Prices and comments are through Thursday, July 19, 2012. Corn, soybean, and wheat prices are an up while cotton is slightly down for the week through Thursday. Prices today reached record levels in corn and soybeans. The September U.S. Dollar Index closed at 82.98, down 0.49 for the week. The Dow Jones Industrial Average closed at 12,943, up 166 points since last Friday. Crude Oil closed at 92.66 a barrel, up 5.56 a barrel for the week. It should be noted that the September 2013 corn, November 2013 soybeans, and July 2013 wheat are all down for the week. My impression is that the market is anticipating that demand needs for 2013 will be met either through foreign or U.S. production and that pricing some for 2013 is worth a look. High prices will cause demand destruction that may take a while to get back. This year’s drought is now the largest in over 50 years and among the top ten in the last century. Crop condition ratings nationwide continue to deteriorate on a weekly basis. The NOAA U.S. Seasonal Drought Outlook at http://www.cpc.ncep.noaa.gov/products/expert_assessment/seasonal_drought.html released July 19 looks for the drought throughout the Midwest and parts of the Mid-South to persist through October. This forecast will be updated August 2.
Corn:
Current Crop: September closed at $8.07 ¾ a bushel, up 67 cents a bushel for the week and a record high close. Technical indicators have a strong buy bias. Support is at $7.78 a bushel with resistance at $8.31 a bushel. Weekly exports were below expectations at 7.1 million bushels (1.3 million bushels for the 2011/12 marketing year and 5.8 million bushels for the 2012/13 marketing year). Corn condition ratings this week were 31% rated good to excellent as compared to 40% last week and 66% a year ago. The trade was expecting 35%. Poor to very poor were at 38% compared to 30% last week and 11% last year. Corn silking was reported this week at 71% compared to 50% last week, 28% last year and the five year average of 36%. Corn in the dough stage is estimated at 12% this week as compared to 3% last year and the five year average of 4%. Weekly ethanol production is at the lowest level in the last 2 years. A recent poll of analysts put national corn yields on the average at 137 bushels per acre with some estimates as low as 130 bushels per acre. This compares to USDA July projection of 146 bushels per acre. The August USDA report will include survey based yields that will give us a good glimpse of production. Secretary of Agriculture, Tom Vilsack, in addition to the EPA, have indicated there was no discussion of changing the ethanol mandate in the Renewable Fuel Standard. I am currently priced at 50% of anticipated production, and 30% with Put Options. A December $7.80 Put would cost 70 cents and set a $7.10 futures floor. This option expires November 23. A September $8.10 Put cost 49 cents and would set a $7.61 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 $7.70 ½ a bushel, up 28 ¾ cents a bushel since last Friday. Technical indicators have a strong buy bias. Support is at $7.42 a bushel with resistance at $8.10 a bushel. September 2013 corn closed at $6.46 ¾ a bushel, down 11 ½ cents for the week. I would have 10% of 2013 production priced.
Cotton:
Current crop: December closed at 72.63 cents per pound, down 0.03 cents since last week. Support is at 71.10 cents with resistance at 73.98 cents per pound. Technical indicators have changed to a buy bias. The Adjusted World Price for July 20– July 26 is 63.45 cents per pound, up 0.62 cents. All cotton weekly export net sales were 84,300 bales (41,600 bales of upland cotton net sales for 2011/12; net sales of 34,100 bales of upland cotton for 2012/13; net sales of 6,400 bales of Pima cotton for 2011/12 and net sales of 2,200 bales of Pima for 2012/13. Cotton equities for 2012 loan cotton have been quoted in the 13 cent range. Keep in contact with your cotton buyer for current quotes on loan equities and pricing alternatives. Cotton squaring nationwide is at 82% compared to 70% last week, 68% last year and the five year average of 75%. Cotton boll set is 36% nationwide compared to 23% last week, 28% last year and the five year average of 29%. Cotton crop condition ratings were 45% good to excellent compared to 44% last week and 28% last year. Poor to very poor were reported at 18% compared to 18% last week and 40% last year.
Deferred: March 2013 cotton closed at 73.33 cents per pound, down 0.44 cents for the week. Support is at 71.96 cents with resistance at 74.72 cents per pound. Technical indicators have a sell bias.
Soybeans:
Current crop: The November contract closed at $16.52 ¼ a bushel, up 99 ¾ cents a bushel since last Friday. The August contract closed at a record high of $17.33 ¾ a bushel. Technical indicators have a strong buy bias. Support is at $15.86 a bushel with resistance at $17.06 a bushel. Weekly exports were slightly below expectations at 15 million bushels (5 million bushels for the 2011/12 marketing year and sales of 10 million bushels for 2012/13). Soybeans blooming this week were reported at 66% compared to 44% last week, 34% last year and the five year average of 42%. Soybean setting pods were 16% this week as compared to 5% last year and the five year average of 9%. Soybean condition ratings were a little worse than expected at 34% good to excellent compared to 40% last week and 64% last year. Poor to very poor ratings were 30% compared to 27% last week, and 10% last year. The National Oilseed Processors Association reported June crush at 134.2 million bushels which was 1.48 million bushels greater than expected. Demand at least at June price levels has not slowed. USDA may have to raise the crush number in the August report, further tightening stocks. I am currently 50% priced overall on anticipated production; with an additional 30% priced in Put Options. From a price risk management standpoint, a $16.60 November Put option would cost $1.25 and set a $15.35 futures floor.
Deferred: January 2013 soybeans closed today at $16.34 a bushel, up 85 ¾ cents since last week. Technical indicators have a strong buy bias. Support is at $15.78 a bushel with resistance at $16.90 a bushel. November 2013 soybeans closed at $12.95, down 22 ½ cents for the week. Start watching for 2013 opportunities.
Wheat:
Nearby: September futures contract closed at $9.35 a bushel, up 87 ¼ cents a bushel since Friday. Technical indicators have a strong buy bias. Support is at $8.81 a bushel with resistance at $9.64 a bushel. Weekly exports were above expectations at 21.6 million bushels for 2012/13. Winter wheat harvest has progressed to 80% harvested on July 15 compared to 75% last week, 64% a year ago and the five year average of 65%. Dry conditions in the Former Soviet Union continue to support wheat prices as do corn prices.
Deferred: March 2013 wheat closed at $9.13 ½ a bushel, up 41 ½ cents since last week. Technical indicators have a strong buy bias. Support is at $8.85 a bushel with resistance at $9.51 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 15 were 65% good to excellent compared to 66% last week and 73% last year. Poor to very poor were 8% compared to 7% last week and 5% a year ago. July 2013 wheat closed at $8.16 ½ a bushel, down 13 ¾ cents for the week. I would be 10% priced for 2013 production.
