Fundamental analysis: Weather returned as the focus of the market today following yesterday's reversal, with the seven-day forecast featuring very little rain and above-normal temps for the Corn Belt (see "Evening Report" for more). After USDA trimmed its yield projection by 20 bu. per acre yesterday, traders added weather premium back into the market.
This morning's weekly export sales data provided early support, as it showed sales of 172,700 metric tons (MT) for 2011-12 and 492,100 MT for 2012-13, which came in above expectations. With about two months left in the old-crop marketing year, export commitments are running 16% below year-ago and USDA expects a 12.8% reduction -- signaling USDA's export forecast may be too high.
Technical analysis: December corn futures posted an inside day up on the daily chart to negate yesterday's key bearish reversal. Contract-high resistance stands at $7.48. Support lies at yesterday's low of $6.85 1/4 and extends to the bottom of the July 5 gap at $6.76.
Hedgers: 40% of expected 2012-crop production is covered in Dec. $6.50 put options for 31 1/2 cents. 35% cash forward sold on expected 2012-crop production -- 25% for harvest delivery; 10% for March 2013 delivery. 90% sold on old-crop in the cash market.
Cash-only marketers: 90% sold on old-crop. 35% forward priced on expected 2012-crop production -- 10% for harvest delivery; 10% for March 2013 delivery; and 15% for May 2013 delivery.
Price action: Soybean futures dipped into negative territory at times today, but bulls maintained a slight upper hand into the close. Futures settled fractionally to around 6 cents higher, which was good for a mid-range close. Soymeal closed mostly firmer while soyoil was lower amid spreading.
Fundamental analysis: Beans benefited from spillover from the corn market due to ongoing weather concerns. But market bears gained traction at times today thanks to a wetter forecast for the southeast Midwest and heavier-than-expected rains in the northwest Corn Belt today. But as forecast showers are generally expected to be light, relief should be limited.
Also giving bulls an edge is the tight supply situation emphasized by strong weekly export sales this morning and tight carryover pegs from USDA yesterday. Weekly export sales of 332,100 metric tons (MT) for 2011-12 and 427,100 MT were above expectations.
But recognition that weather rallies often come to a premature end (i.e., when crop conditions are still declining) is making investors more wary toward the long side of the market.
Technical analysis: November soybean futures staged an inside day of trade, leaving resistance in place at yesterday's contract high of $15.75 and support at last week's gap that extends from $14.78 to $14.93.
Hedgers: 25% of expected 2012-crop production is covered in Nov. $14.00 put options for 42 3/8 cents. 50% of expected 2012-crop production is sold via cash forward contract for harvest delivery. 90% sold on old-crop in the cash market.
Cash-only marketers: 85% sold on old-crop. 50% sold on expected 2012- crop production via forward contract for harvest delivery.
Price action: Wheat futures at all locations finished in the upper quarter of their daily trading range with gains mostly in the in the mid-teens to low 20s.
Fundamental analysis: Action in the wheat pit mirrored that of the corn market today, and corn continues to benefit from weather concerns. Wheat has some weather-related support of its own, as areas of the Former Soviet Union, Europe, Australia and China have seen yield-damaging conditions. Today a Russian lobby official lowered the grain output forecast and Strategie Grain trimmed its soft wheat crop output forecast for the European Union.
Weather concerns kept attention away from a disappointing weekly export sales tally. Weekly wheat sales of 311,800 metric tons came in below expectations.
Technical analysis: December Chicago wheat posted a new 2012 high of $8.70 today, but settled around a dime off this level, leaving it as near-term resistance. The bottom of last week's gap at $8.15 is support.
Hedgers: 75% cash sold on 2012-crop for harvest delivery. 100% sold on 2011-crop in the cash market.
Cash-only marketers: 75% of 2012-crop production is sold for harvest delivery. 100% sold on 2011-crop.
Price action: Cotton futures were pressured by strength in the U.S. dollar index to end 85 to 128 points lower. The low-range close gives bears the upper hand for the next session.
Fundamental analysis: Concerns the euro-zone will not be able to live up to promises to provide more liquidity to banks strengthened the dollar, and the U.S. stock market was weaker today from a lack of confidence after the Federal Reserve yesterday said economic growth remains sluggish. The dollar index rose to its highest level since July 2010.
Additional pressure came from a disappointing weekly export sales tally. USDA reported sales of 8,800 running bales (RB) for 2011-12 and 85,100 RB for 2012-13, reflecting lackluster demand.
Technical analysis: December cotton futures moved below their recent consolidation range. Support lies at the late June low of 67.16 cents and extends to the contract low posted in early June of 64.61 cents. A move above resistance at the June high of 74.80 cents is needed to signal a near-term low has been posted.
Hedgers: 100% sold on old-crop in the cash market. 50% priced on expected new-crop production via cash forward contract for harvest delivery.
Cash-only marketers:100% sold on old-crop. 50% priced on expected new-crop production via forward contract for harvest delivery.