Crops Analysis

Posted on Fri, 12/13/2019 - 15:04

Corn

Price action: December corn futures expired 3/4 cent lower at $3.66 1/4. The March through December 2020 contracts posted gains of 2 to 3 3/4 cents today, though that was midrange and around opening levels. For the week, March corn futures firmed 4 1/4 cents.

5-day outlook: Today’s price action was somewhat disappointing given news of a trade deal in principle between the U.S. and China. Still, with funds short the corn market and recent price action hinting at a low, it wouldn’t be surprising to see some follow-through buying next week. But traders will likely want to see more details of the deal before they push the market solidly higher.

30-day outlook: Once the U.S./China trade deal is signed – hopefully sometime in January – attention will turn to actual sales levels for corn, ethanol and DDGs to China. Of the three, China’s need for ethanol may be the greatest, though plans for nationwide 10% ethanol use in 2020 have been scrapped. Any Chinese purchases of corn or corn-based products would be boost to demand, which is struggling.

90-day outlook: U.S. corn planted acreage will increase in 2020. The new-crop soybean/corn price ratio currently at 2.4 favors corn, but that will fluctuate – potentially sharply. Also, a majority of the record number of prevent-plant acres from 2018 likely will come back into production. So… there are still a lot of variables that will influence final corn acreage.

What to do: Get current with advised 2019-crop sales to take advantage of strong basis and limit further near-term downside risk in futures. We’ll wait on the next push to the upside to start 2020-crop sales.

Hedgers: You should be 50% priced in the cash market on 2019-crop.

Cash-only marketers: You should be 50% priced on 2019-crop.

 

Soybeans

Price action: Soybeans rose to a three-week high but settled off the week’s best levels. March soybeans rose 9 cents to close at $9.21 ½ and up 17 ¾ cents for the week. Prices touched $9.31 ½ earlier today and that will be key resistance next week. March meal was down $1.20 this week, while March soyoil was up $1.37.

5-day outlook: The U.S. and China confirmed they have reached a tentative Phase 1 trade agreement. China has agreed to buy $32 billion of additional U.S. farm products over two years as part of the deal. However, during a press conference today in Beijing, Chinese officials were extremely evasive and vague about the size of ag purchases they will buy. Traders will be watching for signs of any new Chinese purchases next week and further clarification of the trade agreement details. Aside from China news, the market will watch Monday’s NOPA crush report for direction. Traders expect the report to show record crush for November, though down slightly from October’s all-time high.

30-day outlook: Hot, dry weather threatens to cut yields in southern Argentina. Prospects for rain over the next month do not look good. Conditions in Brazil are generally favorable, though there are some dry pockets developing in northeastern areas. South American weather will drive prices through the key growth periods.

90-day outlook: Traders will be watching for increased U.S. meal and soyoil exports developing with the dry weather in Argentina and the country’s largest crusher runs into debt payment problems. Argentine soy crushing giant Vicentin reportedly has halted most of its operations as the company battles to restructure its debt after defaulting earlier this month. Traders will also be watching for increased U.S. soybean purchases by China if Phase 1 of the trade deal is signed.

 What to do: Wait on an extended price rebound before making sales. Be prepared to advance 2019-crop sales and start 2020-crop marketings on the next round of sales. 

Hedgers: You should be 50% forward-priced via hedge-to-arrive contracts for harvest delivery on expected 2019-crop production.

Cash-only marketers: You should be 40% forward-priced via hedge-to-arrive contracts for harvest delivery on expected 2019-crop production.

 

Wheat

Price action: Futures ended steady to slightly higher on Friday, capping weekly gains. March SRW wheat rose 2 ¼ cents to $5.32 ½, March HRW futures ended unchanged at $4.42 ¾ and spring wheat rose 2 ¾. For the week, SRW gained 8 cents, HRW rebounded 11 ¾ cents and spring wheat jumped 13 cents.

5-day outlook: Wheat will follow corn and soybeans next week after the U.S./China trade agreement reduces some U.S. tariffs on in exchange for increased Chinese purchases of American goods. China will import more U.S. grains, China’s vice agricultural minister said today but did not elaborate.

30-day outlook: World market prices will need to lead the U.S. wheat markets to higher levels given the premium that U.S. prices are trading to the rest of the world. U.S. sales have been improving and will need to continue to support a sustained price recovery. The weakness in the dollar this week is a positive for reducing the cost of U.S. wheat to overseas buyers.

90-day outlook: Weather will be closely watched into the late winter. Crops in the Northern Hemisphere did not go into dormancy is great shape. Dryness is beginning to expand in the U.S. Great Plains. Cold weather is always a threat across the Northern Hemisphere if extreme temperatures hit without enough snow cover.

What to do: With prices rebounding, be ready to increase old- and new-crop sales.

Hedgers: You should now be 60% sold in the cash market on 2019-crop Also, you should be forward contracted on 10% of expected 2020-crop wheat via hedge-to-arrive contracts for harvest delivery.

Cash-only marketers:  You should now be 60% sold on 2019-crop. Also, you should be forward contracted on 10% of expected 2020-crop wheat via hedge-to-arrive contracts for harvest delivery.

 

Cotton

Advice: March cotton futures hit our standing order at 67.50 cents to sell another 10% of 2019-crop in the cash market. You should now have 65% of 2019-crop priced in the cash market. 

Price action: Cotton futures climbed to their highest level since June today in early action, but the market was only able to muster a midrange close, with futures ending anywhere from 37 points lower to 26 points higher through the December 2020 contract. Futures posted gains for the week, with the March contract rising 80 points.

5-day outlook: Cotton futures initially enjoyed followthrough buying today on confirmation from China that a Phase 1 trade deal involving ag purchases had been reached in principle. But the market backed off gains as the agreement still needs to go through legal channels and amid skepticism that China really would agree to the $40 billion in U.S. farm good purchases in the first year of the deal that U.S. Trade Representative Bob Lighthizer indicated. That would be a massive jump from the current annual record that’s just shy of $30 billion. Updates on this front, and especially any Chinese comments regarding the farm purchases, will dictate price action next week.

30-day outlook: There were reports that a Phase 1 trade deal between the U.S. and China could be signed the first week of January. If a deal really comes and it includes big purchases of U.S. cotton (said to be one of included commodities), this could light a fire under the cotton market, especially after USDA lowered its U.S. production and carryover estimates this week. At the very least, it should provide underlying support.

90-day outlook: If the U.S./China deal again falters, talk about a global recession and the negative demand impacts that would entail will likely flare back up. The trade war between the world’s two largest economies clearly has spillover effects.

What to do: Get current with advised sales. We plan to set a new sales target above the market, but we want to reassess the price outlook after some of the U.S./China trade dust settles.  

Hedgers: NEW ADVICE — March cotton futures hit our standing order at 67.50 cents to sell another 10% of 2019-crop in the cash market. You should now have 65% of 2019-crop priced in the cash market.   

Cash-only marketers: NEW ADVICE — March cotton futures hit our standing order at 67.50 cents to sell another 10% of 2019-crop in the cash market. You should now have 65% of 2019-crop priced.