Crops Analysis (VIP) -- Advice -- April 10, 2014

April 10, 2014 10:22 AM


Price action:
Corn futures posted losses for most of the day, but the market improved heading into the close. Futures settled narrowly mixed and within 2 cents of unchanged for the day. Funds were even on the day.

Fundamental analysis: Corn futures saw followthrough selling for much of the day as traders continued their sell-the-fact reaction to USDA's smaller-than-expected 2013-14 carryover peg for the U.S. And while this morning's weekly export sales data pointed to still strong demand, recent action indicates that a new source of news is needed to point prices higher.

However, traders are unwilling to push new-crop futures much below the $5.00 mark as corn plantings are expected to be down substantially this year. The recent uptrend in the market represents an effort to buy some acres from soybeans.

Technical analysis: May corn futures settled back above the $5.00 mark today, marking the third consecutive day the contract has done so. This price is initial support, followed by the $4.75 area that halted declines in March. Resistance is layered from the April 1 high of $5.12 1/2 to yesterday's high of $5.19.

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.



Price action: Soybean futures closed lower today with the two front-month contracts falling 12 1/2 to 13 cents, while new-crop futures closed fractionally to 2 cents lower. Old-crop contracts posted low-range closes while new-crop contracts closed near their daily highs.

Fundamental analysis: Soybean futures were under pressure today primarily from profit-taking following recent advances. The market also saw spillover selling from the financial markets, which saw equities slumping sharply along with the U.S. dollar.

Other negative news included reports Chinese firms defaulted on at least 500,000 MT of soybean shipments from the U.S. and Brazil due to their inability to secure credit due to poor crush margins. In addition, new government figures showing significant declines in that nation's exports and imports boosted concerns about the nation's economy. In addition, Brazil's Conab raised its soybean production peg by 700,000 MT to 86.1 MMT after slashing the estimate last month due to drought.

On the plus side, USDA's weekly export sales report showed sales of 79,100 MT for 2013-14 and 210,400 MT for 2014-15, which was in line with expectations. Exports of 700,400 MT were up 6% from the week prior, with China as the lead recipient. Funds sold 6,000 contracts (30 million bu.) today.

Technical analysis: May soybean futures fell after failing to move above the $15.00 level. But that contract appears to be finding support at the $14.80 area, which matches several recent highs. The $14.50 to $14.60 area is a more significant level of support and also coincides with the steep January-March uptrend line. If that support breaks, the $14.10 area would become a target as it represents a 38% retracement of the rally from winter low.

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.



Advice: We advised hedgers to sell another 25% of expected 2014-crop production to get to 75% forward priced. We advised cash-only marketers to sell another 10% of expected 2014-crop production to get to 60% forward sold.

Price action: Wheat futures closed lower with HRW and HRS posting double-digit declines and SRW wheat futures finishing 6 1/2 to 7 1/4 cents lower. SRW wheat futures closed mid-range while HRW and HRS finished near their daily lows.

Fundamental analysis: Forecasts for precipitation this weekend and again late next week over HRW wheat country sent HRW wheat futures tumbling, which pulled down the HRS and SRW wheat contracts. In addition, traders were somewhat disappointed in today's weekly export figures released by USDA, which came in slightly below trade expectations. That news in addition to USDA's boosting of global wheat supplies peg keeps traders on the sell side of the market.

Futures also felt some pressure in spillover from the selloff in the financial markets. Funds sold 4,000 contracts (20 million bu.) today.

Technical analysis: May SRW wheat futures slumped to a new low since posting a high in March. That low came at a support zone resting at the $6.60 area. The winter uptrend line provides additional support at about $6.55 Friday, which roughly coincides with today's low. The $6.90 area offers resistance, which coincides with the 14-day moving average.

Hedgers: NEW ADVICE: Sell another 25% of expected 2014-crop production to get to 75% forward priced. 100% sold on 2013-crop.

Cash-only marketers: NEW ADVICE: Sell another 10% of expected 2014-crop production to get to 60% forward priced. 90% sold on old-crop.



Price action:
Cotton futures ended split amid bull spread unwinding. Nearbys posted losses of 114 to 142 points, while new-crop posted gains of 22 to 50 points.

Fundamental analysis: Hefty losses in nearby cotton contracts did some technical damage on the charts, possibly signaling more downside is ahead. Pressure stemmed from today's weekly export sales report that reflected a marked slowdown in demand. A net sales reduction of 10,900 RB for 2013-14 was a major disappointment and a marketing year low. Net sales of 119,300 RB for 2014-15 were decent, however. Exports were also strong at 303,900 RB.

Technical analysis: May cotton futures settled below key psychological support at 90.00 cents for the first time since early March, turning it into resistance. But bears have the advantage after a low-range close. They will target the October high of 87.54 cents.

Hedgers: 75% of 2013-crop is sold in the cash market. 25% of expected 2014-crop production is sold via cash forward contract for harvest delivery.

Cash-only marketers: 75% of 2013-crop is sold. 25% of expected 2014-crop production is forward sold for harvest delivery.

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