Crops Analysis (VIP) -- Advice -- January 9, 2014

January 9, 2014 08:48 AM
 

Corn

Advice:
Hedgers are advised to make a 35% 2013-crop cash sale; cash-only marketers are advised to make a 25% 2013-crop sale. Hedgers and cash-only marketers are advised to sell 20% of expected 2014-crop production via cash forward contract sale for harvest delivery.

Price action: Corn futures slumped after opening about steady but firmed somewhat near the end of trading to post a midrange close. Futures finished 4 1/4 to 5 cents lower. Funds sold an estimated 9,000 contracts (45 million bu.) of corn today.

Fundamental outlook: Corn futures moved lower on a disappointing export sales report of just 155,300 MT for 2013-14. However, light sales over the holiday season are not unusual. But weakness in Gulf basis for immediate delivery added to concerns of a slowdown in export demand. Adding to today's negative tone was news Brazil's Conab raised its peg of the Brazilian corn crop by 190,000 MT to 78.97 MMT.

Traders are looking ahead to tomorrow's USDA reports expecting USDA to raise the size of the 2013 crop to 14.053 million bu. and for 2013-14 carryover to rise to around 1.84 billion bushels. The grain stocks data is expected to reflect near-record 1st-qtr. usage.

Technical outlook: March corn futures broke through recent support, eliminating hopeful signs of a seasonal bottom. The technical picture is decidedly bearish. The recent support area starting at around $4.18 is now resistance with the psychological mark of $4.00 the next downside support area.

Hedgers: NEW ADVICE: Make a 35% 2013-crop cash sale to get to 60% sold in the cash market on old-crop. Also, sell 20% of expected 2014-crop production via cash forward contract sale for harvest delivery.

Cash-only marketers: Make a 25% 2013-crop cash sale to get to 50% sold in the cash market on old-crop. Also, sell 20% of expected 2014-crop production via cash forward contract sale for harvest delivery.

 

Soybeans

Advice: Hedgers and cash-only marketers are advised to make a 10% cash forward contract sale on expected 2014-crop production for harvest delivery.

Price action: Soybean futures started the day firmer, but ended mixed. January beans ended 4 1/4 cents lower, with March through July up around 4 cents. Deferred futures ended marginally to around 2 cents lower.

Fundamental outlook: Choppy price action was attributed to traders evening positions ahead of tomorrow's USDA reports. Early buying was also limited by a disappointing weekly export sales tally, although Gulf basis for immediate delivery rose 11 cents overall today to reflect a flurry of export business.

Focus in the market early tomorrow will be on traders putting their finishing touches on positions ahead of USDA's reports. Traders look for USDA to raise the size of the 2013 soybean crop, but for carryover to climb by less than 1 million bu. from last month's 150-million-bu. peg. Traders expect the Quarterly Grain Stocks Report to reflect strong first-quarter usage, which, if realized, could re-energize market bulls.

Technical outlook: January soybean futures returned above the $13.00 level but closed back below it, signaling it as an important level of resistance. Support lies at last week's low of $12.80 1/4, which, if violated, could trigger sell stops.

Hedgers: NEW ADVICE: Make a 10% cash forward contract sale on expected 2014-crop production for harvest delivery. 100% sold in the cash market on 2013-crop production.

Cash-only marketers: NEW ADVICE: Make a 10% cash forward contract sale on expected 2014-crop production for harvest delivery. 75% sold on 2013-crop production.

 

Wheat

Advice: Hedgers and cash-only marketers are advised to make a 25% 2013-crop cash sale to get hedgers to 100% sold and cash-only marketers to 75% priced on old-crop. Hedgers and cash-only marketers are also advised to sell 35% of expected 2014-crop production via cash forward contract for harvest delivery.

Price action: Wheat futures were choppy today, with pressure limited by funds covering short positions ahead of tomorrow's USDA reports. SRW wheat ended mostly 3 to 5 cents lower, with HRW and HRS ending mixed.

Fundamental outlook: Early pressure was tied to a disappointing weekly export sales report, as sales for 2013-14 were a new marketing year low. But a mixed tone in outside markets contributed to today's choppy tone.

Focus in the market early tomorrow will be on traders putting their finishing touches on positions ahead of USDA's key reports. The winter wheat acreage data will set the tone for the market into spring and traders look for USDA to show acreage up from year-ago. An increase in 2013-14 carryover is expected, as traders look for USDA to revise its export forecast.

Technical outlook: March SRW wheat futures posted a downside day of trade on the daily chart and posted a contract low of $5.78 1/2. Futures ended mid-range, but bears hold the clear near-term advantage. To signal a near-term low has been posted, futures need to return above Monday's high of $6.12 3/4.

Hedgers: NEW ADVICE: Make a 25% 2013-crop cash sale to get to 100% sold on old-crop. Also, sell 35% of expected 2014-crop via cash forward contract for harvest delivery.

Cash-only marketers: NEW ADVICE: Make a 25% 2013-crop sale to get to 75% sold on old-crop. Also, sell 35% of expected 2014-crop production via cash forward contract for harvest delivery.

 

Cotton

Price action: Cotton futures were highly choppy today, with early gains giving way to profit-taking ahead of tomorrow's USDA reports. Futures ended 2 to 43 points lower, which was near or at session lows.

Fundamental outlook: Traders will wrap up their position evening tomorrow morning ahead of the 11:00 a.m. CT USDA reports. Traders look for USDA to trim the size of the 2013 crop by 100,000 bales to 13.0 million bales and for USDA to increase its export forecast by 100,000 bales to 10.5 million bales. But traders look for a reduction in domestic use to result in an increase in carryover.

This morning's weekly export sales data reflected a slowdown in sales over the holidays, but exports of 211,300 running bales were up 48% from the previous week.

Technical outlook: March cotton futures posted a low-range close, but held above support at Monday's low of 82.66 cents. Resistance is at last week's high of 85.29 cents.

Hedgers: 50% of 2013-crop is sold in the cash market.

Cash-only marketers: 50% sold on 2013-crop production.

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