Crops Analysis -- July 25, 2012

July 25, 2012 10:00 AM
 

Corn

Advice: Hedgers and cash-only marketers should make a 10% 2011-crop cash sale to get to 100% sold on old-crop in the cash market.

Price action: Corn futures rebounded from losses the past two days and finished with gains of 4 to 11 cents in most contracts.

Fundamental analysis: After two days of profit-taking, focus returned to diminishing crop prospects. Traders feel recent rains and any precip that will develop over the coming days will do no more than help stabilize the crop. As a result, sellers were scarce today.

Adding support was a sharply lower U.S. dollar index and an improved risk appetite amid expectations the Fed is moving closer to a third round of quantitative easing.

Technical analysis: December corn futures are consolidating just below the $8.00 mark, which is the contract high posted to start this week. A close above that level would signal the contract is ready to move the next leg higher.

Hedgers: NEW ADVICE: Make a 10% 2011-crop cash sale to get to 100% sold on old-crop in the cash market. 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.

Cash-only marketers: NEW ADVICE: Make a 10% 2011-crop sale to get to 100% 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

Advice: Hedgers should make a 10% 2011-crop cash sale to get to 100% sold on old-crop in the cash market. Cash-only marketers should make a 15% 2011-crop sale to get to 100% sold on old-crop.

Price action: Soybean futures enjoyed strong "value" buying interest today, to pull the market 40-plus cents higher through the January 2013 contract. Most farther deferred contracts saw gains ranging from the 20s to 40s. Soyoil and soymeal enjoyed strong spillover support.

Fundamental analysis: After two days of sharp selloffs, improved outside markets and ideas the overbought condition of the market had been corrected allowed soybean traders to shift their attention back to the state of the crop today.

Extreme heat across the Corn Belt and Mid-South this week has caused further crop deterioration and the market is not optimistic rains in the forecast will be widespread or heavy enough to ease drought. The "make-or-break" time for the soybean crop is now as the crop needs moisture during pod fill.

Technical analysis: November soybean futures were unable to surpass yesterday's high of $16.28. A move through that price would have bulls' eyeing Monday's contract high of $16.91 1/2. Tuesday's low at $15.36 is key near-term support, followed by the 38% retracement of the rally since June at $15.20.

Hedgers: NEW ADVICE: Make a 10% 2011-crop cash sale to get to 100% sold on old-crop in the cash market. 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.

Cash-only marketers: NEW ADVICE: Make a 10% 2011-crop sale to get to 100% sold on old-crop. 50% sold on expected 2012-crop production for harvest delivery.

 

 

Wheat

Price action: Wheat futures ended high-range with nearby contracts 20-plus cents higher. Deferred contracts ended with slightly lighter gains.

Fundamental analysis: After two days of declines, spillover support from weather-inspired rallies in the corn and soybean markets returned buyers to the wheat pit. This plus a weaker dollar kept attention away from spring wheat harvest pressure and better than expected results from the spring wheat tour.

Besides increased feed use due to lofty corn prices, demand prospects for U.S. wheat have also been aided by production concerns overseas. Trouble areas exist in Europe, the Former Soviet Union, Australia and China. Today rumors circulated Russia may ban wheat exports, although there was no confirmation of this talk.

Technical analysis: September Chicago wheat posted an inside day of trade and ended in the upper quarter of both today and yesterday's price action. Thus, near-term resistance remains at Monday's for-the-year high of $9.47 1/4, while yesterday's low of $8.52 3/4 is support.

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 ended 92 to 152 points lower, which was near session lows.

Fundamental analysis: Fresh news was limited today, which contributed to the weak price tone. The sharp drop in the U.S. dollar index was not enough to spark buying interest, signaling traders' attitudes are negative. Driving those attitudes are concerns the weak global economy will continue to limit Chinese demand for U.S. cotton.

Technical analysis: December cotton futures remain well within the established trading boundaries from the contract low at 64.61 cents to the June high at 74.80 cents. Given that wide range, the contract could chop for a long time without a technical breakout.

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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