All of the U.S. corn is now planted and weather is the main focus of the market until we are past the key yield-development timeframe.
However, the yield-development timeframe will occur a little later than normal, leaving July 4 through the July 25 as our timeframe most sensitive to weather.
Our summer month weather premium high has already been achieved by the market.
The USDA is currently forecasting 2013 planted acres at 97.4 million, slightly more than last year and the largest planted acreage since 1936.
Trendline yields are not a requirement, but with crop ratings as high as they are, trendline-plus yields are almost guaranteed.
How low prices go are dependent on the commodity funds. Funds are currently net long with 108,518 contracts, indicating they have lots of liquidating yet to do if they are to get out of all net long positions.
Typically, funds exit long piositions during the third quarter of the year as the market trades lower into harvest, before funds buy into fresh longs in the last quarter of the year in hopes of a post-harvest rally.
A dry period in July or the threat of frost could force a short-covering rally, so be quick to change your marketing strategy if adverse weather threatens the Midwest.
The key pod-setting stage looks to begin about July 20 and last until the Aug. 10, at which the biggest gains in yield estimates can surface with timely rain or biggest upside gains in futures will occur if heat and dryness occurs.
Highs are usually in by July’s end, but highs have likely occurred in early June unless threatening conditions develop during the podsetting stage that will reduce yields and drive prices higher.
With volatility extremely high, this is a high-risk weather market. Rain events that occur in late July and the first week of August should be sold as this will help the development of the crop. The USDA recently forecasted seeded acres at 77.7 million, the largest seeded crop in history.
Funds are net long over 109,924 contracts. Funds typically liquidate longs after the podsetting stage is completed.
Corn closed the week $.19 3/4 lower. Last week, private exporters announced sales of 120,000 metric tons of U.S. corn to an unknown destination.
In the weekly export sales report, new crop corn sales were only 3.2 million bushels. Clearly, foreign buyers are not concerned about getting forward coverage of corn ahead of harvest.
Last week, the crop progress report showed 67 percent of nationwide corn rated good-to-excellent. This compares to 65 percent the prior week.
Conditions look to improve again as the warmer temperatures mixed with rainfall improve the crop. Without the threat of a major weather problem, seasonal highs, which are normally in by June 23, are already in place. The USDA’s projection of a 14.005 billion bushel-crop looks to push harvest lows to major weekly support of $3.91.
Demand will look to improve as we get closer to harvest as foreign buyers will try to time the harvest lows to gain forward coverage.
Informa’s estimate of 89 million harvested corn acres and 160 bushels per acre yield alludes to a crop of more than 14 bb with a 2013/2014 carryout over of 2 bb.
Strategy and outlook: Producers are now 100 percent sold of 2012/13 crop and are also 50 percent sold of the 2013/14 crop.
Producers own December corn puts on 50 percent of 2013 production. We will look to buy at-the-money calls if weather turns adverse.
Soybeans closed the week $.23 3/4 lower from last week. Last week, private exporters noted no private sales.
In the weekly export sales report, new sales were decent at 9.2 mb. The weekly crop progress report showed nationwide soybeans rated 67 percent g-to-e.
This compares to 65 percent the prior week.
The soybean crop was in need of sunshine and warmer temperatures during June to establish its root system, which is exactly what occurred. This is the reason why November soybeans have removed a dollar of weather premium from prices during that timeframe. Normal weather during July will push prices lower as a huge, record large crop will be realized. Seasonal highs are normally in by June 23 and unless weather turns adverse, highs are in place. Informa said the US 2013-14 soybean crop is estimated at 3.376 billion bushels, based on 76.918 million acres harvested and a yield of 43.9 bushels per acre.
Strategy and outlook: Producers are 100 percent sold of the 2012/13 production and are 40 percent sold of 2013/14. Sell 10 percent at $13.45 against the January contract.
Producers own November puts on 50 percent of 2013 production.
This material has been prepared by Brian Hoops, president and senior market analyst of Midwest Market Solutions Inc. and is, or is in the nature of, a solicitation. This material is not a research report prepared by Midwest Market Solution’s Research Department.
The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that Midwest Market Solutions believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such.
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