Prices and comments are through Thursday, March 1, 2012. Corn, soybeans, and wheat prices are up while cotton prices are mixed for the week through Thursday. The March U.S. Dollar Index closed at 78.83, up .53 for the week. The Dow Jones Industrial Average closed down 3 points for the week at 12,980. Crude Oil closed at 108.33 a barrel, down .94 a barrel for the week. February is the month that base prices for crop insurance Revenue Protection is set. Unofficial prices are $5.68 a bushel for corn, 93.35 cents a pound for cotton, and $12.55 a bushel for soybeans. The deadline for purchasing crop insurance in Tennessee is March 15. The monthly USDA Supply & Demand report will be released on March 9.
Corn:
Nearby: May closed at $6.54 a bushel, up 10 cents a bushel for the week. Support is at $6.49 with resistance at $6.55 a bushel. Technical indicators have changed to a strong buy bias. Weekly exports were within expectations at 28.1 million bushels (27.2 million bushels for the 2011/12 marketing year and 905,500 bushels for 2012/13). Ethanol production last week fell 23,000 barrels per day from the previous week, but year to date production is still running 3% over last year. The seasonal pattern for nearby corn futures is a dip the first half of March and then a rally into early to mid-summer. Some of the strength in cash corn prices is coming from a reluctance of producers to sell stored corn. Technical and seasonal patterns aside, for the market to continue to move up there will need to be an indication that price rationing needs to occur. The March 9 USDA report could give that indication as some analyst look for corn stocks to tighten further on both the U.S. and global levels. Buffering against that is the potential for a record corn crop in 2012. Producers with stored corn not ready to price out should at the very least use $6.45 a bushel as a price stop. Prices could hit that mark on a seasonal dip, but I am not convinced that we are following the seasonal pattern or at least did not start it earlier than usual.
New Crop: September closed at $5.98 a bushel, up 9 ¾ cents a bushel since last Friday. Technical indicators have changed to a buy bias. Support is at $5.94 with resistance at $6.01 a bushel. Seasonal patterns show a slight dip in March with a rally to mid-June. The market started a rally late in December to early January; derailed on the January USDA report and have been on an upward to sideways path. With 94+ million acres of corn looming on the market, it most likely will take a combination of lower U.S. and global stocks and a surprise in the March 30 Grain Stocks report for a sustained rally. Otherwise, prices may have the tendency to move sideways until the March 30 planting intentions report then confirmation of actual planted acres with a close eye on the weather. I would have up to 25% of the crop priced at this point. From a price risk management standpoint, a December $5.70 Put would cost 56 cents and set a $5.14 futures floor.
Cotton:
Nearby: May closed at 89.67 cents per pound, down 2.50 cents since last week. Support is at 88.18 cents per pound with resistance at 92.24 cents per pound. Technical indicators have a strong sell bias. The Adjusted World Price for March 2– March 8 is 78.66 cents per pound down 0.83 cents. All cotton weekly export sales were 83,600 bales (sales of 76,200 bales of upland cotton for 2011/12; sales of 2,300 bales of upland cotton for 2012/13 and sales of 5,100 bales of Pima cotton for 2011/12). I am currently at 80% priced for 2011 production and would be willing to hold the remainder for an additional rally. I would target the $1 to $1.05 range as a pricing point.
New Crop: December cotton closed at 90.88 cents per pound, up 0.50 cents for the week. Support is at 89.37 cents per pound with resistance at 92.73 cents per pound. Technical indicators have changed to a sell bias. Loan equities have been quoted at 31.50 cents per pound. Keep in contact with your cotton buyer for current quotes on loan equities and pricing alternatives. China announced that it will raise its government reserves minimum price by 3% this year. This is less than was expected and could be considered friendly to prices as a higher rate was anticipated. Acreage in China is projected to be down 6% – 10%. If greater than that, then exports to China most likely would increase in the 2012/13 marketing year.
Soybeans:
Nearby: The May contract closed at $13.22 ½ a bushel, up 35 ¾ cents a bushel since last Friday. Support is at $13.08 with resistance at $13.29 a bushel. Technical indicators have a strong buy bias. Weekly exports were above expectations at 35.9 million bushels (20.2 million bushels for the 2011/12 marketing year and sales of 15.7 million bushels for 2012/13). Seasonal tendencies for soybeans like corn are for a dip in March then rally through May. Early analyst guesses for the March 9 USDA report are for a drop in ending stocks. Some assumptions are made that a reduced South American crop will translate into increased exports. Sounds logical, but it is thought that USDA factored that in the February report as it will take an increased pace to meet USDA projections. It may be difficult for exports to both increase in the current marketing year as some guesses have it and in the next marketing year as USDA projected in its Outlook Forum both from reduced South American supplies. Producers who continue to hold stored soybeans should at least use a $12.73 stop as a pricing point should prices drop back to that level.
New Crop: November soybeans closed today at $12.94 ¼ a bushel, up 23 ½ cents since last week. Support is at $12.83 with resistance at $13.00 a bushel. Technical indicators have a strong buy bias. Seasonal patterns indicate a drop into mid-March then a rally through May. The ratio between soybean and corn prices while still in corn’s favor has been edging ever so slightly toward soybeans. If it continues, we could see some acreage destined for corn shift to soybeans. If so, this would probably not be reflected in the March 30 planting intentions report. With a positive basis, soybeans for fall delivery have been quoted over $13.00 a bushel. It is hard to pass up that price and I would add another 10% and get up to 30% priced. Alternately, if you are not ready to price I would use a $12.61 futures stop as a pricing point should prices drop back to that level. From a price risk management standpoint, a $13.00 Put would cost 95 cents and set a $12.05 futures floor.
Wheat:
Nearby: May futures contract closed at $6.64 a bushel, up 22 ¾ cents a bushel since Friday. Support is at $6.56 with resistance at $6.75 a bushel. Technical indicators have changed to a buy bias. Weekly exports were at the low end of expectations at 18.7 million bushels (15.2 million bushels for 2011/12 and 3.5 million bushels for 2012/13). An unexpected 4.4 million bushel sale to Iran was announced today.
New Crop: July wheat closed at $6.76 a bushel, up 23 cents since last week. Support is at $6.66 with resistance at $6.89 a bushel. Technical indicators have changed to a buy bias. I am currently 10% priced for the 2012 crop and would use the $6.65 mark as a stop loss to price more. Otherwise, I would move my stop up if prices move up. A $6.70 Put would cost 44 cents and set a $6.26 futures floor.
