Crops Analysis (VIP) -- April 14, 2014

April 14, 2014 09:50 AM
 

Corn

Price action:
Corn futures finished around 4 cents higher through the July 2015 contract. Farther-deferred contracts posted gains of roughly 2 to 3 cents. Futures closed in the upper end of today's range, but off session highs.

Fundamental analysis: The primary source of support was spillover from strong gains in the wheat market. But corn also got a lift from weather. Saturated soils, some new snowcover and cold temps will stall planting efforts across much of the Corn Belt this week. USDA's initial corn planting figures of the spring will show the pace below the five-year average as of Sunday, but the level of concern is not too great at this time.

Funds were buyers in the corn market, purchasing a 7,000 contracts (35 million bu.). Over the past five sessions, funds are flat -- neither net buyers nor sellers. However, four of those five days have seen active fund participation.

Technical analysis: The uptrend from the January low remains firmly intact for May corn futures. As long as that's the case, there isn't a strong urgency for traders to sell corn. But the contract must push above last week's high at $5.19 to extend the rally. Key near-term support lies at the March 11 low at $4.73 1/4.

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.

 

Soybeans

Price action: Soybean futures ended 13 1/4 to 16 1/4 cents higher in old-crop contracts. September finished 9 1/4 cents higher and new-crop posted gains around 5 cents.

Fundamental analysis: Traders returned to the market with favorable attitudes to start the week. Unfavorably cold weather and Black Sea region tensions lifted the grain markets, which translated to support for the bean market, too. Strong gains were impressive considering strength in the U.S. dollar index. Traders were also encouraged by the fact the old-crop contracts again found support at last week's low.

And while weekly soybean export inspections of 267,939 MT fell short of expectations, the pace of inspections picked up and remains above what is needed to meet USDA's export forecast.

Technical analysis: May soybean futures continue to consolidate just above the $14.60 area that acted as support this month and as resistance in March. Resistance is layered between the psychological $15.00 mark and Wednesday's spike high of $15.12.

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.

 

Wheat

Price action: Wheat futures finished mostly 18 to 22 cents higher in HRW contracts, mostly 15 to 18 cents higher in SRW contracts and mostly 15 to 16 cents higher in HRS contracts. Despite the strong gains, most contracts ended mid-range.

Fundamental analysis: Traders responded to weather today as weekend rainfall was disappointing through southwestern portions of the Plains over the weekend. In addition, overnight temps dipped below freezing in some areas and even colder temps are forecast for tonight. As a result, there's risk of some freeze damage as far south as the Texas Panhandle. Key will be how far temps dip and for how long. Generally, it takes temps at 24 degrees or colder for at least two hours to impact jointing wheat.

Building tensions between Ukraine and Russia were also supportive today. Despite grain exports remaining normal to this point, there are concerns shipments will decline if geo-political unrest builds.

Funds were net buyers of 7,000 contracts (35 million bu.) of SRW wheat today.

Technical analysis: After posting a double-bottom at $6.63 3/4 last Thursday and Friday, price action in July SRW wheat futures today signals a short-term low may be in place. But to confirm a short-term low, the contract must push above downtrending resistance from the March high. That trendline intersects around today's high of $6.97 1/4 on Tuesday, marking that level as key near-term resistance.

Hedgers: 75% of expected 2014-crop production is sold via cash forward contract sale for harvest delivery. 100% sold on 2013-crop.

Cash-only marketers: 60% of expected 2014-crop production is sold via forward contract sale for harvest delivery. 90% sold on old-crop.

 

Cotton

Price action: May and July cotton futures ended 189 and 183 points higher, respectively. October cotton futures finished 55 points higher, while the December contract forward posted slight losses for the day.

Fundamental analysis: Traders covered short positions in the cotton market today amid ideas recent losses were overdone and amid strength in the grain and soy contracts. Support also came from the weather as the driest areas of Texas again missed out on the weekend rain event through the Plains. A hard freeze is expected through parts of Oklahoma and Texas tonight, but the impact to cotton should be limited.

Old-crop cotton futures rallied in the face of dollar strength today. Technically, the dollar index is suggesting a short-term low is in place. If the greenback builds on today's gains, it could limit buying interest in cotton futures.

Technical analysis: Today's price action suggests May cotton futures may have posted a short-term low Friday. But the technical picture still favors bears. Bulls need a close above the 93.00-cent area to suggest a challenge of the March 26 spike high at 97.35 cents is likely. Last Friday's low at 88.63 cents is a key level bulls must defend.

Hedgers: 100% sold on old-crop. 25% of expected 2014-crop production is sold via cash forward contract for harvest delivery.

Cash-only marketers: 90% sold on old-crop. 25% of expected 2014-crop production is forward sold for harvest delivery.

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