Crop Analysis (VIP) -- November 7, 2013

November 7, 2013 08:14 AM
 

 

Corn

Price action:
Corn futures ended narrowly mixed, with nearbys favoring a firmer tone and deferreds a weaker tone. Price action was lackluster again today as traders focused on evening positions ahead of tomorrow's reports.

Fundamental analysis: Focus in the market was on evening positions ahead of tomorrow morning's USDA reports. Traders look for USDA to raise the size of the crop to around 14.022 billion bu. and for carryover to climb above 2 billion bushels. Additionally, strength in the U.S. dollar index limited buying interest.

Pressure on futures was limited by continued strong demand. This morning's weekly export sales data showed sales topping 1.7 MMT for 2013-14, with Japan as the lead buyer. The report reminded the market that prices are rebuilding demand, but funds are not willing to rebuild long positions at this point.

Technical analysis: December corn futures posted a downside day of trade on the daily chart and a low-range close. The contract respected $4.20 today, but penetration of this level tomorrow on followthrough selling would make $4.00 bears' next target. Bulls have their work cut out for them, as it would take a return above $4.45 is needed to signal a low is in the works.

Hedgers: 25% of 2013-crop production is sold via cash forward contract for harvest delivery.

Cash-only marketers: 25% of expected 2013-crop production is sold via forward contract for harvest delivery.

 

Soybeans

Price action: Nearby soybean futures contracts surged in early trading and held onto those gains to finish in the upper third of the daily range with gains of 7 1/2 to 15 3/4 cents through the March contract. Deferred contracts closed mixed.

Fundamental analysis: Slow country movement coupled with strong export sales confirmed by USDA this morning sent futures higher from the opening. The market also saw gains on position evening ahead of the release of the USDA Crop Production and Supply & Demand Reports tomorrow. Traders look for USDA to raise the size of the crop to around 3.225 billion bu. and for carryover to rise to 183 million bushels.

Tempering the gains was a stronger U.S. dollar index, which gained strength on the lowering of interest rates by the European Central Bank and better-than-expected U.S. GDP data (see "Evening Report" for more).

Technical analysis: January futures closed at their highest level since Oct. 30 and probed resistance at $12.70. Resistance is layered every dime higher. A close above the October high of $13.12 3/4 would signal a low has been posted. This week's low of $12.47 is initial support.

Hedgers: Get to 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: Get to 75% sold on 2013-crop production.

 

Wheat

Price action: Wheat futures did not stray far from unchanged today and ended mostly around a penny higher for the SRW market and fractionally to 4 1/2 cents lower in the HRW market. HRS wheat closed steady to 2 3/4 cents lower in most contracts.

Fundamental analysis: The technical posture of the wheat market continues to favor market bears. This along with sharp gains in the U.S. dollar index gave them the advantage for much of the day. In addition, while weekly wheat export sales matched expectations, the tally was far from impressive, while corn exports surged. There adds to concerns U.S. feed wheat may be overpriced.

Anticipation of USDA's reports tomorrow limited both buying and selling interest today. USDA is expected to trim its wheat carryover estimate by roughly 34 million bu. to 527.3 million bushels.

Technical analysis: December SRW wheat futures remain well within their downtrend since late October. The contract matched yesterday's low of $6.52 1/4 today, marking that level as near-term support. The next major level of chart support is the contract low of $6.35 1/2.

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 saw two-sided trade today but most contracts ended low-range with losses of 13 to 55 cents.

Fundamental analysis: Cotton futures initially responded positively to USDA's weekly cotton export sales report that showed impressive demand for the U.S. fiber. USDA reports sales of 303,700 RB the week ended Oct. 31 for 2013-14 delivery and 900 RB for 2014-15 delivery.

But this initial surge gave way to profit-taking on marked strength in the U.S. dollar index (see "Evening Report" for more) and uncertainty ahead of USDA's key reports tomorrow. Traders look for USDA to raise the size of the crop to around 13.3 million bales, with carryover expected to rise to around 3.2 million bales.

Technical analysis: December cotton futures spent the day within yesterday's wide trading range, leaving support at Tuesday's low of 75.27 cents and resistance around 79.00 cents.

Hedgers: Profits have been claimed on the 50% 2013-crop hedges held in Dec. cotton futures. 50% of expected 2013-crop is sold in the cash market.

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

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