Crops Analysis -- July 18, 2012

July 18, 2012 10:21 AM
 

Corn

Price action: Corn were lower much of the day but firmed around midday. The September through July contracts ended 10 3/4 to 15 1/2 cents higher, with deferred contracts mostly around a penny lower.

Fundamental analysis: Traders viewed early weakness brought on by profit-taking as a buying opportunity given ongoing drought conditions. Scattered showers are bringing relief to areas of the Corn Belt today, but for some areas, the rains are too late to provide much benefit.

Technical analysis: September corn futures came within 2 3/4 cents of matching the all-time high of $7.99 3/4 on the monthly continuation chart. A move above this key level could set the stage for the next move higher, while failure to move above this level would increase talk the market is topping.

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.

 

Soybeans

Price action: Soybean futures finished with strong gains in the August through January 2013 contracts. March 2013 soybeans posted lesser gains, while far-deferred futures ended lower for the day. August soybean futures posted an intra-day high of $16.85 1/2, which represents a new all-time high on the weekly continuation chart.

Fundamental analysis: Old-crop soybean futures led the price surge today as traders search for a price that actively slows demand amid tight supplies and declining new-crop potential. Strength in soybean basis also helped fuel the old-crop led price surge.

Scattered rains are working across the areas of the Corn Belt, but there's little confidence the rains will provide widespread relief from the drought. Some forecasters are also calling for better rain chances next week, although traders have little confidence in this outlook as forecast rain events have not been panning out.

Technical analysis: November soybean futures closed above $16.00 and posted a new contract high of $16.22. Bulls' next objective is the psychological $16.50 mark.

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.

 

Wheat

Price action: Wheat futures saw a volatile day of trade, but bulls gained the late upper hand. All three locations ended with gains through the May 2013 contract. Far-deferred months closed slightly lower in Kansas City and Chicago.

Fundamental analysis: Action in the wheat pit closely mirrored choppy trade in the corn market today. As corn rallied into the close on concern about heat and dryness in the Corn Belt, so did wheat. The dollar's move off its early highs to near unchanged also made it easier for wheat to join the late rally.

Fundamental support for wheat futures stems from production concerns in areas of Europe, Australia, China and the Black Sea region. Most recently, Russia's ag ministry lowered its grain output forecast to a range of 80 million metric tons (MMT) to 85 MMT, which compares to the ag minister's 85 MMT projection earlier this week. The ministry also cut its export forecast to 16 MMT, which compares to the minister's 18 MMT to 20 MMT outlook.

Technical analysis: September Chicago wheat futures closed above key psychological resistance at $9.00 today, turning it into near-term support. Bulls' next target is the February 2011 spike high of $9.37 1/2 followed by the contract high of $9.63 1/4.

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.

 

Cotton

Price action: Cotton futures saw a round of short-covering today, which helped futures to settle mid-range with gains ranging from 90 to 110 points.

Fundamental analysis: Cotton futures enjoyed spillover support from the late rally in the corn and soybean markets today on heightened drought concerns. News China has no plans at present to sell 300,000 metric tons of cotton from state reserves was also supportive, although CottonChina.org also squashed rumors that the country would increase import quotas.

Technical analysis: December cotton futures settled midrange and within their recent consolidation trading range. Initial support stands at last week's low of 69.66 cents, followed by the contract low of 64.61 cents. The June high 74.80 cents marks the top of the range.

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.
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