Crop Analysis (VIP) -- March 27, 2014

March 27, 2014 09:58 AM
 

Corn

Price action:
Corn futures ended 4 to 7 1/2 cents higher, with nearbys leading gains amid bull spreading due to continued strong demand. Funds bought 10,000 corn contracts (50 million bu.) today.

Fundamental analysis: After a mostly weaker tone in overnight trade, corn futures firmed early this morning in reaction to the better-than-expected weekly export sales data that signals U.S. prices remain competitive on the global market. The report showed corn sales in excess of 1.4 MMT for 2013-14, with Egypt (known as a value buyer), the lead purchaser. Sales of 28,400 MT were reported for 2014-15. Exports of 1.23 MMT were also impressive and topped the four-week average by 29%.

While futures returned to the top of the month-long consolidation range, traders were hesitant to extend long positions too aggressively ahead of next week's USDA's reports, as the late-March data is often a major trendsetter for early spring price direction. Traders look for the reports to show 2014 plant corn acres down from last year and for March 1 corn stocks to come in around 7.1 billion bushels.

Technical analysis: May corn futures posted a bullish reversal and a high-range close, which gives bulls the upper hand heading into overnight trade. The contract remains within the bounds of the month-long consolidation range. December corn futures also posted a bullish reversal, but the contract needs closes above $4.90 to make bulls' next target the $5.00 level.

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 were highly choppy today, with the May through November contacts ending 1/2 to 3 1/2 cents lower and the rest of the market closing steady to 3/4 cents higher amid bull spread unwinding. Meal was stronger and soyoil was weaker.

Fundamental analysis: Futures favored a firmer tone overnight, but buying interest faded as traders reacted to weekly export sales data. Sales of just 11,900 MT were reported for 2013-14, which included cancellations of around 300,000 MT (still not significant). But weekly sales of 534,900 MT for 2014-15 lifted the overall tally above expectations. Exports of 720,100 MT were strong considering the export window should be coming to a close.

Traders are also focused on evening positions ahead of Monday's key USDA reports. This could result in another choppy day of trade tomorrow. Traders expect 2014 soybean plantings around 81.075 million acres, which, if realized, would be up sharply from year-ago. But the Grain Stocks Report is expected to reflect tight March 1 stocks of around 989 million bushels.

Technical analysis: May soybean futures posted a daily high of $14.50 1/2, but that level turned back buyers and futures softened to a daily low of $14.30 1/2. The low-range close gives bears the upper hand in overnight trade, although there is no major sell signal from the still-bullish chart.

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 were the upside leader in the grain sector today and ended mostly around 13 cents higher in the SRW market, while HRW wheat closed 9 1/4 to 12 1/2 cents higher through the March 2015 contract. HRS wheat settled with gains around 7 to 8 cents. Funds bought 7,000 wheat contracts (35 million bu.) today.

Fundamental analysis: Wheat futures faced pressure yesterday as rains moved across the Southern Plains, but the return of mild, windy conditions today renewed concerns about winter wheat crop conditions. Adding support was USDA's weekly export sales report that signaled higher prices are not yet curbing demand. Sales of 400,500 MT for 2013-14 and 327,500 MT for 2014-15 easily topped expectations. Exports were also strong the week ended March 20.

Adding to the positive tone was International Grains Council's forecast for a 9-MMT reduction in global wheat production for 2014-15. Carryover is expected to remain unchanged from 2013-14 at 190 MMT. Traders also worked to ready positions ahead of USDA's reports Monday. This data set has been a trendsetter in the past.

Technical analysis: May SRW wheat futures found buying on the dip through $7.00 and yesterday's low around $6.95, signaling these prices are near-term support levels. Tough resistance stands at the $7.23 1/2 -- this level turned back rallies in July and October, too.

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 90 to 101 points higher in the front two months, while October through May contracts were 2 to 12 points higher.

Fundamental analysis: Cotton export sales of 66,300 RB for 2013-14 and 76,600 RB for 2014-15 were decent but unimpressive, with China as the lead buyer of old-crop supplies. Exports of 259,100 RB were also solid, encouraging mild gains in nearby contracts. Gains in the corn and wheat market added light spillover support.

However, buying in deferred months was limited by reports China will require local mills to buy 4 MMT from the nation's state reserves for every 1 MMT permitted in import quotas under a sliding tariff system, effective April 1. Last year, the domestic purchase to import quota ratio was 3:1.

Technical analysis: May cotton futures spent the day within the bounds of Tuesday and Wednesday's wide daily price swings. Tuesday's high of 94.63 cents is initial resistance, while this week's low of 89.84 cents is support.

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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