Soybean prices are mixed while corn, cotton, and wheat prices are down for the week. The June U.S. Dollar Index is trading midday at 79.58, up 0.82 for the week. The Dow Jones Industrial Average at midday was down 182 points for the week at 13,046. Crude Oil traded before the close at 98.29 a barrel, down 6.49 a barrel for the week. The April jobs report released today showed 115,000 jobs were created, well short of the expectation of 165,000. The unemployment rate fell to 8.1% from 8.2%, but only due to fewer people trying to find a job. The sell-off of grains and soybeans mid-week has been attributed somewhat to the announcement by the CME Group of new margin rules to take affect that would require members to pay the higher speculative margins rather than lower hedge margins on speculative positions. This could affect some of the old crop/new crop spread business at the exchange and may have spurred liquidation of positions before the implementation on May 7 of the provisions of the Dodd-Frank financial reform bill. On Friday, the CME Group announced members had been given a 90 day reprieve on this implementation and that the effective date will be August 5. Other news from the CME Group is that pending approval from the CFTC; they will expand trading hours for grain and oilseed trading including ethanol to cover 22 hours of the day starting on the trade date of May 21. For more information, check out their web site at http://www.cmegroup.com/ . There is some concern among analyst on increased volatility particularly when USDA reports are released during trading hours and among grain elevators on managing settlement prices. USDA has said that expanded hours could affect the way monthly crop reports are released. The Minneapolis Grain Exchange (MGEX) and Kansas City Board of Trade (KCBOT) also announced expanded trading hours. This change most likely was motivated by the Intercontinental Exchange (ICE) announcement earlier that they would offer corn and soybean contracts starting May 14 and that they would trade 22 hours during the day. USDA will release their monthly supply and demand reports on May 10 and will contain the first official look at the projected new crop year.
Corn:
Nearby: July closed at $6.20 ¼ a bushel, down 5 ¼ cents a bushel for the week. Technical indicators have changed to a sell bias. Support is at $6.03 a bushel with resistance at $6.22 a bushel. Weekly exports were at the high end of expectations at 136.7 million bushels (52.4 million bushels for the 2011/12 marketing year and 84.3 million bushels for the 2012/13 marketing year). This was the largest combination of old and new crop corn sales in a single week since 1991. Most analyst are anticipating USDA to tighten old crop stocks in the May 10 report with a guess of 761 million bushels, but it is certainly not a given as a large new crop is expected to come in earlier than normal and help alleviate any tightness in stocks in late summer.
Current Crop: September closed at $5.35 ¼ a bushel, down 15 ¾ cents a bushel since last Friday. Technical indicators have a strong sell bias. Support is at $5.26 a bushel with resistance at $5.46 a bushel. Corn planted as of April 29 was 53% nationwide as compared to 28% last week, 12% last year and the five year average of 27%. The trade expected 43% to have been planted. Corn emergence is 15% compared to 9% last week, 4% last year and the five year average of 2%. USDA will release its first projection for the new crop corn year next week and is expected to use the March 30 planting acreage number of 95.9 million acres and a yield of at least 164 bushels per acre. The fast planting and emergence pace of corn may lend some justification to an even higher yield. I would expect this first projection to generate a large stocks number and there have been some guesses that the actual planted acreage will eventually be 96.1 million acres or 260,000 acres higher than the March 30 estimate. These production numbers will point to a record crop and have the potential to overwhelm even increased usage. The average analyst guess is for a record new crop corn production of 14.395 billion bushels. It is early in the season and a lot can happen between now and harvest. I am currently at 40% priced and would look to add to it by the May 10 report. From a price risk management standpoint, a December $5.20 Put would cost 41 cents and set a $4.79 futures floor.
