Cotton prices are up with corn, soybeans, and wheat prices down for the week. The U.S. Dollar Index traded at 81.23 before the close, up 0.13 for the week. The Dow Jones Industrial Average before the close was 12,589 down 226 points for the week. Crude Oil was trading at 87.06 a barrel, up 0.51 a barrel for the week. Better weather in South America has put pressure on prices as the market deals with the bearish November 9 USDA report. The 2013 production year could be a year where average production could lead to more than adequate supplies and substantially lower prices at harvest. Prices in 2012, particularly at harvest for the grain crops should not be considered the new norm, but rather out of the ordinary. If would behoove producers to start planning for the 2013 production year, if they have not done so already. Included in this plan should be strategies to deal with the risk potential of lower prices. As was in 2012, weather will be a market driver as we hope that the price levels of 2012 do not cause too much demand destruction that could take years to get back. Mississippi River levels are dangerous low and could cause a closure of barge traffic in mid to upper levels of the river. A decision on closure is expected in early December. This could affect grain headed to the Gulf for the export market and most likely will be reflected in increased basis. On the flip side, fertilizer coming into the Gulf headed up river for the Midwest may need a new home and could drive at least that input cost lower at least for a short time. This is, of course, all speculation at this point.
Corn:
Current Crop: December closed at $7.27 a bushel, down 11 ¾ cents a bushel for the week. Technical indicators have a strong sell bias. Support is at $7.03 a bushel with resistance at $7.41 a bushel. Weekly exports were within expectations with net sales of 12.3 million bushels (4.1 million bushels of net sales for the 2012/13 marketing year and 8.2 million bushels of net sales for the 2013/14 marketing year). Ethanol production last week was 824,000 barrels per day, down 3,000 barrels from the previous week and 10% below a year ago and about on pace to meet USDA’s projections. Ethanol stocks slid to 17.9 million barrels, 4.6% above a year ago. At least one firm is estimating U.S. production to be 300 – 500 million bushels less than USDA’S latest estimate based somewhat on a reduction in harvested acres. Some analysts expect a rally in old corn prices after January 1 reflecting a combination of a drop in supplies and a pick-up in demand. I would be priced out of 2012 corn at this time. However, for producers with corn in storage I would not store un-priced or without a floor price in place. A March $7.30 Put costs 35 cents and would set a $6.95 futures floor.
Deferred: March 2013 contract closed at $7.31 a bushel, down 11cents a bushel since last Friday. Technical indicators have a strong sell bias. Support is at $7.07 a bushel with resistance at $7.45 a bushel. The possibility of the above mentioned rally in old crop corn prices into 2013 could pull up new crop prices slightly, creating a pricing opportunity. Currently, an increase in U.S. corn acres in 2013 is expected which with normal weather could produce a large crop and send prices spiraling downward. As we learned this year, normal weather is not a given and the market will keep a weather premium in prices until production is determined. I would expect prices to be volatile in 2013 and have more risk to the down side. September 2013 corn closed at $6.28 ½ a bushel, down 23 ¾ cent for the week. I would have 10% of 2013 production priced.
Cotton:
Current crop: March closed at 72.64 cents per pound, up 2.20 cents since last week. Support is at 71.41 cents with resistance at 73.35 cents per pound. Technical indicators have changed to a sell bias. The Adjusted World Price for November 16 – November 22 is 59.64 cents per pound, down 0.34 cents. Keep in contact with your cotton buyer for current quotes on loan equities and pricing alternatives. All cotton weekly export net sales were 413,300 bales (370,100 bales of Upland cotton net sales for 2012/13; net sales of 2,200 bales of Upland cotton for 2013/14 and net sales of 41,000 bales of Pima cotton for 2012/13). Despite a large stockpile of cotton in China, mills there continue to import cotton that is lower priced than their artificially higher priced stocks. Cotton harvested was 75% compared to 64% last week, 78% last year and the five year average of 68%. I would be 25% – 50% priced on cotton. Look for any rallies as opportunities to add to pricing.
Deferred: July 2013 cotton closed at 74.53 cents per pound, up 1.72 cents for the week. Support is at 73.28 cents with resistance at 75.22 cents per pound. Technical indicators have changed to a sell bias. December 2013 cotton closed at 76.78 cents per pound, up 1.94 cents for the week.
Soybeans:
Current crop: The January contract closed at $13.83 ¼ a bushel, down 68 cents a bushel since last Friday. Technical indicators have a strong sell bias. Support is at $13.51 a bushel with resistance at $14.25 a bushel. Weekly exports were above expectations at net sales of 21.5 million bushels (20.6 million bushels for 2012/13 and 938,000 bushels for 2013/14). News today (Friday) from the China that 22 million bushels of imports were being canceled put additional downward pressure on the market. Soybeans harvested were reported at 96% compared to 93% last week, 95% last year and the five year average of 93%. Domestic soybean usage remains strong as the National Oilseed Processors Association reported that October crush was 153.5 million bushels, 9 million bushels greater than the trade expected. This was 9% above last year and 33.8 million bushels above September. I am currently priced out of 2012 production. Weather or production issues in South America will need to come to the forefront to drive prices back up. There have been reports of soybean rust on volunteer soybeans in Brazil. However, they have dealt with rust problems before and it may not become an issue. There does not appear to be any advantage to storing other than price speculation. That may be better served by selling soybeans and buying an out of the money March or May call option. A $14.40 March Call would cost 37 cents. I would not store un-priced without setting a floor price. A March $13.80 Put would cost 67 cents and set a $13.13 futures floor. This option expires February 22, 2013.
Deferred: March 2013 soybeans closed today at $13.68 a bushel, down 68 ½ cents a bushel since last week. Technical indicators have a strong sell bias. Support is at $13.37 a bushel with resistance at $14.05 a bushel. November 2013 soybeans closed at $12.62 ½, down 57 ¼ cents for the week. Watch for 2013 opportunities. Prices dropped through the previous 100 day moving average of $13.17 so I would be 5% priced on 2013 production.
Wheat:
Nearby: December futures contract closed at $8.38 a bushel, down 48 ½ cents a bushel since Friday. Technical indicators have changed to a strong sell bias. Support is at $8.18 a bushel with resistance at $8.59 a bushel.
New Crop: July 2013 wheat closed at $8.45 ¾ a bushel, down 42 ¾ cents since last week. Technical indicators have changed to a sell bias. Support is at $8.28 a bushel with resistance at $8.64 a bushel. Winter wheat planted nationwide is reported at 95% compared to 92% last week, 95% last year and the five year average of 94%. Emergence is reported at 79% compared to 73% last week, 81% last year and the five year average of 81%. Wheat crop condition ratings were reported with good to excellent at 36% compared to 39% last week, and 50% last year. Poor to very poor were 22% compared to 19% last week, and 14% last year. The drought outlook for the Plains states is for the drought to persist into 2013. This should give some support to the market. I am currently priced 10% on the 2013 crop and would put serious consideration to pricing more as the wheat crop develops.
