Crops Analysis -- July 26, 2012

July 26, 2012 10:14 AM
 

Corn

Price action: Corn futures ended low-range with the September and December contracts down 13 1/4 and 11 3/4 cents, respectively. Other contracts posted losses of 4 to 9 cents.

Fundamental analysis: Corn futures enjoyed slight gains this morning thanks to a sharply weaker U.S. dollar index and recognition recent and forecast rains will at best stabilize the crop. But spillover from soybeans and net sales reductions for the 2011-12 and 2012-13 marketing years in this morning's Weekly Export Sales Report that signal high prices have reduced export demand gave bears the advantage.

Technical analysis: December corn futures saw an inside day of trade, thus leaving support intact at Tuesday's dip to $7.45 1/2 and resistance at Monday's contract high of $8.00. The contract continues to consolidate just below this level.

Hedgers: 100% sold on 2011-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: 100% sold on 2011-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 faced pressure most of the day and softened into the close to settle low-range with losses of 34 1/4 to 48 cents in the August through March 2013 contracts; farther deferred months saw lighter losses. Soymeal futures posted sharp losses, while soyoil futures were moderately lower.

Fundamental analysis: Soybean futures initially held up well in the face of profit-taking thanks to a weaker dollar and an export sales tally that topped expectations and signaled significant demand rationing has yet to take place.

But the main market price driver today was the occurrence of rain overnight and today with more precip in the five-day forecast. These rains are especially timely as the bean crop is flowering and setting and filling pods. Coverage and amounts of rain events into early next week will be key as soils in the Corn Belt and Mid-South are extremely dry.

Technical analysis: Despite the sharp decline, November soybean futures posted an inside day of trade, which leaves near-term support at yesterday's low of $15.36 while strong resistance stands at Monday's contract high of $16.91 1/2.

Hedgers: 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: 100% sold on old-crop. 50% sold on expected 2012-crop production for harvest delivery.

 

 

Wheat

Price action: Wheat futures saw choppy trade today and heavily favored the downside into the close. Chicago wheat ended 1 1/4 to 19 1/4 cents lower; Kansas City wheat closed mostly 6 3/4 to 14 cents lower. Minneapolis wheat futures ended with losses in the teens to 20s. Nearby contracts led losses at all locations.

Fundamental analysis: Wheat futures need strength in the corn market to rally; when that faded this morning, wheat futures also softened. Adding incentive to take profits was a disappointing weekly export sales tally of 367,000 metric tons (MT) for 2012-13. Generally better than expected yield results from the spring wheat tour weighed on Minneapolis wheat.

But wheat's downside remains limited by much-improved export prospects for U.S. wheat due to unfavorable weather overseas, especially in the Black Sea region. The International Grains Council reminded the market of this today when it lowered its global grain production and ending stock estimates for 2012-13.

Technical analysis: December Chicago wheat futures saw an inside day of trade, so support remains at Tuesday's low of $8.64 1/4 while Monday's high of $9.53 1/4 is resistance.

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 enjoyed corrective short-covering today, which helped futures to close high-range with gains of 146 to 188 points.

Fundamental analysis: Sharp losses in the U.S. dollar index along with improved investor risk appetite on an easing of euro-zone concerns and positive US jobs data returned buyers to the cotton market today. Also, weekly cotton export sales were decent if not inspiring. USDA reported sales of 9,700 running bales (RB) for 2011-12 and 132,600 RB for 2012-13.

Technical buying interest increased when December cotton futures traded through psychological resistance at 70.00 cents.

Technical analysis: December cotton futures continue to chop between the June high of 74.80 cents and the late-June low of 67.16 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.

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