Cotton prices are up; soybeans mixed; with corn and wheat prices down for the week. The U.S. Dollar Index before the close was at 79.55, down 0.85 for the week. The Dow Jones Industrial Average traded before the close at 13,135 down 20 points for the week. Crude Oil traded before the close at 86.76 a barrel, up 0.70 a barrel for the week. USDA released their December 11 report and was considered neutral to bullish for corn, cotton, and soybeans and bearish for wheat. Negative reaction in the wheat market has also put a damper on corn and soybeans prices.
Corn:
Nearby: March closed at $7.30 ¾ a bushel, down 6 ½ cents a bushel for the week. Technical indicators have a strong sell bias. Support is at $7.08 a bushel with resistance at $7.34 a bushel. Weekly exports were within expectations with net sales of 10.7 million bushels (10.2 million bushels of net sales for the 2012/13 marketing year and 539,355 bushels of net sales for the 2013/14 marketing year). Ethanol production last week was 824,000 barrels per day, down 11,000 barrels from the previous week. USDA left the 2012/13 marketing year ending stocks unchanged at 647 million bushels. The trade on the average was expecting a 16 million bushel increase. It is widely expected that harvested acreage in the January 11 will be reduced and production along with it. The question remains if demand from a slowdown in export sales and ethanol production will offset any cuts in production. There is expectation that exports could pick up in late winter – early spring as U.S. corn becomes the main player in the world market. For now, the analysts’ consensus seems that corn prices will trade stronger into and around the January 11 report and then will see prices fade as we get into the 2013 production year. With dry and drought conditions existing now in parts of the Midwest, weather will be one of the main drivers in the 2013 market. 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 30 cents and would set a $7.00 futures floor.
New crop: September contract closed at $6.49 ½ a bushel, down 8 ¼ cents a bushel for the week. Technical indicators have changed to a strong sell bias. Support is at $6.40 a bushel with resistance at $6.55 a bushel. I would have 10% of 2013 production priced.
Cotton:
Nearby: March closed at 75.09 cents per pound, up 1.30 cents since last week. Support is at 74.12 cents with resistance at 75.64 cents per pound. Technical indicators have a strong buy bias. The Adjusted World Price for December 14 – December 20 is 62.37 cents per pound, up 0.67 cents. Keep in contact with your cotton buyer for current quotes on loan equities and pricing alternatives. All cotton weekly export net sales were 325,500 bales (283,900 bales of Upland cotton net sales for 2012/13; net sales of 26,000 bales of Upland cotton for 2013/14 and net sales of 15,600 bales of Pima cotton for 2012/13. USDA did cut ending stocks 400,000 bales in this month’s report as production was reduced and exports rose. U.S. stocks stand at 5.4 million bales while world stocks dropped 630,000 bales to 79.64 million bales or a 74.8% stocks to use ratio. The cotton market will be closely watching economic reports as a determination on the economy and potential increases in usage. What has to happen and looks like it will is that stocks will have to be reduced from less acreage planted (U.S. and foreign) and consumption increased. When will that happen and affect the market is the unknown – 2013 or 2014. I would be 25% – 50% priced on cotton. Look for rallies as opportunities to add to pricing.
New crop: December 2013 cotton closed at 78.24 cents per pound, up 0.63 cents for the week. Support is at 77.35 cents with resistance at 78.73 cents per pound. Technical indicators have changed to a strong buy bias. Although cotton prices from a stocks perspective are the most negative and on the average project the least returns for 2013, I would not write cotton off. Producers set up to raise cotton in 2013, may still want to consider having some in the planting mix. Although maybe not a lot, I think there is more upside than downside to prices in 2013.
Soybeans:
Nearby: The January contract closed at $14.96 a bushel, up 23 ¾ cents a bushel since last Friday. Technical indicators have changed to a hold bias. Support is at $14.66 a bushel with resistance at $15.11 a bushel. Weekly exports were well above expectations with a marketing year high of net sales at 48.5 million bushels for 2012/13. As the trade somewhat expected, USDA lowered ending stocks 10 million bushels to 130 million bushels. However, it was on increased crush rather than exports. Increased crush does correspond with the National Oilseed Processors Association crush report today that put November crush among its members at 157.308 million bushels. This is up 11% from last year and on target to what analysts were looking for. At this pace, USDA may have to raise crush in future reports. Exports have been strong but one would think that could change quickly if South America does produce the record crop that they are projected to. The next few months will be critical to production there. I am currently priced out of 2012 production. There does not appear to be any advantage to storing other than price speculation, basis is very strong in some locations. That may be better served by selling soybeans and buying an out of the money March or May call option. A $15.20 March Call would cost 36 cents. I would not store un-priced without setting a floor price. A March $14.90 Put would cost 49 cents and set a $14.41 futures floor. This option expires February 22, 2013.
New crop: November 2013 soybeans closed today at $13.17 ½ a bushel, down 11 ½ cents a bushel since last week. Technical indicators have changed to a sell bias. Support is at $13.02 a bushel with resistance at $13.25 a bushel. Watch for 2013 opportunities. I would be 5% priced on 2013 production.
Wheat:
Nearby: March futures contract closed at $8.14 a bushel, down 47 cents for the week. Technical indicators have a strong sell bias. Support is at $7.93 a bushel with resistance at $8.25 a bushel. Weekly exports were within expectations at net sales of 21.1 million bushels (19.1 million bushels for 2012/13 and net sales of 2 million bushels for 2013/14). USDA did release a bearish wheat supply & demand report during the week as 2012/13 ending stocks are projected at 754 million bushels, 50 million bushels higher than last month and 42 million bushels higher than the average trade guess. The market reacted negatively and probably was oversold going into today’s trade where prices did go up 5 ½ cents on the nearby. Since USDA’s report, wheat production estimates in Argentina according to their Buenos Aires Grain Exchange are 62 million bushels lower than USDA’s estimate.
New Crop: July 2013 wheat closed at $8.33 a bushel, down 43 ¾ cents since last week. Technical indicators have changed to a sell bias. Support is at $8.22 a bushel with resistance at $8.41 a bushel. New crop wheat prices were affected by the bearish USDA report, but support is still seen in poor conditions in the Plains state as we go into winter. I think there will be additional opportunities to price wheat in 2013. I am currently priced 10% on the 2013 crop.
