Crops Analysis (VIP) -- October 9, 2012

October 9, 2012

Corn

Price action: The corn market enjoyed gains much of the session, but bears gained some traction heading into the close. Futures ended steady to 3 cents higher for the day, which was low-range for the day.

Fundamental analysis: The corn market enjoyed corrective short-covering most of the day as traders continued to ready positions for what is expected to be friendly USDA reports Thursday. But strength in the U.S. dollar index and general hesitation toward adding risk ahead of the report caused futures to soften into the close.

In addition, a disappointing weekly export sales tally and news South Korea bought South American corn today reminded traders that demand destruction has occurred.

Technical analysis: December corn futures nearly matched yesterday's trading range and close. The $7.40 area stemmed losses the past two days, marking it as near-term support, followed by the September low of $7.05. The October high of $7.68 1/2 is initial resistance.

Hedgers: 100% sold on 2012-crop in the cash market -- 90% for harvest delivery; 10% for March 2013 delivery. Also, Dec. $6.50 put options, which were purchased on 40% of 2012-crop for 31 1/2 cents, are held as a crop insurance hedge.

Cash-only marketers: 75% sold on 2012-crop -- 50% for harvest delivery; 10% for March 2013 delivery; and 15% for May 2013 delivery.

Soybeans

Price action: Soybean futures saw gains erode into the close. November beans ended 1 cent lower, with most other contracts ending 1 to 2 cents higher. Meal ended weaker, with soyoil able to hold onto slight gains.

Fundamental analysis: Early gains were tied to short-covering, but buying interest eroded as focus returned to the macro-economic picture. The U.S. dollar index posted sharp daily gains after the International Monetary Fund lowered its forecast for global economic growth.