Corn and soybean prices are up while cotton and wheat prices are down for the week. Markets were closed on Friday due to the Good Friday holiday so market closes are as of Thursday, April 5, 2012. The June U.S. Dollar Index closed is at 80.09, up .95 for the week. The Dow Jones Industrial Average closed down 152 points for the week at 13,060. Crude Oil closed at 103.31 a barrel, up 0.34 a barrel for the week. Employment gains were reported on Friday while the markets were closed and were weaker than expected. The unemployment rate dipped slightly to 8.2%. USDA will update its monthly Supply & Demand report on Tuesday, April 10. Comments on this report will be posted at http://economics.ag.utk.edu/outlook.html on the afternoon of April 9. Corn and soybean production from South America are expected to be reduced by USDA. The standard corn soybean ratio closed the week at 2.51 edging toward favoring soybeans, but yields of both crops are the key to which is the most profitable.
Corn:
Nearby: May closed at $6.58 ¼ a bushel, up 14 ¼ cents a bushel for the week. Technical indicators have changed to a strong buy bias. Weekly exports were well above expectations at 44.2 million bushels (36.9 million bushels for the 2011/12 marketing year and 7.3 million bushels for the 2012/13 marketing year). China accounted for 15.5 million bushels of old crop sales. Some sales could have been pushed forward in anticipation of the March 30 Grain Stocks report. The average trade guess for old crop ending stocks for the April 10 USDA report is 717 million bushels, down 84 million bushels from March.
New Crop: September closed at $5.69 ¼ a bushel, up 6 cents a bushel since last Friday. Technical indicators have a strong sell bias. Corn planted as of April 1 was 3% nationwide as compared to 2% last year and the five year average of 2%. It is expected that next week’s report will show above average planting for this time of year. There is a slight freeze concern in the Upper Midwest, but it is not expected to impact many planted acres. I would have up to 25% of the crop priced at this point and look to price more this spring. New crop concerns are that good planting weather will see corn acres not only meet USDA planting intentions but exceed them as planters roll. From a price risk management standpoint, a December $5.50 Put would cost 48 cents and set a $5.02 futures floor.
Cotton:
Nearby: May closed at 88.54 cents per pound, down 4.98 cents since last week. Support is at 86.82 cents per pound with resistance at 91.30 cents per pound. Technical indicators have changed to a strong sell bias. The Adjusted World Price for April 6– April 12 is 80.71 cents per pound up 1.31 cents. All cotton weekly export sales were a reduction of 42,700 bales (reduction of 143,700 bales of upland cotton for 2011/12; sales of 96,200 bales of upland cotton for 2012/13; and sales of 4,800 bales of Pima cotton for 2011/12. Shipments were strong this week and could lead to USDA bumping up exports next week. Based on ginning data, 2011 production could be trimmed by an average trade guess of 130,000 bales. Overall the trade is looking for USDA to cut ending stocks 420,000 bales from March to 3.48 million bales. 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 87.54 cents per pound, down 3.46 cents for the week. Support is at 86.46 cents per pound with resistance at 89.54 cents per pound. Technical indicators have changed to a strong sell bias. Equities for 2012 cotton have been quoted in the 28 cent range. Keep in contact with your cotton buyer for current quotes on loan equities and pricing alternatives. Cotton planting is pegged at 7% compared to 5% last year and the five year average of 4%. Look at prices in the mid 90s as a pricing point to price a portion of the 2012 crop.
Soybeans:
Nearby: The May contract closed at $14.34 a bushel, up 31 cents a bushel since last Friday. Technical indicators have a strong buy bias. Weekly exports were well above expectations at 40.9 million bushels (15 million bushels for the 2011/12 marketing year and sales of 25.9 million bushels for 2012/13). The average trade guess for soybean ending stocks in the April 10 USDA report is 246 million bushels, down from 275 million bushels in March. Exports will have to continue to pick up to meet those projections.
New Crop: November soybeans closed today at $13.81 ½ a bushel, up 23 ½ cents since last week. Technical indicators have a strong buy bias. It is clear that the soybean market is trying to buy additional acres and I would not be surprised to see more acres planted than USDA’s intentions report. Where they come from will be the question as corn may be hard pressed to give up many. A few could come from cotton. I would be priced at 40% of estimated 2012 production. Alternately, if you are not ready to price I would use a $13.35 futures stop as a pricing point should prices drop back to that level. From a price risk management standpoint, a $13.80 Put would cost 87 cents and set a $12.93 futures floor.
Wheat:
Nearby: May futures contract closed at $6.38 ½ a bushel, down 22 ¼ cents a bushel since Friday. Technical indicators have changed to a sell bias. Weekly exports were above expectations at 18.8 million bushels (15 million bushels for 2011/12 and 3.8 million bushels for 2012/13). The average trade guess has wheat stocks at 796 million bushels compared to 825 million bushels last month. Wheat fundamentals are the weakest of all crops.
New Crop: July wheat closed at $6.46 ¼ a bushel, down 27 ¾ cents since last week. Technical indicators have changed to a strong sell bias. Spring wheat planted is at 8% compared to 1% last year and the five year average of 2%. Winter wheat conditions as of April 1 were 58% good to excellent compared to 37% last year. Poor to very poor are estimated at 12% compared to 32% last year. I am priced 20% on new crop and would watch closely on pricing more. A $6.45 Put option would cost 39 cents and set a $6.06 futures floor.
