Corn, cotton, soybean, and wheat prices are all up for the week. The September U.S. Dollar Index traded before the close at 83.47, down 0.09 for the week. The Dow Jones Industrial Average at mid-day traded at 12,745, up 171 points today but down 27 points since last Friday. Crude Oil traded at 87.30 a barrel mid-day, up 2.85 a barrel for the week. USDA released their supply & demand report on July 11 and made several adjustments to the monthly numbers. Markets have had volatile reactions during the week, trading in large ranges. We have gotten good rains this week in Tennessee; however, much of the Midwest is still suffering from drought. The Drought Monitor Index (http://droughtmonitor.unl.edu/ ) as of July 10 shows 83% of the Midwest covered by drought up from last week. We are starting to see a lot of mainstream media pick up on the drought as well as extremely high prices projected for corn and soybeans if the drought doesn’t end soon. Those are typically signs that the bull rally is close to ending and that highs have been put in. Only time will tell if that is the case here. This uncertainty is a good reason to look closely at using Put Options as a tool to set a floor price and leave the upside open if prices skyrocket. A lot of unknowns in the market right now from effects of the weather and what demand will be at higher prices.

Corn:

Current Crop: September closed at $7.40 ½ a bushel, up 45 ¼ cents a bushel for the week. Technical indicators have a strong buy bias. Support is at $7.16 a bushel with resistance at $7.59 a bushel. Weekly exports were above expectations at 26.2 million bushels (6.8 million bushels for the 2011/12 marketing year and 19.4 million bushels for the 2012/13 marketing year). Corn condition ratings this week were 40% rated good to excellent as compared to 48% last week and 69% a year ago. The trade was expecting 42%.  Poor to very poor were at 30% compared to 22% last week and 9% last year. Corn silking was reported this week at 50% compared to 25% last week, 11% last year and the five year average of 19%. Although many analysts had been saying they thought new corn yields could be in the mid-140s, they did not expect USDA to make the 20 bushel per acre cut to projected yields at this point in the season. Along with a 1.820 billion bushel cut in production, USDA made in their July 11 report a 1.055 billion bushel cut in demand. New crop ending stocks dropped 698 million bushels from June to 1.183 billion bushels. Old crop exports were also cut 50 million bushels, increasing old crop carryover to 903 million bushels. The August 10 USDA report will use field/producer surveys to estimate yields and some analyst look for production to be cut further as yields decline and more planted acres are abandoned. I am currently priced at 50% of anticipated production, 15% with Put Options and I would add this week another 15% pricing using put options. A December $7.40 Put would cost 64 cents and set a $6.76 futures floor. This option expires November 23. A September $7.40 Put cost 44 cents and would set a $6.96 futures floor. It does expire August 24. I would want to cover the bushels through harvest and when they are sold. In some cases, the September Put may be suitable.

Deferred: March 2013 contract closed at $7.41 ¾ a bushel, up 41 ¾ cents a bushel since last Friday. Technical indicators have a strong buy bias. Support is at $7.20 a bushel with resistance at $7.58 a bushel.  September 2013 corn closed at $6.58 ¼ a bushel, up 22 cents for the week. I would have 10% of 2013 production priced at this level.

Cotton:

Current crop: December closed at 72.66 cents per pound, up 2.04 cents since last week. Support is at 69.29 cents with resistance at 74.45 cents per pound. Technical indicators have changed to a hold bias. The Adjusted World Price for July 13– July 19 is 62.83 cents per pound, down 0.01 cents. All cotton weekly export net sales were 112,500 bales (8,800 bales of upland cotton net sales for 2011/12; net sales of 95,100 bales of upland cotton for 2012/13; net sales of 6,200 bales of Pima cotton for 2011/12 and net sales of 2,400 bales of Pima for 2012/13. Keep in contact with your cotton buyer for current quotes on loan equities and pricing alternatives. Cotton squaring nationwide is at 70% compared to 49% last week, 56% last year and the five year average of 64%. Cotton boll set is 23% nationwide compared to 14% last week, 18% last year and the five year average of 19%. Cotton crop condition ratings were 44% good to excellent compared to 47% last week and 28% last year. Poor to very poor were reported at 18% compared to 18% last week and 42% last year. USDA increased old crop ending stocks 100,000 bales on a cut in domestic use. Although new crop production was not changed from June, planted acreage decreased to 12.64 million acres as harvested acres were only lowered 100,000 acres and yields increased 8 pounds to 785 pounds per acre. New crop ending stocks were lowered 100,000 bales from June to 4.80 million bales with season average price expected to fall in a 60 cent to 80 cent range. New crop global stocks are projected to decrease 2.12 million bales to 72.39 million bales. Today’s market strength of up 2.73 cents has been attributed somewhat to China’s Gross Domestic Product (GDP) growth coming in at 7.6% or within expectations.

