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
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.
Click here to see more...