Crop Analysis (VIP) -- May 9, 2013

May 9, 2013 09:56 AM
 

Corn

Price action: Old-crop corn futures rallied into the close to finish 12 1/4 to 19 1/2 cents higher, with new-crop futures 8 to 9 1/2 cents higher.

Fundamental analysis: Focus in the market was on evening positions ahead of tomorrow's USDA Supply & Demand Report. Traders look for USDA to trim old-crop stocks by just 3 million bu. from last month to 754 million bu., but for USDA to come in with a 2013-14 initial carryover peg of 1.973 billion bushels. But today's strong close signals traders don't want to be caught short ahead of the report given ongoing planting delays and uncertainty as to how strong USDA anticipates demand will return in the year ahead.

Buying interest in early trade was limited by a lackluster weekly export sales report, as it showed sales of just 115,800 MT for 2012-13 and 169,900 MT for 2013-14.

Technical analysis: December corn posted a bullish reversal, but the contract needs to see followthrough buying tomorrow and fill in the Monday-Friday gap of $5.52 to signal a near-term low is in the works. Closes above the late April high of $5.55 1/4 are needed to signal bulls are regaining their footing. Doing so would make bulls' next target the February high of $5.96 1/2. Support lies at the April low of $5.17.

Hedgers: 100% sold on 2012-crop in the cash market. 10% of expected 2013-crop production is sold via cash forward contract for harvest delivery.

Cash-only marketers: 75% sold on 2012-crop production. 10% of expected 2013-crop production is sold via cash forward contract for harvest delivery.

 

Soybeans

Price action: Old-crop soybean futures ended 10 1/2 to 18 cents higher, while new-crop posted gains mostly around 4 cents. This was a high-range close for most contracts.

Fundamental analysis: Traders worked to reduce risk exposure in old-crop soybeans today as they expect tomorrow's Supply & Demand Report to remind of very tight carryover supplies of 124 million bu. for 2012-13. Plus, country basis levels have improved, which signals a pickup in demand and/or tightening supplies.

New-crop beans, on the other hand, saw lighter gains due to expectations rains and the forecast for chilly temps could encourage some to switch acres to beans. Plus, some midday weather updates bring rain back into the 6- to 10-day outlook. However, another daily purchase of new-crop soybeans by China signals their appetite for U.S. beans will remain strong in the upcoming year.

Gains in the bean market were especially impressive considering gains in the U.S. dollar index.

Technical analysis: July soybean futures finished in the upper part of the market's recent trading range from the May low of $13.65 1/2 to the April high of $14.23 3/4. These levels mark near-term support and resistance, respectively.

Hedgers: 100% sold on 2012-crop in the cash market. 50% of expected 2013-crop production is hedged in November soybean futures at $12.19. 10% of expected 2013-crop production is sold via cash forward contract for harvest delivery.

Cash-only marketers: 75% sold on 2012-crop production. 10% of expected 2013-crop production is sold via cash forward contract for harvest delivery.

 

Wheat

Price action: Kansas City was the upside leader with gains of 17 1/2 to 20 1/4 cents today. Chicago wheat was close behind with gains of 15 1/2 to 19 1/2 cents. Minneapolis wheat ended steady in the front-month and 9 1/4 to 13 1/2 cents higher in deferred contracts.

Fundamental analysis: Spillover from corn and soybeans encouraged buying in the wheat market today, as did concerns about the impact of hail and wind in the Central and Southern Plains on an HRW crop that is already dealing with drought and freeze damage. Buying interest in Minneapolis was limited as the Northern Plains are expected to miss out on precip tracking across the western Corn Belt today, which should enable planting to pick up.

The market also worked to ready for tomorrow's USDA reports. Pre-report expectations are for USDA to peg all wheat production at 2.059 billion bu., up 210 million bu. in 2012. Old-crop carryover is expected to come in at 731 million bu., while expectations are for a 2013-14 carryover projection of 627 million bushels.

Technical analysis: July Chicago wheat futures filled and closed above Monday's downside gap, signaling bulls' next target is the April high of $7.36 3/4, closely followed by the March high of $7.40 1/2. Support is layered from the April 24 low of $6.87 3/4 to the 2013 low of $6.64 3/4.

Hedgers: 75% sold on 2012-crop in the cash market. No 2013-crop sales advised yet.

Cash-only marketers: 75% of 2012-crop is sold. No 2013-crop sales advised yet.

 

Cotton

Price action: Cotton futures opened weaker, but strengthened into the close. July 2013 through July 2014 cotton futures ended 7 to 24 points higher, with far-deferred futures slightly lower.

Fundamental analysis: Futures were initially pressured by a slowdown in weekly export sales to 117,300 RB for 2012-13 and 84,000 RB for 2013-14. But China was the lead buyer for both marketing years, easing concerns that demand from the country would slow. Exports of 277,100 RB were down 24% from the previous week, with China the lead destination.

But the market firmed as traders shifted their focus to tomorrow's Supply & Demand Report. Pre-report expectations are for USDA to peg 2013-14 production at 15.5 million bales, which would be down 1.8 million bales from its April projection. Exports are expected to be forecast at 12 million bales, down 1 million bu. from last month, while USDA is expected to trim its ending stocks forecast by 200,000 bales to 4.0 million bushels.

Additional support came from concerns about planting delays in the South, raising questions about yield potential and acreage shifts away from cotton.

Technical analysis: December cotton futures saw two-sided trade but posted a high-range close. Followthrough from yesterday's high strongly suggests a near-term low has been posted, but to confirm a low, futures need to return above the March high of 89.20 cents.

Hedgers: 50% of expected 2013-crop production is hedged in December cotton futures at 83.87 cents. 50% of expected 2013-crop production is also sold via cash forward contract for harvest delivery. 100% sold on old-crop in the cash market.

Cash-only marketers: 85% sold on old-crop. 50% of expected 2013-crop production is sold via cash forward contract for harvest delivery.

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