Crops Analysis -- Advice -- (VIP) -- April 24, 2013

April 24, 2013 09:48 AM
 

Corn

Price action: May corn futures ended a penny higher and low-range for the day. The rest of the corn market settled high-range with gains of 4 1/4 to 8 1/4 cents.

Fundamental analysis: Corn futures benefited from light short-covering today on ideas the downside has recently been overdone -- especially as the 2013 crop is far from in the bag and some acres in northern regions will not likely be seeded to corn as originally intended due to persistent cold, wet weather -- including snow. But so far, traders haven't been overly concerned about the corn crop being planted on time and today's gains were largely short-covering in nature.

A pickup in weekly ethanol production last week was also mildly supportive as it keeps tight old-crop supplies in mind. Historically high basis levels are also indicative of this.

Technical analysis: December corn futures hit a new monthly low of $5.17 this morning, which is new support followed by the psychological $5.00 mark. But the contract finished well off this level, giving bulls the upper hand heading into the overnight session. Their initial target is the April high of $5.51.

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: The May through September soybean contracts posted low-range closes with losses of 10 1/2 to 15 3/4 cents, while new-crop futures posted a mid-range finish with losses of 2 1/4 to 3 1/2 cents.

Fundamental analysis: Ongoing concerns about demand for old-crop soybeans pressured nearby futures, as traders react to the spread of H7N9 bird flu in China. This triggered bull spread unwinding. Pressure on new-crop futures was initially limited by news of a soybean sale of 116,000 MT for 2013-14 to an unknown destination. So far this week, USDA has announced soybean sales of 682,000 MT for 2013-14.

Pressure on new-crop futures was limited by expectations producers would be able to finally begin planting corn across the Corn Belt next week, which alleviates (for now) talk that soybeans would pick up some previously intended corn acres.

Technical analysis: May soybean futures posted a downside day of trade on the daily chart and violated uptrending support drawn off the early April reaction lows. Followthrough pressure tomorrow would have bears targeting the April low of $13.54 1/2. Resistance stands at last week's high of $14.41 1/2.

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: Wheat futures finished roughly 3 to 5 cents lower in Chicago, narrowly mixed in Kansas City and steady to slightly firmer in most Minneapolis contracts. That was a mid-range close at all three exchanges.

Fundamental analysis: Wheat futures struggled to find buying interest again today despite another freeze event through HRW wheat areas of the Plains overnight and ongoing spring wheat planting delays. Higher-than-expected Canadian wheat planting intentions (see "Evening Report for details) get part of the blame for the lack of buying interest, but general bearish attitudes were again the biggest limiting factor. Until attitudes change, the upside will remain limited to corrective buying, while futures will be vulnerable to fresh selling pressure.

News Ukraine lifted its wheat export ban was expected and is little more than psychologically negative for the wheat market, as active Ukraine wheat exports are not likely.

Technical analysis: Short-term boundaries for July Chicago wheat futures lie at the March 28 high of $7.40 1/2 and the April 1 low at $6.46 3/4. The eventual breakout from this range is likely to spark the next extended price move.

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

Advice: Hedgers were advised to hedge 50% of expected 2013-crop production in December cotton futures. Our fill was 83.87 cents.

Price action: Cotton futures posted sharp losses today, ending 139 to 223 points lower through the July 2014 contract. Futures finished low-range for the day.

Fundamental analysis: Liquidation pressure weighed on cotton futures today as speculators continue to dump long positions they amassed on the strong rally from November to early March. Additional pressure came from news Tuesday that India plans to start selling state-owned cotton reserves onto the domestic market beginning Friday.

To stem the recent tide of selling, weekly export sales likely need to come in much stronger than anticipated tomorrow morning.

Technical analysis: December cotton futures did significant technical damage on the daily price chart today by plunging through the uptrend from last November's low and also closing below a 38% retracement of the November-to-March rally. Followthrough tomorrow would confirm a heightened bearish technical posture. The next landing area for the contract is old resistance at 81.30 cents.

Hedgers: NEW ADVICE: Hedge 50% of expected 2013-crop production in December cotton futures. Our fill was 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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