Crops Analysis -- Advice (VIP) -- April 17, 2013

April 17, 2013 09:35 AM
 

Corn

Price action: Front-month May corn futures ended 2 3/4 cents lower, with July up 1/2 cent. The rest of the market ended 6 to 7 3/4 cents higher.

Fundamental analysis: Bull spread unwinding was the featured activity in the corn market today, with all contracts holding up well in light of sharp strength in the dollar index and sharp weakness in crude oil and gold futures.

Without fresh news for old-crop contracts to digest and with Gulf basis softening slightly this morning, focus turned to planting delays in the heart of the Corn Belt. Traders say they aren't overly concerned about planting delays at this point because producers can plant a lot of corn in a shorter amount of time, but they are beginning to recognize that USDA's March 28 planted acreage projection of 97.3 million will be the high-water mark for the season.

Technical analysis: December corn futures posted an upside day of trade on the daily chart. Followthrough buying tomorrow would pose a test of this week's high of $5.51. But to signal a near-term low has been posted, the contract needs to return above the March high of $5.73 3/4. Support lies at the April low of $5.25 1/2.

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

Advice: Hedgers were advised to hedge 50% of expected 2013-crop production in November soybean futures. Our entry was $12.19.

Price action: Soybean futures saw a volatile day of trading, facing pressure on the open this morning but later trimming these losses and moving into positive territory. Old-crop futures closed 3 1/2 to 10 3/4 cents higher, while new-crop futures ended narrowly mixed. This was a mid-range close for most contracts.

Fundamental analysis: Old-crop soybean futures benefited from bull spreading activity heading into the close. Encouraging this action is tight carryover supplies that have kept basis at historically high levels and the likelihood of greater 2013 bean plantings than earlier expected. Cold, wet weather is expected to persist through month-end, which increases the likelihood some of these intended corn acres will shift to soybeans.

While delays in the start of the South American bean shipping season kept the U.S. export window open longer than usual, it also means the region will still be shipping beans as new-crop U.S. supplies come available.

Technical analysis: May soybean futures remain within their uptrend since the first week of April and the contract appears headed for a test of the March 28 high of $14.59 3/4. Uptrending support drawn off the April lows intersects around $13.97 1/2 tomorrow.

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

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 closed mixed with a modest upside bias in Chicago, mixed to mostly lower in Kansas City and steady to 3 cents lower in Minneapolis.

Fundamental analysis: Wheat futures rallied intra-day amid concerns with the HRW crop and corrective short-covering. But buying interest dried up in late trade, largely due to strong gains in the U.S. dollar index, which also weighed on futures earlier in the session.

Weather in the Plains is drawing increased attention, but traders are uncertain whether to give more credence to beneficial rains over much of HRW country or the potential for another freeze event. As a result, price action is likely to remain choppy near-term as traders sort through the weather events.

Technical analysis: Near-term technical boundaries for July Chicago wheat futures are support at the April 1 low of $6.64 3/4 and resistance at the March high of $7.40 1/2. Violation of either of these levels would likely spark the next trending 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 and cash-only marketers were advised to make a 25% 2013-crop cash forward contract sale on expected 2013-crop production for harvest delivery to get to 50% forward priced on new-crop.

Price action: Cotton futures rebounded from early losses to finish 65 to 130 points higher. Still, that was well off session highs.

Fundamental analysis: Cotton futures rallied in the face of a strong rally in the U.S. dollar index today, which was impressive. Unless the dollar strength dissipates, however, the upside is limited to corrective buying.

Fundamentally, traders are trying to sort out the global demand picture after Chinese first quarter GDP came in well below expectations earlier this week. Traders are also trying to gauge whether cotton may pick up some acres from corn with the corn prevent-plant date for Southern states quickly approaching.

Technical analysis: May cotton futures narrowly missed posting a bullish reversal today. Unless downtrending resistance from the March high is violated, the traders have incentive to sell price strength. The downtrend from the March high intersects at 85.93 cents Thursday.

Hedgers: NEW ADVICE: Make a 25% 2013-crop cash forward contract sale on expected 2013-crop production for harvest delivery to get to 50% forward priced on new-crop. 100% sold on old-crop in the cash market.

Cash-only marketers: NEW ADVICE: Make a 25% 2013-crop cash forward contract sale on expected 2013-crop production for harvest delivery to get to 50% forward priced on new-crop. 85% sold on old-crop.

 

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