Crops Analysis -- Advice (VIP) -- April 23, 2014

April 23, 2014 10:03 AM
 

Corn

Price action:
Corn futures extended gains into the close to finish 6 to 8 1/4 cents higher, with new-crop contracts leading gains. Funds bought a net 9,000 contracts (45 million bu.) of corn today, after buying 12,000 contracts yesterday.

Fundamental analysis: Futures were bolstered by technical buying, as well as concerns about the cooler- and wetter-than-normal outlook into next week for the Corn Belt. While there is still plenty of time to get this year's crop seeded, traders believe the odds of a slower-than-normal planting pace continuing are increased with the forecast, which lowers the chances of corn picking up acres from March intentions.

Traders are also anticipating tomorrow's weekly export sales report to show a solid showing with old-crop sales expected between 500,000 MT and 800,000 MT and new-crop between 150,000 MT and 250,000 MT.

Technical analysis: December corn futures posted a strong upside day of trade on the daily chart and a high-range close, which gives bulls momentum heading into overnight trade. Importantly, the contract closed back above the psychological $5.00 level, which has served as a pivot-point over the last month. Followthrough buying tomorrow would make bulls' next upside objective the April high of $5.08 3/4.

Hedgers: 70% sold on old-crop. 30% of expected 2014-crop is sold via forward contract for harvest delivery.

Cash-only marketers: 60% sold on old-crop. 30% of expected 2014-crop is sold via forward contract for harvest delivery.

 

 

Soybeans

Price action: Soybean futures closed mixed with the May and July contracts down 11 1/4 and 6 cents, respectively, while the August and later contracts closed 3 1/4 to 13 1/2 cents higher. New-crop contracts were generally 12 to 13 1/2 cents higher. Funds sold a net 3,000 contracts (15 million bu.) of soybeans today.

Fundamental analysis: Active bullspread unwinding led to the double-digit losses in May futures and double-digit gains in new-crop futures. The sharp increase of the daily limit range (effective May 1) announced late yesterday prompted some traders to lighten spread positions, contributing to the unwinding of the bull spreads. In addition, news of the pending arrival of Brazilian soybeans at U.S. ports contributed to the spread unwinding, even though the news confirms widely circulated rumors and the need for imports this year. USDA projects record soybean imports for 2013-14 as U.S. supplies are extremely tight.

News from China that the nation's preliminary purchasing managers' index (PMI) still points to ongoing contraction in the nation's manufacturing sector provided some selling pressure. Macro-economic concerns may cool Chinese soybean imports as importers may struggle to get letters of credit. In addition, the U.S. ag attaché in Argentina estimates 2014-15 soybean plantings will rise to 20.6 million hectares from the current year, up 1.5%, with soybean production estimated at 57.5 MMT.

Technical analysis: July soybean futures closed in the upper edge of the $14.44 to $14.66 support zone that formed in early April. Today's close marked the breaking of the 14-day moving average. Resistance starts near the $14.85 area. November beans found support at the $12.10 area, surged above the 14-day moving average and closed near resistance at $12.30.

Hedgers: 25% of expected 2014-crop is sold via forward contract for harvest delivery. 100% sold in the cash market on 2013-crop production.

Cash-only marketers: 25% of expected 2014-crop is sold via forward contract for harvest delivery. 90% priced on old-crop.

 

 

Wheat

Price action: Wheat futures closed generally 1 1/2 to to 3 1/2 cents higher in SRW and HRW contracts and 1 to 5 3/4 cents higher in HRS contracts. Futures closed near their daily highs. Funds bought a net 1,000 contracts (5 million bu.) of SRW wheat today.

Fundamental analysis: Technical buying was the driving factor behind the rise in wheat futures after futures initially dipped on forecasts of rain for the dry HRW wheat country. The surge in corn futures also lifted wheat futures along with some help from a weaker U.S. dollar index. The market absorbed the near-term forecast for chances of rain in the Plains and again forecasts on the NWS's 6- to 10-day forecast that calls for a return to dry conditions and more stress for the crop.

Technical analysis: July SRW wheat futures bounced after testing support just under $6.70. Today's close brought that contract back to the 14-day moving average average, trading under it the previous two days of this week. The support zone runs from $6.63 to $6.68. Resistance starts at $6.88.

Hedgers: 75% of expected 2014-crop production is sold via cash forward contract sale for harvest delivery. 100% sold on 2013-crop.

Cash-only marketers: 60% of expected 2014-crop production is sold via forward contract sale for harvest delivery. 90% sold on old-crop.

 

 

Cotton

Advice: Hedgers and cash-only marketers are advised to sell 25% of expected 2014-crop production via forward contract for harvest delivery to get to 50% forward priced on new-crop.

Price action: May cotton futures ended high-range with gains of 189 points. Deferred contracts also ended high-range, but they posted losses of 1 to 61 points for the day.

Fundamental analysis: While May cotton futures enjoyed technical buying interest today, the rest of the market faced profit-taking after Tuesday's gains. The July contract uncovered buying interest around 91.00 cents, while October futures bounced off the 81.00 cents area. Traders are hesitant to push futures through near-term levels of support preceding the Weekly Export Sales Report tomorrow.

News the recovery pace of China's textile industry has picked up according to improved returns on equity helped the market pare losses ahead of the close. The same can be said for gains in the grain markets and losses in the U.S. dollar index.

Technical analysis: May cotton futures came within a couple ticks of the April 4 high of 93.23 cents and settled just off this level, marking it as bulls' initial target, followed by the March 31 high of 94.80 cents. Support is layered from the psychological 90.00-cent level to the April low of 88.63 cents.

Hedgers: NEW ADVICE: Sell 25% of expected 2014-crop production via forward contract for harvest delivery to get to 50% forward priced on new-crop.100% sold on old-crop.

Cash-only marketers: NEW ADVICE: Sell 25% of expected 2014-crop production via forward contract for harvest delivery to get to 50% forward priced on new-crop. 90% sold on old-crop.

 

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