Crops Analysis (VIP) -- April 21, 2014

April 21, 2014 09:46 AM
 

Corn

Price action:
Corn futures posted losses of 4 1/2 to 6 3/4 cents today, with old-crop leading to the downside. This was a low-range close.

Fundamental analysis: Corn futures faced profit-taking to start the week, with selling interest heightened by spillover from the soybean and wheat markets. Rain over the weekend and more in the forecast will keep farmers out of the field in some areas of the Corn Belt. But traders are more focused on warmer temps and renewed soil moisture. Farmers in the southern and central Midwest are thought to be taking advantage of warm, dry conditions to advance fieldwork and planting.

Traders expect USDA to peg planting progress around 9% complete this afternoon, which compares to 14% on average.

The market brushed off another week of strong corn export inspections, signaling a new source of support is needed to extend the rally.

Technical analysis: May corn futures appear to have posted a downside breakout from the market's recent consolidated trading range around $5.00 and are headed for a test of tough support around $4.75. The $5.00 mark is now tough resistance.

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 closed 11 1/2 to 15 3/4 cents lower after trimming hefty losses of around 25 cents in the last hour of trading.

Fundamental analysis: Traders started the week with a negative tone, taking profits after touching nine-month highs Thursday and as weather patterns appear positive for the start of spring planting over large portions of the Corn Belt, save for the upper areas of the belt.

Traders have been expecting the soybean export pace to slow and they received more confirmation of that view with today's Weekly Export Inspections Report. While the report came in within the range of expectations at 138,777 MT, it was at the low end of the range and down 129,652 MT from the previous week.

Soybean futures also suffered from spillover selling from wheat and corn futures. Funds sold 5,000 contracts, (25 million bu.) today.

Technical analysis: May soybean futures were solidly on the negative side today but rallied in the last hour trading to trim losses and close well off the lows. The rebound came as the contract found support at the 14-day moving average and at the $14.85 area. Resistance starts at the important $15.00 area, which the contract settled just below. Thursday's high is the next upside target.

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: SRW and HRW wheat futures ended roughly 20 to 24 cents lower, while HRS wheat closed 18 to 21 cents lower. That was a low-range close, but off session lows.

Fundamental analysis: Weather weighed heavily on wheat futures today. Much needed rains fell on the Southern and Central Plains over the weekend. While the rains were spotty in some of the driest areas, they were enough in traders' minds to press the market lower. Additionally, more rains are in the forecast this week. If these rains materialize, it will be hard for wheat to find buying interest, even if USDA confirms more HRW crop deterioration.

The weather gave funds a reason to be sellers today. They sold an estimated 7,000 contracts (35 million bu.) of SRW wheat futures. That adds to a very small net short position they had built coming into the week.

Technical analysis: Key near-term support for July HRW wheat futures lies at the April 11 low of $7.23 1/4. A 38% retracement of the rally from the January low lies just below that level around $7.19. Violation of these two key near-term support levels would be a stronger technical sell signal for chart-based traders. Downside targets would then be ($6.96 -- a 50% retracement) and the $6.75 area (roughly a 62% retracement and the mid-point of the late-February consolidation area).

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 saw two-sided trade today, but softened into the close to finish 3 to 48 points lower. The low-range close gives bears momentum heading into the overnight session.

Fundamental analysis: Without fresh news for the markets to digest, price action was choppy this morning, but cotton was eventually pressured by spillover from weakness in the grain markets. Traders are discouraged by the slowdown in export business for U.S. cotton, which has largely been the general source of recent price pressure.

Technical analysis: May cotton futures posted a downside day of trade on the daily chart. Near-term boundaries are defined by the two-week trading range, with support at the April 11 low of 88.63 cents and resistance at the April 14 high of 91.67 cents. Closes above resistance are needed to confirm a near-term low has been posted, while violation of support would signal bears clearly hold the near-term technical advantage.

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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