Crop Analysis (VIP) -- January 2, 2014

January 2, 2014 08:54 AM
 

 

Corn

Price action:
Corn futures closed low-range and generally 1 1/2 to 2 cents lower in 2014 contracts and 2 to 3 3/4 cents lower in 2015 contracts. Funds were even on the day.

Fundamental outlook: Corn futures slipped in late trading under the weight of spillover selling in soybeans and wheat. The news was mostly negative as rains moved across Argentina's corn-growing areas in recent days and temperatures moderated. The dollar was stronger as well. But early gains came on short-covering amid ideas the selloff in corn futures had been overdone.

Technical outlook: March corn futures posted a contract-low close of $4.20 1/2, taking out its previous record-low close of $4.21 set Nov. 18. Today's lowest trade matches the contract low posted Dec. 2. Resistance starts at $4.25 with a close above the December high of $4.40 3/4 needed to turn traders' heads. The contract has psychological support at $4.15 and $4.00.

Hedgers: 25% of 2013-crop production is sold in the cash market. Be prepared to advance sales on an overdue bounce.

Cash-only marketers: 25% sold on 2013-crop. Be prepared to advance sales on a bounce.

 

Soybeans

Price action: Soybean futures faced heavy pressure throughout the day and ended 13 1/4 to 25 1/2 cents lower through the August contract, with deferreds down roughly 6 to 8 cents. This was a low-range close. Funds sold 9,000 contracts (45 million bu.) today.

Fundamental outlook: Soybean futures sustained some technical chart damage on Tuesday and followthrough selling today triggered sell stops. This was especially evident in the front-month contract as it plunged through tough psychological support at $13.00. Dollar strength added incentive for traders to exit positions to start the year.

Fundamental pressure stemmed from beneficial Argentine rains as well as more moderate temps. In addition, traders expect soybean production in the U.S. to rise this year, though of course this is a long ways off.

Technical outlook: January soybean futures broke through tough support at $13.00 today, turning that price into resistance. This opens downside risk to the Nov. 19 low of $12.68 1/4, followed by the Nov. 5 low of $12.47.

Hedgers: 100% sold in the cash market on 2013-crop production. We'll manage risk on the board the remainder of the marketing year.

Cash-only marketers: 75% sold on 2013-crop production.

 

Wheat

Price action: Wheat futures initially held up well in the face of dollar strength and spillover from the soybean market, but the market eventually caved. SRW wheat futures ended roughly 8 cents lower while HRW and HRS wheat posted losses ranging from 6 to 10 cents.

Fundamental outlook: Strong gains in the U.S. dollar index again fueled concerns about the competitiveness of U.S. wheat prices on the global market. Demand for U.S. wheat has generally been lackluster and traders expect tomorrow's Export Sales Report to reflect more of the same -- especially since it will cover the week of Christmas.

The market is not overly concerned about either dryness on the U.S. Southern Plains or frigid temps in northern parts of winter wheat country. A thin layer of snow is thought to be shielding the bulk of the crop from the elements in northern areas. And the crop entered dormancy with its best condition rating in years.

Technical outlook: March SRW wheat broke through and settled below the psychologically significant $6.00 level, kicking the new year off with yet another contract low of $5.94 1/2. That turns the $6.00 level into resistance. On the weekly continuation chart, support is closely layered from the May 2012 double-bottom of $5.92 1/4 to the January 2012 low of $5.90.

Hedgers: 75% sold on 2013-crop in the cash market. No 2014-crop sales are advised.

Cash-only marketers: 50% sold on 2013-crop. No 2014-crop sales are advised at this time.

 

Cotton

Price action: Cotton futures closed mixed today with the front two contracts 38 to 60 points weaker, the July contract unchanged and deferred contracts 25 to 73 points higher. March and May futures closed midrange.

Fundamental outlook: Strength in the U.S. dollar index prompted some early selling and profit-taking as prices fell back after the March contract's fourth failed test to close above 85.00 cents. But that profit-taking turned into bargain-buying once again as technical traders uncovered support at the $83.50 level. Traders are looking ahead for an update on export demand from tomorrow's holiday-delayed Weekly Export Sales Report.

Technical outlook: March cotton futures fell after testing the weekly high of 85.29 cents. But the selloff attracted bargain buying once again and futures closed midrange. The $85.29 area marks resistance followed by the 87.00 area. Today's low of $83.50 marks the top of a 1-cent wide support zone.

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

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

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