Crops Analysis (VIP) -- Advice -- January 27, 2014

January 27, 2014 08:58 AM
 

Corn

Price action:
Corn futures close 2 to 3 cents higher and near their highs for the day in very thin trading. Funds bought an estimated 6,000 contracts (30 million bu.) today.

Fundamental analysis: Corn futures again traded in a very narrow range as traders had little news to digest. What news they did have, however, tended to be positive as it continued to demand is rebuilding. USDA started the day with an announced sale of 119,888 MT to an unknown destination for 2013-14. The mid-morning export inspections data showed corn inspections above expectations.

As result of demand improvement, Gulf corn basis saw a lift at midday. This could also signal more demand news lies ahead. However, traders viewed recent rains in Argentina as reducing crop concerns in that country. But the forecast is for temps to again rise this week

Technical analysis: March corn futures posted an upside day of trade on the daily chart to climb above last week's high of $4.31 1/4. Above that, resistance is at the January high of $4.36. Support begins at last week's low of $4.21 and extends to the contract low of $4.06 1/4.

Hedgers: 60% sold in the cash market on 2013-crop. 20% of expected 2014-crop production is sold via cash forward contract sale for harvest delivery.

Cash-only marketers: 50% sold in the cash market on 2013-crop. 20% of expected 2014-crop production is sold via cash forward contract sale for harvest delivery.

 

Soybeans

Price action: Soybean futures were choppy today, with nearbys ending 1 to 3 cents higher amid bull spreading with deferred contracts, which ended 1 1/4 to 8 1/4 cents lower. Meal also ended mixed, with soyoil weaker amid profit-taking. Funds bought 2,000 contracts (10 million bu.) today.

Fundamental analysis: Soybean futures favored a weaker tone today, but saw periods of strength from continued strong demand. This morning, USDA announced an unknown buyer purchased 183,000 MT of soybeans for 2014-15 and weekly export inspections were above expectations and topped year-ago by a wide margin. But news that a Brazilian shipping agent expects the country to export a record 2.5 MMT of soybeans in February remained on traders' minds, as it reminds them Brazilian supplies should soon be readily available, as well as of the possibility that China could cancel U.S. soybean purchases.

Traders are also keeping an eye on South American weather, which is a mixed bag. Dry areas of southern Brazil are a concern, but overall a record South American crop still seems likely.

Technical analysis: March soybean futures finished mid-range, but still inched out a slight upside day of trade on the daily chart. But November soybean futures ended near session lows and matched support at Friday's low of $11.01. Next support for new-crop soybeans is this month's low of $10.95, with resistance at the Jan. 17 high of $11.29.

Hedgers: 100% sold in the cash market on 2013-crop production. 10% of expected 2014-crop production is sold via cash forward contract sale for harvest delivery.

Cash-only marketers: 75% sold on 2013-crop production. 20% of expected 2014-crop production is sold via cash forward contract sale for harvest delivery.

 

Wheat

Price action: Wheat futures saw a choppy day of trade, but most contracts ended at or near session lows with losses. SRW wheat ended roughly 1 to 2 cents lower, while the HRW and HRS markets saw losses ranging from 1 to 6 cents.

Fundamental analysis: Traders in the wheat market weighed crop concerns against lackluster demand for U.S. wheat. Wheat found support at times today from cold temps across winter wheat country, with much of the crop exposed to the elements. But as has been the case in recent weeks, demand concerns have outweighed production issues as the impact of bitter cold on the crop will not be known until it exits dormancy this spring.

Weekly wheat export inspections came in near the low end of expectations and expectations were far from impressive. But somewhat offsetting this was news Saudi Arabia included the U.S. in its purchase of 715,000 MT of wheat for 2014-15.

Technical analysis: March SRW wheat futures continue to consolidate above tough contract-low support at $5.60 1/2. Resistance is layered from the Jan. 14 high of $5.80 to the psychologically significant $6.00 level.

Hedgers: 100% sold on 2013-crop in the cash market. 35% of expected 2014-crop production is sold via cash forward contract for harvest delivery.

Cash-only marketers: 75% sold on old-crop. 35% of expected 2014-crop production is sold via cash forward contract for harvest delivery.

 

Cotton

Advice: Hedgers and cash-only marketers were advised to make a 25% 2013-crop cash sale to get to 75% priced on old-crop. Hedgers and cash-only marketers were also advised to sell the first 25% of expected 2014-crop production via cash forward contract sale for harvest delivery.

Price action: Cotton futures faced heavy pressure and ended off sessions lows with losses of 155 to 296 points, with nearbys leading losses.

Fundamental analysis: Cotton futures posted a series of lower highs last week as the market gave signals that its rally may have run its course. Traders returned to the market this week with profit-taking in mind. Selling pressure snowballed and the market broke through key levels of support, including its uptrend since November.

While weekly export sales data of late has reflected strong demand, there is concern this could change if prices continue to rise. Also, cotton production is expected to rise in 2014; this added to pressure on deferred contracts.

Technical analysis: March cotton futures took out support at the July double-top around 85.75 cents and the December high of 85.29 cents, triggering a round of technical selling and pushing the contract through 85.00 cents and 84.00 cents. The dip through 84.00 cents triggered some value buying, however, and the contract settled above that price, marking it as tough support.

Hedgers: NEW ADVICE: Make a 25% 2013-crop cash sale to get to 75% priced on old-crop. Also sell the first 25% of expected 2014-crop production via cash forward contract sale for harvest delivery.

Cash-only marketers: NEW ADVICE: Make a 25% 2013-crop cash sale to get to 75% priced on old-crop. Also sell the first 25% of expected 2014-crop production via cash forward contract for harvest delivery.

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