Price action: Corn futures closed 30-plus cents higher in the September through March 2013 contracts, with the May and July 2013 contracts not far behind. Far-deferred months posted gains mostly in the 10- to 12-cent range. Funds bought an estimated 20,000 contracts (100 million bu.) of corn today.
Fundamental analysis: Traders continue to actively build premium into the market amid deteriorating crop conditions and declining yield potential. Forecasts call for hot temps this week, with heat advisories and warnings in effect across much of the Corn Belt through mid-week. Scattered showers are possible in some areas mid-week, but overall the outlook is dry. The 6- to 10-day forecast signals conditions will remain hot and dry next week.
While crop problems in the driest areas have been well documented, concerns are starting to mount in the "good" areas as the drought is spreading. That definitely gives traders a reason to keep corn futures charging higher, but the high prices will eventually slow demand. As a result, traders are watching for signs of demand erosion to signal prices have rallied far enough.
Technical analysis: Corn futures hit a high of $7.80 1/4 on the weekly continuation chart today, meaning the only remaining resistance is the all-time high of $7.99 3/4 posted in June of last year. December corn futures posted a contract high of $7.78 today.
Hedgers: 40% of expected 2012-crop production is covered in Dec. $6.50 put options for 31 1/2 cents. 35% cash forward sold on expected 2012-crop production -- 25% for harvest delivery; 10% for March 2013 delivery. 90% sold on old-crop in the cash market.
Cash-only marketers: 90% sold on old-crop. 35% forward priced on expected 2012-crop production -- 10% for harvest delivery; 10% for March 2013 delivery; and 15% for May 2013 delivery.
Price action: Bulls' maintained a solid grip on the soybean market today and pulled futures to a high-range close. Futures ended 30-plus cents higher through the July 2013 contract, with nearby contracts leading the advance. Soyoil and soymeal also posted strong gains.
Fundamental analysis: Traders worked to build additional weather premium into prices today after weekend rains weren't widespread or heavy enough to reduce the drought's grip and the forecast calls for building heat with limited precip chances. As a result, traders expect crop condition ratings to continue to fall. These crop concerns emphasize that rationing will be needed to make supplies last. Export inspections data as of the week ended July 12 signaled this has yet to occur.
Additional support came from better-than-expected soy crush data from NOPA this morning and a weaker U.S. dollar index.
Technical analysis: November soybean futures gapped higher on the open and rallied to a new contract high within 1 1/2 cents of the psychological $16.00 level; this remains bulls' target. Last week's high of $15.75 is now support, followed by the $15.00 mark and the July 5 gap from $14.93 to $14.78.
Hedgers: 25% of expected 2012-crop production is covered in Nov. $14.00 put options for 42 3/8 cents. 50% of expected 2012-crop production is sold via cash forward contract for harvest delivery. 90% sold on old-crop in the cash market.
Cash-only marketers: 85% sold on old-crop. 50% sold on expected 2012- crop production via forward contract for harvest delivery.
Price action: Wheat futures closed 30-plus cents higher at all three exchanges in the nearby contracts, which was good for a high-range close.
Fundamental analysis: Early support came on spillover from the corn market, as traders recognize wheat has become a competitive feed alternative to corn. September Chicago wheat widened its premium to September corn futures today.
Adding to early support was USDA's announcement of a 107,214 metric ton (MT) wheat sale to Japan for 2012-13. But more concerning are global crop prospects. Russia returned to the headlines as conditions remain poor for its developing crop -- adding to ideas of stepped up demand for U.S. wheat.
Technical analysis: Chicago September wheat has completed a 75% retracement of the decline from the contract high ($9.63 1/4 on May 26, 2011) to the contract low ($6.06 3/4 on May 14, 2012). That make bulls' next target the contract high. Support now lies at the August 2011 high of $8.53 1/2.
Hedgers: 75% cash sold on 2012-crop for harvest delivery. 100% sold on 2011-crop in the cash market.
Cash-only marketers: 75% of 2012-crop production is sold for harvest delivery. 100% sold on 2011-crop.
Price action: Price action in the cotton pit was rather lackluster today, with futures seeing a very narrow price range. Futures ended 25 to 64 points higher on help from dollar weakness.
Fundamental analysis: The inability of the cotton market to benefit from spillover from strength in the corn and soybean markets signals traders are more focused on the plentiful global supply situation than they are about the expanding and worsening drought. The cotton market needs a round of fresh demand news or a global supply scare to interest bulls.
Cotton came off its session lows as the U.S. dollar index softened as this also lifted key markets like crude oil.
Technical analysis: December cotton futures closed above last week's high of 72.76 cents, but needs closes above the June high of 74.80 cents to open upside potential to the 80.00-cent level. Support begins at last week's low of 69.66 cents and extends to the contract low of 64.61 cents.
Hedgers: 100% sold on old-crop in the cash market. 50% priced on expected new-crop production via cash forward contract for harvest delivery.
Cash-only marketers:100% sold on old-crop. 50% priced on expected new-crop production via forward contract for harvest delivery.