Crop Analysis (VIP) -- March 3, 2014

March 3, 2014 09:01 AM
 

 

Corn


Price action:
Corn futures opened sharply higher, trimmed gains and finished midrange. Futures closed 3 1/4 to 7 1/4 cents higher. Funds bought 20,000 contracts (100 million bu.) today.

Fundamental analysis: Concerns over military action in the Ukraine, an export competitor for both wheat and corn, sent futures higher at the open. Adding to demand enthusiasm was an announcement from USDA that Japan purchased 211,500 MT of U.S. corn -- 47,000 MT for 2013-14 and 164,500 MT for 2014-15, as well as a 140,000-MT purchase of old-crop corn by South Korea.

Profit-taking appeared after the initial surge, but prices stabilized as USDA announced strong weekly export inspections. The tally was well above expectations and last week's tally.

Technical analysis: May corn futures hit buy stops in overnight trade to extend gains to a daily high of $4.82 3/4. The contract setback to $4.70 1/2 on today's close, but today's higher-high is a positive sign for technicals. Key tomorrow will be for futures to remain supported above $4.65.

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 saw extreme price volatility today, with the March contract posting a 37 3/4 cent daily trading range and finishing near session lows with a 7 cent daily loss. November beans posted a 15 cent daily range and closed mid-range with gains of 2 1/4 cent. Funds sold 5,000 contracts (25 million bu.) today.

Fundamental analysis: Old-crop futures were up sharply in overnight trade, but buying enthusiasm waned at the start of daytime trade as focus turned to bull spread unwinding. Early gains came on spillover from wheat, which ended the day sharply higher on political unrest between Ukraine and Russia. But profit-taking entered the market as traders realize the unrest will not have a large impact on soybean demand.

There are also few new developments to report regarding South American soybean shipping delays and traders believe those concerns are currently factored into futures. However, if fresh news surfaces, it could help to support the market this week given the very tight old-crop U.S. soybean stocks situation.

Technical analysis: Increased price volatility at high prices is often a sign a market is working on a high. However, the contract corrected its overbought reading with today's mild losses. Near-term resistance is at the contract high of $14.52 for March futures, with support at Friday's low of $13.84 3/4.

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: 90% priced on old-crop. 10% of expected 2014-crop production is sold via cash forward contract sale for harvest delivery.

 

Wheat

Price action: Wheat futures posted sharp gains throughout the day session, with SRW up 21 1/2 to 29 1/4 cents, HRW up 21 3/4 to 26 cents and HRS up 15 1/2 to 25 cents.

Fundamental analysis: Wheat futures surged on rising tensions between Ukraine and Russia, as it raises questions about the ability of the region to export wheat effectively. As a result, traders believe the U.S. could pick up extra business in the near-term as importers turn to "reliable" sources to fill their needs.

Much of today's gains came from the Black Sea region concerns, but weather also remains a supportive factor for wheat. Cold temps across the winter wheat belt raise concern about winterkill and dry conditions across the Southern Plains keep drought concerns on traders' minds.

Technical analysis: May SRW wheat futures gapped higher on the open and hit buy stops on the move through last week's high of $6.20, which is now support. Today's high of $6.44 1/2 is resistance given today's mid-range close.

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 gains of 59 to 127 points with nearby futures leading the way.

Fundamental analysis: Cotton futures were boosted today by a general upswing in many commodity markets, including the grain markets. Support for corn and wheat came from rising tensions in Ukraine and the Black Sea region. While cotton won't be directly impacted if tensions continue to escalate, the cotton market proved today it's very aware of what is going on around it.

Today's price strength in cotton came despite a sharp rise in the U.S. dollar index, which was higher in response to the Ukrainian situation. While cotton brushed off the dollar move today, it will be difficult for traders to ignore a sustained move higher in the greenback as they would then fear an impact to U.S. cotton exports.

Technical analysis: July cotton futures have spent the past four trading sessions pivoting around the uptrend from the November low. For that trendline to remain as support, the contract likely needs to push above resistance at the 90.00-cent mark soon. A close below last week's low at 85.67 cents would be a warning sign of topping action.

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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