Crop Analysis (VIP) -- August 1, 2012

August 1, 2012 10:00 AM
 


Corn

Price action: Corn futures were under pressure for much of the day, but posted a strong recovery in late trade to end just slightly lower in all but the July 2013 contract, which finished 1 1/4 cents higher.

Fundamental analysis: Early losses were tied to profit-taking, as there was little fresh news for traders to digest and focus was on minimizing risk ahead of this afternoon's statement from the Federal Open Market Committee. But even as the dollar rose sharply in reaction to the Fed (see "Evening Report" for more), corn futures moved well off session lows as traders remain concerned about yield prospects.

The ability of the corn market to recover well off session lows late suggests market bulls aren't willing -- quite yet -- to throw in the towel despite signs high prices are slowing use.

Technical analysis: December corn futures saw a 35 1/2 cent daily trading range and ended mid-range at $8.00 1/2. Today's low of $7.81 1/4 is initial support, with yesterday's contract high of $8.20 1/2 initial resistance.

Hedgers: 100% sold on 2011-crop in the cash market. 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.

Cash-only marketers: 100% sold on 2011-crop. 35% forward priced on expected 2012-crop production -- 10% for harvest delivery; 10% for March 2013 delivery; and 15% for May 2013 delivery.

 

Soybeans

Price action: Soybean futures closed 4 1/4 to 38 3/4 cents lower, but came well off session lows late to finish mid-range.

Fundamental analysis: Soybean futures faced corrective selling today as fresh news was limited. While there are ongoing crop concerns, there wasn't any fresh news on that front, which gave traders an opportunity to take profits out of the market.

Additional pressure came from weather forecasts as midday updates called for better rain chances into early next week. While rains would be timely, the late move well off session lows signals traders are skeptical the rains will develop. And if they do develop that they won't be heavy and widespread enough to have a beneficial impact.

Technical analysis: November soybean futures filled Monday's price gap at $16.12, but finished well above that level. Today's low at $15.95 3/4 is initial support, with stronger support at last week's low of $15.36 and the July 5 gap from $14.93 to $14.78. To the upside, Tuesday's high at $16.63 1/4 is initial resistance, followed by the contract high at $16.91 1/4.

Hedgers: 100% sold on old-crop in the cash market. 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.

Cash-only marketers: 100% sold on old-crop. 50% sold on expected 2012-crop production for harvest delivery.

 

Wheat

Price action: Chicago and Kansas City wheat futures finished widely mixed. The September through May contracts ended slightly lower and mid-range for the day, while 2013-crop contracts posted strong gains and finished on session highs. Minneapolis wheat futures finished 16 to 26 cents lower in the September through July 2013 contracts.

Fundamental analysis: Wheat futures were pressured by profit-taking as support from the corn market was lacking today. While there are crop concerns in the Former Soviet Union, wheat needs the corn market for support. The late recovery well off session lows in corn is the reason Chicago wheat futures pared losses amid short-covering.

Minneapolis wheat futures faced seasonal pressure today as combines are actively rolling in the Northern Plains. Until harvest activity winds down, hedge-related pressure will be something Minneapolis wheat futures have to deal with. Once that seasonal pressure is out the way, however, support should come from expected strong demand for high-protein U.S. spring wheat supplies.

Technical analysis: September Minneapolis wheat futures dropped through support at last week's low of $9.45 1/2. That level is now initial resistance. Next support is at the bottom of the July 5 gap at $8.99 1/2.

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.

 

Cotton

Price action: Cotton futures saw two-sided trade today, but faded into the close to finish 52 to 140 points lower as the dollar strengthened following the Fed's statement on the economy and monetary policy. The low-range close gives bears momentum heading into tomorrow's session.

Fundamental analysis: Futures remain in their two-month-long consolidation range due to a lack of fresh positive news. Cotton futures have not participated in the grain market rally as traders recognize global supplies will be able to make up a shortfall if the drought in the U.S. mid-South worsens.

Cotton futures need fresh demand news to move prices higher. Traders will be monitoring tomorrow's weekly export sales data to see if China's appetite has improved.

Technical analysis: December cotton futures remain bound in the consolidation range. Futures need to move either above resistance at the June high of 74.80 cents or support at the June low of 64.61 cents to suggest the next trending move has begun.

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:s100% sold on old-crop. 50% priced on expected new-crop production via forward contract for harvest delivery.

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