at 70% compared to 55% last week, 69% last year and the five year average of 53%. USDA cut cotton production 308,000 bales in their recent report, but offset it with a 200,000 bale decrease in exports resulting in ending stocks of 3.8 million bales, 100,000 bales less than last month. Global ending stocks are forecast at 54.96 million bales, an increase of 130,000 bales from last month. Over the next few weeks, exports will be closely watched to see if China is rebuilding reserves as has been rumored to happen this fall. I am currently at 60% priced and would target any additional rallies to the 105 cent range as a point to evaluate pricing although if cotton is put in the loan, it is more important to watch equity price movement. If equities get to a level that you are comfortable with on your overall pricing (loan, equity, seed, and hauling), have your recap sheets ready for your cotton buyer and price them out.
Deferred: March cotton closed at 98.04 cents per pound, down 0.42 cents for the week. Support is at 96.12 cents per pound, with resistance at 100.04 cents per pound. Technical indicators have a strong sell bias. December 2012 prices closed at 95.73 cents/lb.
Soybeans:
Current Crop: The January contract closed at $11.75 ½ a bushel, down 45 ½ cents a bushel since last Friday. Support is at $11.61 with resistance at $11.87 a bushel. Technical indicators have a strong sell bias. Weekly exports were above expectations at 22.3 million bushels
(22.2 million bushels for the 2011/12 marketing year and 103,000 bushels for the 2012/13 marketing year). Soybeans harvested were at 92% compared to 87% last week, 98% last year and the five year average of 88%. USDA reduced yields 0.2 bushels per acre this week, lowering production 14 million bushels. Ending stocks for 2011/12 are increased 35 million bushels from last month to 195 million bushels as the decrease in production is more than offset by a 50 million bushel reduction in exports. The export reduction was greater than the market expected, but stiff export competition is expected from South American soybeans as Brazil is expected to overtake the U.S. as the largest soybean exporter. Growing conditions in South America are currently favorable for a good crop, but their production season is just getting started. The soybean markets as well as other commodity markets will need a weaker dollar to help stimulate export business and help support prices. In weekly comments, I am currently 50% forward priced for 2011 and 25% priced using a November $14 Put option that has been offset or closed out with a $1.62 profit. I would look to store the remainder with a lowered price target in the $12.80 – $13.00 range. The risk in the market is that Europe’s finances remain jumbled, the dollar strengthens and prices drop as exports struggle.
Deferred: May soybeans closed today at $11.96 a bushel, down 43 ¼ cents since last week. Support is at $11.82 with resistance at $12.07 a bushel. Technical indicators have a strong sell bias. November 2012 soybeans closed at $11.92 ½ this week.
Wheat:
Nearby: December futures contract closed at $6.16 ¾ a bushel, down 20 cents a bushel since Friday. Support is at $6.01 with resistance at $6.33 a bushel. Technical indicators have a strong sell bias. Weekly exports were below expectations at 11 million bushels for 2011/12. USDA reduced production by 9 million bushels as yields were reduced 0.2 bushels per acre as the results of resurveying some spring wheat states. Usage was unchanged as ending stocks were projected at 828 million bushels, a reduction of 9 million bushels. World ending stocks are projected at 7.444 billion bushels, up 8 million bushels from the October estimate as beginning stocks increased, world production increased and consumption increased from the October estimate. Overall, this report is bearish wheat as ending stock projections came in above the pre report estimates. However, wheat will follow corn and grains as well as being influenced by outside markets.
New Crop: July 2012 wheat closed at $6.81 a bushel, down 20 cents since last week. Support is at $6.64 with resistance at $6.93 a bushel. Technical indicators have a strong sell bias. Nationwide, winter wheat planted is 94% compared to 89% last week, 95% last year and the five year average of 92%. As of November 6, winter wheat emergence is at 76% compared to 68% last week, 81% last year and the five year average of 79%. Winter wheat condition ratings were 49% good to excellent compared to 46% last week and 45% a year ago. The poor to very poor ratings were 15% compared to 13% last week and 17% a year ago. Texas increased its poor to very poor from 38% to 46% this week. Weather in the Plains and the Ukraine will bear watching as the winter wheat crop develops.