Deferred:  March 2013 cotton closed at 73.77 cents per pound, up 1.87 cents for the week. Support is at 70.79 cents with resistance at 75.37 cents per pound.  Technical indicators have a sell bias.  

Soybeans:

Current crop: The November contract closed at $15.52 ¾ a bushel, up 46 ¾ cents a bushel since last Friday. Technical indicators have a strong buy bias. Support is at $14.95 a bushel with resistance at $15.59 a bushel. Weekly exports were above expectations at 27.9 million bushels (12.2 million bushels for the 2011/12 marketing year and sales of 15.7 million bushels for 2012/13). Soybeans blooming this week were reported at 44% compared to 26% last week, 17% last year and the five year average of 25%.  Soybean condition ratings were an about expected 40% good to excellent compared to 45% last week and 66% last year. Poor to very poor ratings were 27% compared to 22% last week, and 8% last year. USDA also surprised the soybean market by cutting new crop soybean yields 3.4 bushels per acre in the July 11 report to 40.5 bushels per acre. Although planted and harvested acres were up, overall production is projected down 155 million bushels. New crop demand was also cut 150 million bushels resulting in projected ending stocks for the 2012/13 marketing year at 130 million bushels or 4.2% stocks to use ratio. Weather could still help soybean production, but there is some concern that some of the additional double crop acres added to the mix may be abandoned. As in corn, uncertainty surrounds the level of demand at current prices levels particularly with a large South American crop looming in 2013. Volatility should continue in the market.  I am currently 50% priced overall on anticipated production; an additional 15% priced in Put Options and would price another 15% with Put options.  From a price risk management standpoint, a $15.60 November Put option would cost $1.05 and set a $14.55 futures floor.

Deferred: January 2013 soybeans closed today at $15.48 ¼ a bushel, up 46 ¾ cents since last week. Technical indicators have a strong buy bias. Support is at $15.09 a bushel with resistance at $15.76 a bushel. November 2013 soybeans closed at $13.17 ¾, up 18 cents for the week. Start watching for 2013 opportunities.

Wheat:

Nearby: September futures contract closed at $8.47 ¾ a bushel, up 41 ½ cents a bushel since Friday. Technical indicators have a strong buy bias. Support is at $8.28 a bushel with resistance at $8.75 a bushel. Weekly exports were below expectations at 11.5 million bushels for 2012/13. Wheat harvest has progressed to 75% harvested on July 8 compared to 69% last week, 58% a year ago and the five year average of 56%.

Deferred: March 2013 wheat closed at $8.72 a bushel, up 65 ¾ cents since last week. Technical indicators have a strong buy bias. Support is at $8.53 a bushel with resistance at $8.95 a bushel. Spring wheat is 88% headed compared 73% last week, 24% last year and the five year average of 55%. Spring wheat condition ratings as of July 8 were 66% good to excellent compared to 71% last week and 73% last year. Poor to very poor were 7% compared to 5% last week and 4% a year ago. USDA projected 2012/13 wheat ending stocks at 664 million bushels, 30 million bushels lower than the June report. Global stocks are expected to decrease 122 million bushels from last month projection to 7.703 billion bushels. Slightly over half of the world’s stocks are held in China, India, and the U.S. Of those three, mostly the U.S. is providing wheat for the export market. Growing and weather conditions in other countries could influence the wheat market even with an overall abundant world supply. It matters on where the wheat is. July 2013 wheat closed at $8.30 ¼ a bushel, up 12 ½ cents for the week. I would be 10% priced for 2013 production.