Weekly Crop Comments
By Chuck Danehower
February 5, 2010
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Click to subscribe to podcastCorn, cotton, and soybeans are down and wheat prices are even for the week. Commodity markets have held up well for the week considering how negative the non agricultural influences have been. The government’s monthly jobs report today showed a cut in jobs of 20,000 for January, but an improvement in the unemployment rate to 9.7%. Since the recession began in December 2007, 8.4 million jobs have been lost. Concerns in Europe this week over the level of debt that Greece, Spain, and Portugal are facing caused a drop in confidence in the euro, strengthening the dollar. The March U.S. Dollar Index before the close is up 1.03 for the week at 80.68, the highest since July, 2009. The Dow Jones Industrial Average before the close was at 9990; about 2% down for the week. March Crude Oil was trading before the close at 71.09 a barrel, down 1.80 for the week. Commodity futures prices have dropped, depending on commodity, from 7% to13% in January. Generally, this would be considered oversold and due a rally, but this is the time of year for seasonal weakness. Any sustained rallies are going to need help from the non ag influences and that is not being provided at this time. USDA will release their long term forecast on February 11 at the 2010 Ag Outlook Forum in Arlington, VA. This is usually not considered a market mover, but does give a glimpse into at least some base line numbers for 2010. The monthly USDA supply and demand report will be out on Tuesday, February 9. Comments on this report will be posted at http://economics.ag.utk.edu/outlook.html on the afternoon of February 9.
Corn:
Nearby: March futures closed at $3.52 a bushel on Friday, down $0.05 bushel for the week. Support is at $3.44 a bushel with resistance at $3.64 a bushel. Weekly exports sales were 36.5 million bushels (36.4 mb for 09/10 and 118,107 bushels for 10/11), in line with expectations, but still questionable whether it will be able to meet USDA’s current projection. USDA could possibly reduce exports in the February 9 report, but an increase in corn for ethanol could offset it. The announcement this week by EPA that corn now meets all Renewable Fuels Standards 2 for fuel blends was seen as positive long term for corn. It will not have much impact in the short term. The trade is expecting corn ending stocks for 2009/10 to be slightly decreased 17 million bushels to 1.747 billion bushels
New Crop: The September contract closed at $3.80, down $0.05 a bushel for the week. Support is $3.75 with resistance at $3.90 a bushel. I would be priced 40% for 2010 production at this time. Catch up pricing on any rallies as well as evaluate option strategies.
Cotton:
Nearby: The March futures closed at 66.62 cents/lb. down 2.41 cents/lb. for the week. Support is at 64.71, resistance at 70.37 cents per pound. Weekly exports sales were again above expectations and for the second week in a row, a marketing year high at 668,800 bales (519,500 bales of upland cotton for 09/10; 143,500 bales of upland cotton for 10/11; and 5,800 bales of Pima for 09/10). I would not be surprised to see USDA increase exports and slightly decrease ending stocks in Tuesday’s report. Equities for the 2009 crop have been in the 8 - 9 cent range. Keep in contact with your cotton buyer for current quotes on loan equities. The Adjusted World Price for February 5 – February 11 is 58.69 cents/lb.
New Crop: The December futures contract closed at 68.73 cents/lb., down 2.11 cents/lb. for the week. Support is at 67.04 cents per pound, resistance at 71.80 cents per pound. Equities for the 2010 cotton could be booked in the 11 cent range. Although fundamentals for cotton have improved, price improvement will depend heavily on a stronger economy and weaker dollar. The National Cotton Council will be releasing the results of their annual planting intentions survey this afternoon at their American Cotton Growers meeting in Memphis. Cotton Inc. is sponsoring a free Cotton Price Risk Management seminar on February 17 at The Peabody in Memphis. Call 1-919-678-2271 to reserve your spot.
Soybeans:
Nearby: March futures closed at $9.14 bushel, down $0.005 bushel for the week. Support is at $8.94 bushel, with resistance at $9.26 a bushel. Weekly exports were a marketing year low and below expectations at 14.1 million bushels with 14.0 million bushels in this marketing year and 113,000 bushels in 2010/11 marketing year. Slower export sales and some cancellations are to be expected as the South American soybeans hit the world market. Harvest has started in Brazil, but farmers have been slow selling soybeans due to low prices from currency valuations. Trade estimates for the February 9 USDA report are for soybean ending stocks to be lowered 24 million bushels to 221 million bushels.
New Crop: The November contract closed at $9.04 bushel, down $0.08 a bushel this week. Support is at $8.93 with resistance at $9.22 bushel. I am currently priced 15% for the 2010 soybean crop.
Wheat:
Nearby: March futures contract closed at $4.73 bushel, even for the week. Weekly exports were 17.7 million bushels with 15.3 million bushels in this marketing year and 2.4 million bushels in 2010/11 marketing year. This was in line with expectations. Wheat ending stocks are not expected to change much from January, but some analysts are projecting an eventual carryover of 1 billion bushels. There are still very negative fundamentals.
New Crop: July futures closed at $5.01 bushel, even for the week. Support is at $4.84 with resistance at $5.17 a bushel. I would currently have up to 20% of the 2010 wheat crop priced. Put options could be used to set a floor price and leave an upside. A July $4.90 put option would cost $0.37 a bushel and set a $4.53 futures floor. There are other option strategies that could lessen the cost of the put, but would require a margin account.
