Crops Analysis (VIP) -- April 10, 2013

April 10, 2013 09:30 AM
 

Corn

Price action: Corn futures rallied into the close to finish 2 3/4 to 5 cents higher. That was still only good enough for a mid-range close.

Fundamental analysis: USDA didn't raise its corn carryover projection as much as anticipated, increasing it only 125 million bu. from last month to 757 million bushels. This didn't spark an immediate friendly reaction, but it was enough to encourage late short-covering. On the global front, USDA upped its world corn carryover projection by 7.81 MMT, which was much greater than anticipated.

Heavy rains continue to fall across the Corn Belt and the forecast remains cool and wet for at least the next two weeks. As a result, corn planting efforts will be pushed back. Traders aren't concerned yet, but if forecasts pan out, the level of concern could start to build.

Funds were net buyers of an estimated 8,000 contracts (40 million bu.) of corn today. Over the past three sessions, funds have bought 25,000 contracts (125 million bu.) of corn after being aggressive sellers March 28 through April 4. Fund activity is every bit as much important to near-term price action as fundamentals.

Technical analysis: Today's high at $6.66 3/4 is initial resistance for May corn futures, followed by the April 1 gap from $6.79 to $6.95 1/4. The contract must fill that gap to signal a short-term low. To the downside, the April 5 low at $6.26 1/2 is key near-term support. A close below that level would make $6.15 next solid daily chart support.

Hedgers: 100% sold on 2012-crop in the cash market. 10% of expected 2013-crop production is sold via cash forward contract for harvest delivery.

Cash-only marketers: 75% sold on 2012-crop production. 10% of expected 2013-crop production is sold via cash forward contract for harvest delivery.

 

 

Soybeans

Price action: Soybean futures saw choppy, two-sided trade today and settled in the lower half of its daily trading range with losses of 2 3/4 to 5 3/4 cents for the day. Soymeal futures posted slight losses while soyoil finished with marginal gains.

Fundamental analysis: Soybean futures softened following the release of USDA's Supply & Demand Report. The department left its carryover estimate unchanged from March at 125 million bu., which was on the friendly side of expectations. But traders put more focus on USDA's 2.42-MMT increase in its world soybean carryover projection from last month -- most had expected a slight cut to this figure. Also, USDA left its South American soybean projection estimates unchanged, whereas the market had expected a reduction to these estimates. The market's reaction to the report signals tight U.S. bean supplies are considered factored into prices.

Cold, wet weather in the Corn Belt added to pressure on new-crop soybeans as this will delay the start of the planting season and could signal some corn acres may be switched to beans.

Technical analysis: May soybean futures traded through but were unable to sustain buying above the psychological $14.00 mark earlier today, leaving it as near-term resistance. The contract must close above the March 28 high of $14.59 3/4 to signal a low is in place. Support stands at the April low of $13.54 1/2.

Hedgers: 100% sold on 2012-crop in the cash market. 10% of expected 2013-crop production is sold via cash forward contract for harvest delivery.

Cash-only marketers: 75% sold on 2012-crop production. 10% of expected 2013-crop production is sold via cash forward contract for harvest delivery.

 

 

Wheat

Price action: Wheat futures faced pressure throughout the session, but Chicago wheat did move off its lows into the close to settle 7 to 12 cents lower. Kansas City and Minneapolis wheat ended mid- to low-range with losses of roughly 12 to 17 cents.

Fundamental analysis: Ahead of the release of USDA's Supply & Demand Report, traders in the wheat market focused on booking profits and reducing risk. Then when USDA's carryover estimate came in right in line with expectations, traders took a "sell-the-fact" approach to the data. Adding incentive to sell, USDA's global carryover estimate of 182.26 MMT was higher than anticipated.

The report data kept attention away from freezing temps across the Plains as far south as the Texas Panhandle last night, which spell trouble for the winter wheat crop. Traders will likely shift more attention to this as the Monday Crop Condition update nears.

Technical analysis: May Chicago wheat futures traded through and settled below the psychological $7.00 level today. This is now initial resistance, followed by the April high of $7.16. Strong support remains at the April low of $6.59 3/4.

Hedgers: 75% sold on 2012-crop in the cash market. No 2013-crop sales advised yet.

Cash-only marketers: 75% of 2012-crop is sold. No 2013-crop sales advised yet.

 

 

Cotton

Price action: Cotton futures settled 62 to 95 points higher, which was mid-range.

Fundamental analysis: Cotton futures enjoyed strong early gains on short-covering, but gains faded after the release of USDA's Supply & Demand Report. U.S. ending stocks were unchanged from March as higher production was offset by increased use. But on the global front, USDA upped its carryover projection by 710,000 bales.

Now that the report data is factored into the market, focus will turn to tomorrow morning's weekly export sales data. Traders will continue to watch export demand to see if higher prices have curbed foreign buying.

Technical analysis: Key near-term support for May cotton futures is the old consolidation range from 85.24 cents to 81.35 cents. The contract closed back above the top of that range today after closing below it for yesterday.

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

Cash-only marketers: 85% sold on old-crop. 25% of expected 2013-crop production is sold via cash forward contract for harvest delivery.

 

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