Weekly Crop Comments, March 22, 2013 – UT Institute of Agriculture

Corn, soybeans, and wheat prices are up while cotton prices are down for the week. Markets most likely will be positioning themselves leading up to the March 28 USDA reports on grain stocks and planting intentions for the 2013 crop. It is very possible that one report could be bullish while the other is bearish. After those reports the markets will focus more on planting weather this spring. Crop progress reports pick back up April 1. A closely watched private acreage estimate was released today and updated from earlier in the year. It looks for corn and soybean acreage up from last year, cotton acreage down but higher than their January estimate; and wheat acreage up slightly than last year. An interesting article in USA Today late this week theorizes that lower crop prices will somewhat be offset by higher yields with a result of lower overall food prices allowing consumers to spend more on things that will stimulate the economy. Here’s the link
http://www.usatoday.com/story/money/business/2013/03/21/midwest-farmers-drought-optimism/2006825/ . One thing we know, lower prices will necessitate having higher yields for producers to be profitable. Consider forward pricing or using options to lock in prices or set a floor price that is acceptable. Corn & soybean prices could be quite a bit cheaper in the fall, depending on growing condition in the Midwest. The markets will be closed March 29 for Good Friday with the next Crop Marketing Comments on April 1.

Corn: Nearby:

Weekly exports were just below expectations with net sales of 10.8 million bushels (net sales of 3.6 million bushels for the 2012/13 marketing year and 7.2 million bushels of net sales for the 2013/14 year). Ethanol production increased 12,000 barrels per day to 809,000 barrels per day in the latest report. The March 28 Grain Stocks report will give us good numbers to estimate corn for feed usage. Since we generally know how much corn is being exported and approximately how much goes into ethanol, we can take the grain stocks and back into the feed usage. USDA in the March 8 report signaled that they thought the corn for feed number was 100 million bushels higher than earlier estimates. Next Thursday’s report will give direction on old crop or nearby prices and have some influence on new crop prices.

New Crop:

The private acreage estimates released today pegged corn acres to increase 550,000 acres from last year to 97.753 million acres. This is 1.6 million acres less than this group’s January estimate which falls in line with the thought that corn has lost a little of its profitability edge it once held. None the less, large corn acreage coupled with more normal yields equals a large increase in stocks in the next marketing year. The end result would be lower prices. Supporting corn prices has been wet conditions in the South which have hindered corn planting. Strength in cotton prices may have pulled a few acres back from corn. Corn prices are within a hair of my $6.00 bushel target so rather than wait for 3 more cents; I would price at least another 10% of the crop having a total of 20% priced. Also consider buying a $6.00 September Put Option costing 47 cents which set a $5.53 futures floor. If we don’t have a weather market, the put should pay off while if a weather market develops, market prices will go higher.

Cotton: Nearby:

All cotton weekly export net sales were 233,900 bales (114,100 bales of Upland cotton net sales for 2012/13; net sales of 72,400 bales of Upland cotton for 2013/14; net sales of 40,000 bales of Pima cotton for 2012/13; and 7,400 bales of net sales of Pima cotton for 2013/14). Profit taking from the recent rally and speculators rolling into later months have been credited with the downturn in prices this week. Feeding into the market is also news that China and India will likely release stocks from their reserves to their domestic markets

New Crop:

Although it is widely assumed cotton acres will be down in 2013, the recent uptick in prices may have bought back a few acres and this has put a little pressure on the market. The private acreage estimate released today projects cotton acreage at 10.4 million acres, down 1.9 million acres from 2012. However, this is up from this group’s January estimate of 10.1 million acres and compares to the National Cotton Council survey of 9.01 million acres. Implementing a floor price strategy would entail buying an 87 cent put option costing 6.26 cents and setting an 80.74 cent futures floor. Cotton equities on 2013 loan cotton look to end the week in the 27 – 27.50 cent range.

Soybeans: Nearby:

Weekly exports were below expectations with net sales of 12.6 million bushels (net sales of 4 million bushels for 2012/13 and net sales of 8.6 million bushels for 2013/14). Delays loading and shipping soybeans from Brazilian ports have led to China canceling purchases from Brazil but have not showed up as U.S. sales. This speculation on additional exports to China has been supportive of the market. Look for the March 28 Grain Stocks report to also give an indication of just how tight stocks really are. There are some in the trade that look for there to be more soybeans than earlier estimated.

New Crop:

A private acreage estimate of 78.5 million acres for 2013 if realized would be 1.3 million acres more than last year. I would have up to 10% priced on 2013 production. I think there may be an opportunity for additional pricing at higher levels or an opportunity to put in place an option strategy. If the market can get back to $13, I would closely at prices in that range. Currently, a $12.80 Put Option would cost 80 cents and set a $12.00 futures floor.

Wheat: Nearby:

A private acreage estimate of 78.5 million acres for 2013 if realized would be 1.3 million acres more than last year. I would have up to 10% priced on 2013 production. I think there may be an opportunity for additional pricing at higher levels or an opportunity to put in place an option strategy. If the market can get back to $13, I would closely at prices in that range. Currently, a $12.80 Put Option would cost 80 cents and set a $12.00 futures floor.

New Crop:

A private estimate placed all wheat acres at 56.1 million acres, up 400,000 acres from 2012. Markets will closely be watching wheat conditions in the Plains as we enter spring and as the crop progress reports resume in April. I am currently priced 10% on the 2013 crop. A $7.30 Put Option would cost 41 cents and set a $6.89 futures floor.