Crops Analysis (VIP) -- April 22, 2014

April 22, 2014 09:57 AM
 

Corn

Price action:
Corn futures closed 5 to 8 1/4 cents higher today, with old-crop contracts leading gains. Futures closed high range.

Fundamental analysis: Technical buying triggered by Monday's bounce off support zones carried futures higher today. Some traders also cited concerns over USDA's report that only 6% of the nation's corn crop had been planted relative to the five-year average of 14%. While others note there is still plenty of time to get the crop planted, recent forecasts calling for showers and cold temperatures across the Midwest will likely keep the planting pace slowed well into next week.

Funds were also a factor today, buying 12,000 contracts (60 million bu.) today. The funds sold 9,000 contracts (45 million bu.) yesterday.

Technical analysis: May corn futures bounced higher today, probing resistance formed since April 1 running from $4.94 to the monthly high at $5.19. Technical traders view a close above $5.00 as needed to boost the bullish outlook for prices. Futures failed to close above $5.00 today. The $4.90 to $4.75 area continues to provide support.

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 3/4 to 19 cents lower through the August contract, with the lead-month May contract leading those declines. New-crop futures ended roughly 5 to 8 cents lower. Meal and soyoil futures also posted losses for the day. Funds were net sellers of 7,000 contracts (35 million bu.) of soybeans today, along with 3,000 contracts of soymeal and 2,000 contracts of soyoil.

Fundamental analysis: Talk of South American soybean/meal shipments into the U.S. weighed on the soy complex today. Two shipments of Brazilian soybeans originally sold to China have been diverted to the U.S. and there's also talk of South American soybean meal imports into the Southeast. Plus, China will reportedly start auctioning older inventories of soybeans from state reserves next month. While none of this news should come as much of a surprise, it was enough to encourage corrective selling in the form of long liquidation, profit-taking and bull spread unwinding.

The slowed pace of corn planting also weighed on new-crop soybean futures today. The longer corn plantings remain below the average pace, the more likely it becomes soybean plantings will be at or above March intentions.

Technical analysis: May soybean futures have posted three consecutive lower closes, but have done no technical damage -- the uptrend from the January low remains intact. In addition to the uptrend, which intersects around $14.81 1/4 Wednesday, flat support is layered from last week's low of $14.61 1/4 to the April 2 low of $14.56. Violation of this latter level would signal a deeper corrective pullback is underway. The downside target would then be the March 31 low at $14.23. If this near-term support holds, a challenge of last week's contract high of $15.31 3/4 is likely.

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 saw choppy trade at times today, but the market ended high-range with gains around 4 to 8 cents in the SRW and HRW markets, while HRS wheat finished mostly 1 1/2 to 5 3/4 cents higher.

Fundamental analysis: While wheat saw mixed trade at times today amid reminders the situation in Ukraine has not disrupted grain shipments or early planting efforts, crop concerns and ideas the downside had been overdone gave bulls the upper hand. USDA data yesterday showed another slight decline in the condition of the winter wheat crop due to ongoing drought in the Plains (see "Evening Report" for more) as well as a hard freeze event last week. But better chances for rain this week limited buying interest.

Meanwhile, a 7-cent jump in Gulf SRW wheat basis for immediate delivery signals export demand news may lie ahead.

The market saw profit-taking at times today on news Ukraine farmers have planted nearly 97% of early spring grain intended acres (spring wheat, barley and peas) and on reports that grain exports continue to advance uninterrupted.

Technical analysis: May SRW wheat futures found buying on a test of yesterday's low of $6.62 3/4. This is near-term support, followed by the April double-bottom of $6.56 1/4. The contract finished back above the 40-day moving average after closing below that level for the first time since February on Monday. Resistance is layered from the April 9 high of $6.88 to $7.00.

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 rebounded today to finish 104 to 132 points higher through the July contract, while deferred months were steady to 50 points higher. This was a high-range close.

Fundamental analysis: Cotton planting advanced just 1 percentage point the week ended April 20, to 9% complete. This is down from 10% last year and 12% on average for this time of the year. Of note, planting in Texas is 3 percentage points behind the average pace, while Georgia lags the average pace by 4 percentage points. Though it is early in the season, this lifted cotton futures.

Light support also stemmed from news Australia's cotton production and exports will decline by around 5% in 2014-15 due to adverse weather, according to a U.S. ag attaché report.

Early gains in new-crop cotton triggered buys stops as a number of contracts hit new highs for the year. Weakness in the U.S. dollar index added support.

Technical analysis: May cotton futures settled back above 91.00 cents, turning that price into support again. The contract also closed above the downtrend drawn off the late-March/early-April lows, which intersects around 90.00 cents tomorrow. Below that, tough support is at the April low of 88.63 cents. Bulls' next target is the March 7 high of 93.35 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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