Crop Analysis (VIP) -- January 16, 2014

January 16, 2014 08:39 AM
 

Corn

Price action:
Corn futures favored a firmer tone throughout the day, but gains were limited by a mix of export news. Futures ended 1 to 2 1/4 cents higher, with nearbys leading gains. Funds were a net buyer of 2,000 corn contracts today (10 million bushels).

Fundamental outlook: Traders were encouraged by this morning's weekly export sales report, as it showed sales above expectations. Of note, Egypt -- traditionally a value buyer -- was the top buyer of corn this week, which signals corn prices are "cheap." But somewhat offsetting the positive weekly sales data was news that an unknown buyer has cancelled 126,000 MT of old-crop purchases. Traders suspect this is China due to the ongoing issues with unapproved GMO material found in corn and DDG shipments.

A weaker tone in the U.S. dollar was also supportive today, although the index is working on weekly gains. Crude oil was weaker today and gold was higher. The Goldman Sach's Commodity Index ended the day with losses.

Technical outlook: March corn futures spent the day pivoting around $4.30 and closed beneath it. The contract is working on losses for the week, which makes tomorrow's price action all the more important. A weekly low-range close would suggest a near-term high is in the works.

Hedgers: 60% sold in the cash market on 2013-crop. 20% of expected 2014-crop production is sold via cash forward contract sale for harvest delivery.

Cash-only marketers: 50% sold in the cash market on 2013-crop. 20% of expected 2014-crop production is sold via cash forward contract sale for harvest delivery.

 

Soybeans

Price action: Soybean futures enjoyed gains for most of the session, but the market softened late to close low-range and mixed, with nearbys steady to 3 cents lower and July and later contracts up 3 to 4 cents. Funds sold 4,000 contracts (20 million bu.) today.

Fundamental outlook: Soybean futures opened stronger on supportive export news, but the market later softened amid profit-taking after March futures probed resistance at $13.30. USDA's weekly soybean export sales figures exceeded expectations by a wide margin. They came in at 701,500 MT for 2013-14 and 525,300 MT for 2014-15. USDA also announced a daily sale to China for 60,000 MT of U.S. beans for 2013-14 and 405,500 MT for 2014-15 delivery.

Adding early support was news China's Ministry of Commerce has nearly doubled its forecast for January soybean imports to 4.61 MMT, based on the strong export pace the first half of the month. A 10-cent boost in Gulf soybean basis this morning added to initial gains.

But profit-taking as futures tested recent highs erased the morning gains in nearby contracts. Deferred contracts benefited from the unwinding of bull spreads.

Technical outlook: March soybean futures fell back on their initial probe of the wide resistance area from $13.20 to the December high at $13.39 1/4. It will take a close above the latter level to stimulate followthrough buying and point the contract toward the September high of $13.77 3/4. The $12.80 area provides support.

Hedgers: 100% sold in the cash market on 2013-crop production. 10% of expected 2014-crop production is sold via cash forward contract sale for harvest delivery.

Cash-only marketers: 75% sold on 2013-crop production. 20% of expected 2014-crop production is sold via cash forward contract sale for harvest delivery.

 

Wheat

Price action: Wheat futures faced pressure in the early going, but this eventually gave way to some bargain buying and short-covering. SRW wheat futures ended 4 to 5 cents higher, while HRW wheat ended mostly 7 to 9 cents higher. HRW wheat posted gains of 5 1/4 to 10 cents.

Fundamental outlook: While wheat futures remain well within a downward trend, recent indications U.S. wheat prices may have finally reached value levels encouraged some tentative buys today. It will take consistent demand news, however, for the market to recover as U.S. and global wheat supplies are expected to be plentiful.

While weekly export sales of 319,900 MT for 2013-14 and 82,000 MT for 2014-15 met lackluster expectations, exports of 586,800 MT were up 53% from the four-week average. Also, Egypt (a value buyer) included U.S. wheat in its tender today.

Technical outlook: March SRW wheat futures finished high-range but the market remains pointed definitively lower. Last week's contract low of $5.60 1/2 marks tough support. Initial resistance stands at the psychological $6.00 level.

Hedgers: 100% sold on 2013-crop in the cash market. 35% of expected 2014-crop production is sold via cash forward contract for harvest delivery.

Cash-only marketers: 75% sold on old-crop. 35% of expected 2014-crop production is sold via cash forward contract for harvest delivery.

 

Cotton

Price action: Cotton futures surged today, and while the market finished well off its highs, gains were still strong at 85 to 133 points for nearby contracts; December and later months ended 35 to 50 points higher.

Fundamental outlook: Cotton futures surged on better-than-expected weekly cotton export sales today. While export sales reports over the holidays were generally lackluster, today's report reflected strong demand for the first non-holiday week of the year. Sales of 223,700 RB were up 46% from the four-week average, and an additional 9,300 RB in sales were recorded for 2014-15. Exports were also solid at 217,400 RB.

The subsequent run-up in prices triggered buy stops as the market staged an upside breakout from its multiweek consolidation range. Key will be if the market builds on these gains to wrap up the week.

Technical outlook: March cotton futures surged through resistance at the December high of 85.29 cents, the Oct. 18 high of 85.47 and the psychological 86.00-cent area, turning these levels into support. The contract settled well off its daily high of 86.67 cents, leaving this as initial resistance. After that, resistance is layered from 87.00 cents to the October high of 87.62 cents.

Hedgers: 50% of 2013-crop is sold in the cash market.

Cash-only marketers: 50% sold on 2013-crop production.

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