Crops Analysis (VIP) -- April 15, 2014

April 15, 2014 10:20 AM
 

Corn

Price action:
Corn futures saw two-sided trade today, with bears holding a slight advantage most of the day. Futures ended 1/2 to 3/4 cents higher in nearbys, while the September and later contracts ended fractionally lower. Funds were even on the day.

Fundamental analysis: Corn futures saw another day of limited trading action, with most contracts chopping around or just above the $5.00 mark. Strong gains in the soybean market helped corn futures pare early losses, but it was not enough to spark active buying interest.

Meanwhile, a return of cold, wet weather in the Midwest this week is limiting selling interest in new-crop contracts, but it is not yet late enough in the season for traders to build weather premium into prices.

Technical analysis: Near-term support remains at the $5.00 mark, as the contract closed back above this level Monday. A close below this price would open downside risk to the $4.75 area that acted as support in March. Resistance is layered from the April 1 high of $5.12 1/2 to this month's high of $5.19.

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 finished 17 1/4 to 25 cents higher through August contract, with the May contract leading the way amid active bull spreading. September beans closed 13 1/2 cents higher. New-crop contracts posted gains of 7 3/4 to 9 cents.

Funds were active buyers in the soy complex on the day, purchasing a net 9,000 contracts (45 million bu.) of soybeans. The also bought a net 4,000 contracts of soymeal and 3,000 contracts of soyoil.

Fundamental analysis: Bull spreading was seen in the soybean market through mid-morning, but that price activity picked up and old-crop futures surged following a bullish NOPA crush report (see "Evening Report" for details). With no signs that current prices are slowing use -- either domestic (crush) or exports -- traders have a fundamental reason to push old-crop futures higher.

While record-large soybean plantings are expected in the U.S. this year and global soybean stocks are plentiful, new-crop soybean futures continue to follow old-crop higher. That's largely because the old-crop/new-crop spread is within a dime of its high of $2.82. That spread can widen, but as long as old-crop futures rally, new-crop will follow.

Technical analysis: May soybean futures got within 2 3/4 cents of the April 9 contract high of $15.12. A push above that level would open the door for the next push higher. Bulls' upside target would then be the 2013 high of $15.58 3/4 on the weekly continuation chart. Uptrending support from the January low, which intersects at $14.69 1/2 Wednesday is initial support, followed by Monday's low at $14.61 1/4 and the March high at $14.60.

Bulls' upside target for November soybean futures is the August/September double-top at $12.35. Flat support is at the March high of $11.98, while uptrending support from the January low intersects at $11.88 Wednesday.

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 sharply higher and near their daily highs. All three flavors of wheat finished around 17 to 23 cents higher. Funds bought 8,000 contracts (40 million bu.) today.

Fundamental analysis: Wheat futures started steady to firmer on weather concerns regarding the HRW wheat crop. But rising tensions in Ukraine sent prices racing mid-morning. News of Ukraine's effort to remove Russian sympathizers from recently seized government buildings is worrisome. Last night's freezing temperatures on the Plains increased traders' concerns about the HRW wheat crop. Forecasts call for more cold temps later this week. Fund traders, following positive technical signals, returned to the market today, adding to buying enthusiasm.

USDA yesterday reported ongoing declines in the condition of the winter wheat crop. This translated to a 6-point drop for the HRW wheat crop on Pro Farmer's Crop Condition Index (0 to 500-point scale with 500 being perfect). The SRW crop posted a 4-point rise.

Technical analysis: July SRW wheat futures easily surged through the beginning of the 25-cent wide resistance area posted in March. If July futures take out the March high, the top of the gap area posted June 24 at $7.42 1/2 would become the next upside target. Yesterday's high at $6.97 1/4 now represents support.

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: Cotton futures ended 99 points lower in the front two contracts while deferred months posted losses of 46 to 73 points.

Fundamental analysis: Cotton futures continued their gradual slide since the spike high in March today, with the front-month settling back below the key 90.00-cent level today. Nearby contracts have thus far respected support at last week's lows however.

The market responded negatively to a reminder China is winding down its cotton stockpiling program this year. Over the past week, China has sold 39% of the cotton reserves it put up for auction. This percentage is about steady with the week prior.

Technical analysis: May cotton futures settled below the 90.00 cent area today, turning that price level back into near-term resistance. Initial support is at Friday's low of 88.63 cents.

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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