Crops Analysis (VIP) -- April 1, 2014

April 1, 2014 09:43 AM
 

Corn

Price action:
Corn futures settled mid- to high-range with gains of 5 1/2 to 7 3/4 cents today, with new-crop leading to the upside. Funds again added an impressive number of long positions -- 12,000 contracts, or 60 million bushels.

Fundamental analysis: The corn market enjoyed followthrough buying today after USDA's reports yesterday that reflected grain stocks about as expected and planting intentions more than 1 million acres shy of the average pre-report trade guess. This gave traders some incentive to try to "buy back" some acres from beans today, which resulted in new-crop futures leading gains. Also, more snow and cold temps for the Midwest raise concerns about planting delays with the 2014 crop, which could make it even more difficult for corn to gain acres.

Spillover from the soybean market and spreading with wheat added support. Futures' move to seven-month highs today added some technical buying interest, as well.

Technical analysis: May corn futures closed at its highest level since Aug. 26 today, turning the $5.00 level into near-term support. The August high of $5.27 1/2 is bulls' next target. Action in new-crop futures was similar. December corn also ended above $5.00, turning that price into support. Resistance stands at the April 2013 low of $5.26 3/4.

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 soared with futures closing near their daily highs. Futures finished 15 1/4 to 27 3/4 cents higher with the July contract leading gains. Funds bought 8,000 contracts (40 million bu.) today.

Fundamental analysis: Soybean futures surged higher as traders priced in the tightening old-crop carryover supplies and bought new-crop on ideas USDA's large intended planted acreage figure may be the high-water market and is already factored into prices. Traders shrugged off news of a cooling Chinese economy. Traders expect government leaders will initiate stimulus measures to boost economic activity if data continues to disappoint.

Soybeans are benefited from news China's ministry of commerce raised its soybean import estimate for March by 440,000 MT to 5.69 MMT. The ministry expects bean imports to hold strong in April at 5.11 MMT.

Technical analysis: May soybean futures followed through on their surge above their March highs. The breakout means the $14.60 area is support with the $15.00 area marking psychological resistance. November futures finished 20 cents higher finishing just under resistance at the Sept. 12 high of $12.11 1/4. The Sept. 3 high of $12.35 marks the next area of resistance. Support starts just under $12.00 at 11.98.

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 faced pressure overnight and throughout the day session and most contracts settled low-range. SRW wheat closed roughly 7 to 12 cents lower, while HRW wheat finished with losses ranging from 8 1/2 to 10 1/2 cents. HRS wheat ended around 6 3/4 to 9 cents lower. Funds sold 6,000 wheat contracts (30 million bu.) today.

Fundamental analysis: Wheat futures faced profit-taking pressure today, as even with USDA's friendly report data yesterday the market was unable to halt its recent decline. Traders view crop problems on the Central and Southern Plains as largely factored into prices. Plus, traders are discouraged by reports Ukraine's grain shipments have not been interrupted by unrest in the region.

The country's ag ministry today said the nation exported 2.98 MMT of grain in March, which is up from 2.82 MMT in February. Production or shipment problems stemming from the crisis may not be evident until the 2014-15 crop.

Technical analysis: May SRW wheat futures saw an inside day of trade and settled low-range. Yesterday's dip to $6.76 1/2 marks support, while resistance drawn off the highs since March 20 intersects around $7.06 tomorrow.

Hedgers: 50% of expected 2014-crop is sold via forward contract for harvest delivery. 100% sold on 2013-crop.

Cash-only marketers: 90% sold on old-crop. 50% of expected 2014-crop is sold via forward contract for harvest delivery.

Cotton

Price action:
May and July cotton futures faced pressure today and settled 145 and 105 points lower, respectively. October through December contracts closed 13 to 17 points lower, while deferred months posted similar gains.

Fundamental analysis: The cotton market saw some mild bull spread unwinding today, and nearby contracts tested but respected steeper uptrending support drawn off the November and January lows. Whether the contract holds above this level tomorrow will be key.

Fundamental pressure stemmed from news the International Cotton Advisory Committee raised its global ending stocks projection for 2014-15 to a record high 21.04 MMT, which compares to 20.04 MMT in 2013-14. This follows USDA's higher planted acreage projection yesterday.

Technical analysis: May cotton futures matched uptrending support drawn off the November and January lows today, but settled just above this level, which intersects around 92.00 cents tomorrow. Tougher support stands at the uptrend drawn off the November and February lows, which intersects around 89.50 cents tomorrow. Yesterday's high of 94.80 cents is initial resistance.

Hedgers: 75% of 2013-crop is sold in the cash market. 25% of expected 2014-crop production is sold via cash forward contract for harvest delivery.

Cash-only marketers: 75% of 2013-crop is sold. 25% of expected 2014-crop production is forward sold for harvest delivery.

 

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