Crops Analysis (VIP) -- April 16, 2013

April 16, 2013 09:36 AM
 

Corn

Price action: Corn futures strengthened as the day progressed and ended 16 1/2 and 12 3/4 cents higher in May and July futures, respectively. The rest of the market ended with gains of 5 1/4 to 9 1/2 cents.

Fundamental analysis: After actively dumping commodities yesterday, traders returned today with an appetite renewed by weakness in the U.S. dollar index. Funds bought 14,000 contracts (70 million bu.) of corn today.

Old-crop corn futures benefited from concerns about tight old-crop supplies and what-if questions regarding a late start to the 2013 planting season. Corn planting is just 2% complete as of Sunday and the forecast, if realized, would keep farmers out of the fields for at least another week -- more precip is expected this week and temps are expected to remain below-normal over the next 10 days.

Technical analysis: May corn futures staged a bullish reversal today. Followthrough buying tomorrow would have bulls targeting former support at the February low of $6.80 3/4, followed by the top of the April 1 downside gap at $6.95 1/4. Support remains at the April 5 low of $6.26 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.

 

 

Soybeans

Price action: Soybean futures finished 14 to 19 1/4 cents higher through the August contract, while new-crop futures were 11 3/4 to 13 cents higher. That was near session highs.

Fundamental analysis: Soybean futures bounced back from Monday's hefty losses with a round of solid corrective gains today. The high-range close suggests additional short-covering is possible, but a lack of followthrough could trigger fresh selling as bears have momentum.

In addition to the corrective buying, old-crop soybean futures were supported by tight supplies and a firm cash maket. Barring a sharp, extended round of liquidation pressure, the tight supplies and strong cash market will be a source of underlying support.

Technical analysis: A quick rebound back above $12.25 1/4 in November soybean futures would signal the spike of this level was a bear trap. But if bulls are unable to push the contract back above this level soon, it would suggest another wave of price pressure is likely. The next level of strong daily chart support is June 2012 low at $11.40.

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 firmed into the close to finish mostly 7 to 9 cents higher in the Chicago and Kansas City markets, with Minneapolis up 11 to 13 cents in the 2013 contracts. Funds bought an estimated 4,000 contracts (20 million bu.) of wheat today.

Fundamental analysis: Ideas yesterday's losses were overdone and a correction in key outside markets like sharp weakness on the U.S. dollar index triggered a round of short-covering in wheat futures today. But while the dollar was sharply lower and the Dow Jones Industrial Average erased about half of yesterday's losses, gold futures softened in late trade to suggest there is more near-term downside risk in key outside markets.

Fundamental support came from concerns about the late start to planting in spring wheat country. With more snow in the near-term forecast, traders are starting to wonder if all the intended acres will be planted. The forecast also calls for another round of freezing temps in the HRW Wheat Belt later this week.

Technical analysis: July Chicago wheat futures rallied into the close and erased about half of yesterday's losses. The high-range close gives bulls more momentum heading into the overnight session, although they have a lot of work ahead of them to signal a near-term low has been posted. Important support is at the April low of $6.64 3/4 with resistance at the March high of $7.40 1/2. The contract ended the day near the middle of that range.

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 saw two-sided trade but softened into the close to finish 21 to 98 points lower.

Fundamental analysis: Sharp weakness in the U.S. dollar index and strength in markets like gold, which was down sharply yesterday, triggered some short-covering. But futures softened into the close on indications producers in the South would soon be switching corn and wheat acres to cotton. One market source say traders were picking up news that freeze-damaged wheat in Texas might be switched to cotton, although producers in Texas have other options such as sorghum.

Yesterday's crop progress report from USDA showed 8% of the nation's cotton crop was planted by Sunday, which compares to 13% last year and 10% on average. Leading the way is California and Arizona with 35% planted, which is above the five-year averages of 30% and 29%, respectively.

Technical analysis: December cotton futures posted a downside day of trade on the daily chart, closing just above support at last week's low of 84.67 cents. Violation of that support would make the 38% retracement of the rally from the November low to the March high bears' next target, which lies at 83.49 cents.

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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