Crops Analysis (VIP) -- Advice -- September 5, 2013

September 5, 2013 10:02 AM
 

Corn

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Price action: Corn futures faced pressure throughout the day and the market ended low-range with losses of 8 1/2 to 10 1/2 cents in all but the September contract, which settled 4 1/2 cents lower. Funds sold 7,000 corn contracts (35 million bu.) today.

Fundamental analysis: Corn futures continue to struggle to attract any buying interest as the market still expects the U.S. to produce a record-large crop, heat and dryness concerns are seen as overstated and export demand has been more sensitive to price jumps for corn than with soybeans. Chances for light rain in some areas of the Midwest over the next five days added to the negative tone, as did a slight decline in weekly ethanol production.

Meanwhile, private crop watchers have lowered their corn production forecast this week in response to recent and ongoing heat and building drought conditions.

Gulf basis jumped 13 cents for September delivery at midday, possibly signaling some bargain buying by exporters.

Technical analysis: December corn futures traded through and closed below initial support at the Aug. 23 low of $4.63 1/2, signaling a test of the August low of $4.45 3/4 is likely. Tough resistance remains at the August high of $5.08 1/4.

Hedgers: 100% sold on 2012-crop in the cash market. 25% of expected 2013-crop production is sold via cash forward contract for harvest delivery.

Cash-only marketers: 100% sold on old-crop. 25% of expected 2013-crop production is sold via forward contract for harvest delivery.

 

Soybeans

Price action: Soybean futures saw followthrough selling early in today's session, but ahead of midday, this gave way to bargain buying. Futures ended 7 1/4 to 25 1/4 cents higher with nearby contracts leading to the upside. Soymeal also enjoyed strong gains, while soyoil finished slightly lower.

Fundamental analysis: Some forecasts calling for a bit better rainfall amounts in areas of the Corn Belt this week initially pressured the soybean market, but this eventually gave way to some bargain buying. Accumulation from any rainfall is still not expected to be significant or widespread, and previous price dips have been met with strong export buys. The market will get a read on this in tomorrow's export sales report.

Also lifting the bean market was recognition by private crop watchers that recent and ongoing heat and dryness have dragged down the crop's yield potential. More condition rating declines are likely in Monday's update from USDA.

Technical analysis: November soybean futures traded in a wide range today and dipped into the wide August gap area. But the contract ultimately failed to close this gap and ended just off session highs. Followthrough buys overnight would have bulls targeting the psychological $14.00 mark. Support remains at the bottom of the August gap at $13.31 1/2.

Hedgers: 50% of expected 2013-crop production is sold via a forward-price cash contract for harvest delivery. 100% sold on 2012-crop in the cash market.

Cash-only marketers: 50% of expected 2013-crop production is sold via a forward-price cash contract for harvest delivery. 100% sold on 2012-crop in the cash market.

 

Wheat

Price action: SRW wheat futures faced pressure throughout the day and ended 5 1/2 to 7 1/4 cents lower. Other flavors softened into the close to end mostly around 8 cents lower for HRW wheat and 9 to 10 cents lower for HRS wheat.

Fundamental analysis: Wheat futures remain in a follower's role to corn with action in the wheat pit closely mirroring that of corn today. This along with strength in the U.S. dollar index set the stage for another downside day of trade for the market.

Egypt's GASC issued its fourth international wheat tender in the past two weeks after the close. Very likely, Egypt will buy Black Sea origin supplies, which will be another reminder that U.S. wheat isn't competitively priced on the global market.

While the Black Sea region is actively exporting wheat onto the world market, Russia's deputy ag minister said today Russian wheat exports for 2013-14 may be less than initially thought.

Technical analysis: December SRW wheat futures came within 1 1/4 cent of the contract low at $6.35 1/2 today. The next level of support on the weekly continuation chart is at the August low of $6.23. Resistance remains at the rough triple-top around $6.79 3/4.

Hedgers: 50% of 2013-crop is sold in the cash market. 100% sold on of 2012-crop.

Cash-only marketers: 25% of 2013-crop is sold. 100% sold on 2012-crop.

 

Cotton

Price action: Cotton futures faced light pressure for much of the day and the market ended likewise with losses of 13 to 43 points.

Fundamental analysis: News Indian cotton exports are expected to fall by 22% this year, in part due to a major drop in Chinese purchases, weighed on the U.S. cotton market; this raises concerns about the country's cotton export demand as a whole. Last week, the country completed a draft plan to scrap its stockpiling program for cotton. Tomorrow's Weekly Export Sales Report will provide a read on the country's export demand. Recent reports have been disappointing.

Strength in the U.S. dollar index and a risk-off approach in the grain markets added pressure.

Technical analysis: December cotton futures continue to inch their way toward tough support at the June low of 81.72 cents. A move through this level would open downside risk to the psychological 80.00 cent area.

Hedgers: 50% of expected 2013-crop production is hedged in December cotton futures at 83.87 cents. 50% of expected 2013-crop production is also sold via cash forward contract for harvest delivery. 100% sold on 2012-crop in the cash market.

Cash-only marketers: 50% of expected 2013-crop production is sold via cash forward contract for harvest delivery. 100% sold on 2012-crop.

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