Crop Analysis (VIP) -- October 31, 2013

October 31, 2013 10:08 AM
 

Corn

Price action: Corn futures were firmer in overnight trade but slumped in daytime trade and posted a low-range close with losses of 2 to 3 cents.

Fundamental analysis: Corn futures benefited from short-covering overnight and initially were supported by a much-stronger-than-expected weekly export sales tally for the weeks ended Oct. 10, 17 and 24. The report showed sales for 2013-14 during that period at over 4.55 MMT, with Mexico the lead buyer. Check "Evening Report" for additional details from this morning's sales report.

But recent demand improvements are doing little more than limit price pressure, as traders factor in this year's larger crop. Adding to the negative tone was strength in the dollar index and news Ukraine is loading its first-ever shipment of corn to the Chinese market. Ukraine's ag minister states a total of 120,000 MT of Ukrainian corn would be sent to China by the year-end, while an additional 1.0 MMT of corn could be exported to China in the second half of this season.

Technical analysis: March corn futures posted a bearish reversal and a contract low of $4.38 1/4. Followthrough pressure tomorrow would have bears targeting the $4.25 level, with key support at $4.00. The contract has moved into oversold territory according to the 9-day Relative Strength Index, which signals a time or price correction is due.

Hedgers: 25% of expected 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: Soybean futures slumped after trading higher in overnight trade. Futures finished 7 1/4 cents to 10 3/4 cents lower and near session lows.

Fundamental analysis: Futures firmed initially on news of strong export sales occurring during the government shutdown. USDA reported total export sales of 4.742 MMT for 2013-14 and said China accounted for 2.112 MMT of the purchases. But prices then slumped as the U.S. dollar index firmed and both corn and wheat futures fell despite corn export sales coming in well above expectations.

In addition, traders focused on prospects USDA will increase its estimate of the size of this year's harvest due to continuing reports of yields coming in better than expected.

Technical analysis: November soybean futures turned back from resistance at $13.00 but held above support at yesterday's low of $12.79. The next level of support rests at the October low of $12.61 3/4. It takes a close above $13.28 to confirm a bottom has been made.

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

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

 

Wheat

Price action: Wheat futures favored a weaker tone throughout the day, with nearby SRW and HRW futures ending mostly between 6 to 7 cents lower and HRS posting losses between 1 and 4 cents.

Fundamental analysis: Confirmation that corn exports have picked up pressured wheat futures today, as traders recognize wheat demand remains decent, but has slowed from the previous strong pace. This resulted in spread unwinding with corn futures, with strength in the U.S. dollar index adding to the weaker tone.

This morning's combined weekly export sales data for the weeks ended Oct. 10, 17 and 24 showed wheat sales of over 1.3 MMT, which came in at the low end of expectations. Additionally, export commitments are now running 39% ahead of year-ago, which compares to 43% ahead the week ended Oct. 3.

Technical analysis: March SRW wheat futures posted another downside day of trade on the daily chart to complete a 50% retracement of the rally from the September low to the October high. Next support is the 62% retracement level at $6.75 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 started the day session stronger but weakened into the close to finish mostly around 60 points lower. The low-range close gives bears momentum heading into tomorrow's open.

Fundamental analysis: Early support came from a stronger-than-expected three-week combined weekly export sales tally of 612,300 bales for 2013-14 and 13,300 bales for 2014-15. USDA released sales for the weeks ended Oct. 10, 17 and 24 this morning. The data suggests cotton sales improved during the government shutdown, with importers taking advantage of softer prices and weakness in the U.S. dollar index. China was the lead buyer and destination for exports.

Export commitments were running 27% behind year-ago the week ended Oct. 3 and are now running "just" 21% behind year-ago, which is in line with USDA's projection for a 20.2% reduction in exports from the previous marketing year.

But buying from the export sales data was limited and futures hit sell stops to extend losses as bearish attitudes prevail.

Technical analysis: December cotton futures posted a bearish reversal and finished just above the 77.00 cent level. Bears' next target is the November 2012 low of 74.35 cents, with resistance at the psychological 80.00 cent level.

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.

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

 

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