Crop Analysis (VIP) -- April 2, 2014

April 2, 2014 10:15 AM
 

 

Corn

Price action:
Corn futures fell by double digits in old-crop months while new-crop ended roughly 4 to 8 cents lower. Futures ended around midrange. Funds sold 13,000 contracts (65 million bu.) today.

Fundamental analysis: The corn market suffered from profit-taking as traders saw a lack of strong fundamental news as a reason to bank profits. Reports of increased farmer selling on yesterday's surge above $5.00 by the nearby contracts also contributed to the downturn. A stronger U.S. dollar index added pressure. New-crop contracts saw some support on lingering concerns about delayed plantings due to continuing cold temperatures and precipitation due for the Midwest.

Technical analysis: May corn futures fell on profit-taking but found support at $4.90, the old resistance area that capped March rallies. Futures bounced after testing support and closed 5 1/4 cents above that support area. Tuesday's high of $5.12 1/2 is immediate upside resistance with the August high of $5.27 1/2 the next upside target. December corn posted a similar chart pattern with the $4.92 area offering support. Resistance is the April 2013 low of $5.26 3/4.

Hedgers: 70% sold on old-crop. 30% of expected 2014-crop is sold via forward contract for harvest delivery.

Cash-only marketers: 60% sold on old-crop. 30% of expected 2014-crop is sold via forward contract for harvest delivery.

 

Soybeans

Price action: Soybean futures enjoyed gains overnight and early in today's session, but this gave way to profit-taking. Old-crop finished 16 to 22 1/4 cents lower, with the front-month leading to the downside. New-crop finished roughly 7 to 10 cents lower. Funds sold 9,000 soybean contracts (45 million bu.) today.

Fundamental analysis: Soybean futures got off to a firmer start, but early gains gave way to profit-taking. The front-month's inability to move above psychological resistance at $15.00 encouraged profit-taking, as did strength in the U.S. dollar index and recent strong gains in the soybean market. In addition, expectations for planting delays in the Midwest due to ongoing cold would point to soybeans holding onto what is already expected to be record high acres.

Adding pressure was news from Brazil's trade ministry reported the country's soybean exports jumped from 2.79 MMT in February to 6.23 MMT in March, citing strong Chinese demand. This adds to ideas the U.S. export window will close soon. Traders expect tomorrow's weekly export sales tally to reflect a major slowdown in demand.

Technical analysis: May soybean futures narrowly avoided posting a bearish reversal today. The contract settled just above yesterday's low at $14.60 1/2, marking this level as near-term support. Tough resistance stands at $15.00.

Hedgers: 25% of expected 2014-crop is sold via forward contract for harvest delivery. 100% sold in the cash market on 2013-crop production.

Cash-only marketers: 25% of expected 2014-crop is sold via forward contract for harvest delivery. 90% priced on old-crop.

 

Wheat

Price action: Wheat futures faced stepped-up profit-taking pressure through the day and ended with double-digit losses. SRW futures ended 11 to 16 cents lower, with HRW down 12 to 14 3/4 cents and HRS down 11 1/2 to 13 cents.

Fundamental analysis: Traders opted to take some more of the weather premium out of the market due to forecasts for improved moisture chances for the Plains. At least one private forecaster said the atmosphere is ripe for timely rains to keep the HRW crop moving ahead through the spring. But another lasting dry spell would have traders returning premium to the wheat market in a hurry, as the crop came out of dormancy in tougher shape than recorded last fall.

Technical analysis: May SRW wheat futures posted a big downside day of trade on the daily chart and a low-range close, which raises the risk of followthrough pressure in overnight trade. Violation of uptrending support suggests a near-term high has been posted. As a result, stay in touch for advice to increase cash sales. For now, we are willing to give the market a chance to post a recovery.

Hedgers: 50% of expected 2014-crop is sold via forward contract for harvest delivery. 100% sold on 2013-crop.

Cash-only marketers: 90% sold on old-crop. 50% of expected 2014-crop is sold via forward contract for harvest delivery.

 

Cotton

Price action:
Cotton futures were choppy today and softened into the close to finish 15 to 56 points lower, with nearbys leading losses.

Fundamental analysis: Early support came on ideas yesterday's losses were overdone, but in the end, expectations that Chinese stocks are burdensome added to pressure. The International Cotton Advisory Council has raised alarms about record 2014-15 global cotton stocks as it’s concerned China’s inventories will surge due to the government stockpiling program. A slowdown in global demand, it says, will more than offset a drop in global cotton production. Given that news, it's somewhat impressive cotton futures haven't seen steeper price pressure.

Technical analysis: May cotton futures posted a downside day of trade on the daily chart. The low-range close gives bears more momentum heading into the next session. The contract respected uptrending support drawn off November and February reaction lows, but could violate that important level if followthrough pressure is seen tomorrow.

Hedgers: 75% of 2013-crop is sold in the cash market. 25% of expected 2014-crop production is sold via cash forward contract for harvest delivery.

Cash-only marketers: 75% of 2013-crop is sold. 25% of expected 2014-crop production is forward sold for harvest delivery.

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