Cotton:
Nearby: July closed at 87.99 cents per pound, down 3.24 cents since last week. Support is at 86.84 cents per pound with resistance at 90.14 cents per pound. Technical indicators have changed to a strong sell bias. The Adjusted World Price for May 4– May 10 is 77.33 cents per pound, down 1.03 cents. All cotton weekly export sales were 64,900 bales (a reduction of 25,300 bales of upland cotton for 2011/12; sales of 79,200 bales of upland cotton for 2012/13; and sales of 11,000 bales of Pima cotton for 2011/12. Even with this week’s cancellations, commitments are still 5% above the April USDA cotton export estimate. India’s on again off again cotton export ban is off and that has weighed heavy on the cotton market this week. I am currently at 80% priced for 2011 production and would be willing to hold the remainder through the end of May for an additional rally.
Current Crop: December cotton closed at 85.80 cents per pound, down 2.10 cents for the week. Support is at 84.75 cents per pound with resistance at 87.29 cents per pound. Technical indicators have a strong sell bias. Equities for 2012 cotton have been quoted in the 26-27 cent range. Keep in contact with your cotton buyer for current quotes on loan equities and pricing alternatives. Cotton planting is pegged at 26% compared to 18% last week, 16% last year and the five year average of 19%. One private estimate released today expects U.S. cotton acreage to be 12.8 million acres, down 330,000 acres from USDA’s March projection. Worldwide, cotton production is expected to be down but still higher than consumption. Prices will have trouble rallying without an uptick in the economy or production problems somewhere in the world. I am still holding out for prices in the mid 90s as a pricing point to price a portion of the 2012 crop, although a rally back to that point is looking more difficult.
Soybeans:
Nearby: The July contract closed at $14.78 ¼ a bushel, down 15 ¼ cents a bushel since last Friday. Technical indicators have changed to a buy bias. Support is at $14.49 a bushel with resistance at $14.95 a bushel. Weekly exports were above expectations at 63.6 million bushels (21.9 million bushels for the 2011/12 marketing year and sales of 41.7 million bushels for 2012/13). As the saying goes, small crops get smaller seems to also apply to South American soybean production as downgrades to their crop continue in advance of the May 10 USDA monthly report. Look for USDA to trim old crop stocks in next week’s report, the average trade guess is 215 million bushels based on increased exports.
Current Crop: November soybeans closed today at $13.66 ¾ a bushel, up 4 ¾ cents since last week. Technical indicators have changed to a strong buy bias. Support is at $13.42 a bushel with resistance at $13.84 a bushel. Soybean planting has progressed to 12% compared to 6% last week, 2% last year and the five year average of 5%. Unlike corn, there is not a clear relationship between early soybean planting progress and higher yields. Analysts on average are looking for new crop production in USDA’s report to be 3.214 billion bushels. It could be the lowest production estimate for the year as at least one private estimate guesses 2012/13 U.S. soybean acres at 75.822 million acres, which would be up 1.92 million acres from the USDA March projection. I am currently 50% priced overall. From a price risk management standpoint, a $13.60 Put option would cost 83 cents and set a $12.77 futures floor.
Wheat:
Current crop: July futures contract closed at $6.09 ½ a bushel, down 40 ½ cents a bushel since Friday. Technical indicators have a strong sell bias. Support is at $5.88 a bushel with resistance at $6.31 a bushel. Weekly exports were within expectations at 26.1 million bushels (9.4 million bushels for 2011/12 and 16.7 million bushels for 2012/13). Overall, 54% of the winter wheat crop has headed compared to 42% last week, 29% last year and the five year average of 24%. Winter wheat conditions as of April 29 were 64% good to excellent compared to 63% last week, and 34% last year. Poor to very poor conditions are estimated at 10% compared to 10% last week and 41% last year. The Kansas Wheat Tour is looking at record large wheat yields this year. This has been bearish on the market. I am priced 20% on the current crop and would target any rallies to the $6.50 range as a point to price more. A $6.10 Put option would cost 33 cents and set a $5.77 futures floor. This option expires on June 22.
Deferred: December wheat closed at $6.48 a bushel, down 36 ¼ cents since last week. Technical indicators have a strong sell bias. Support is at $6.48 a bushel with resistance at $6.64 a bushel. Spring wheat planted is at 74% compared to 57% last week, 9% last year and the five year average of 32%. Spring wheat emergence is 30% compared to 18% last week, 3% last year and the five year average of 8%
