Crops Analysis (VIP) -- April 29, 2013

April 29, 2013 09:43 AM
 

Corn

Price action: Corn futures finished their 40-cent daily limit higher in the May through September contracts today, meaning the limit will be expanded to 60 cents tomorrow. New- crop futures ended high-range with gains of 29 to 35 1/2 cents for the day.

Fundamental analysis: Traders focused on building weather premium into prices today as this weekend provided just a small window of opportunity to get into the fields, while the outlook for this week calls for near-daily rain chances in the Corn Belt as well as a major cool-down in temps around midweek. In addition, the extended outlook calls for above-normal precip for the Eastern Corn Belt and below-normal temps for the heart of the Midwest.

The prospect for planting delays heightens concerns about a very tight old-crop supply of corn, as indicated by lofty basis levels around the country.

Adding to the bullish tone, outside markets were supportive today.

Funds were active buyers, purchasing an estimated 26,000 contracts (130 million bu.) of corn today. Fund activity will be key to watch as they have been reducing their long exposure.

Technical analysis: May corn futures surged into the April 1 gap on the daily chart. Bulls will now attempt to close that gap at $6.95 1/4. The top of the recent consolidation range at $6.66 3/4 is now support.

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 favored a weaker tone overnight but firmed with the start of open-outcry trade and extended gains into the close to finish 17 1/2 to 27 3/4 cents higher in all but the front-month May contract, which closed 41 cents higher.

Fundamental analysis: Early pressure came from spreading with corn, as traders expect planting delays to result in producers switching some acres to soybeans -- especially in the northwest Corn Belt. But the start of open-outcry trade brought a round of fresh buying. Expectations that demand has picked up fueled buying. Gulf soybean basis surged 20 cents to stand 85 cents above May futures for early May shipment. This signals demand announcements are just around the corner.

Traders' focus tomorrow will be on end-of-the-month position squaring, as well as reaction to this afternoon's crop progress data, which will show corn planting lagging.

Technical analysis: November soybean futures posted a big upside day of trade on the daily chart and penetrated and closed on resistance at the April 18 high of $12.29 1/4. The contract has a lot of work ahead in order to suggest a near-term low has been posted. While steep downtrending resistance drawn off late March and early April lows has been violated, a close above the late March high of $12.81 is needed to confirm a low is in place.

Hedgers: 100% sold on 2012-crop in the cash market. 50% of expected 2013-crop production is hedged in November soybean futures at $12.19. 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 settled mostly 21 to 25 cents higher in Chicago and Kansas City, while Minneapolis wheat ended with gains of mostly 14 to 20 cents.

Fundamental analysis: Spillover from very strong gains in corn, weather/crop concerns in the Plains and a weaker U.S. dollar triggered an active wave of short-covering and fresh buying interest in wheat today. In addition, fund and technical-based buying was also supportive today.

With the Wheat Quality Council set to embark on its annual HRW wheat tour tomorrow through Thursday, attention on the crop is heightened. Traders are expecting to get a better indication of crop damage from recent freeze events. But slowed maturity of the crop due to recent cold temps will likely make it harder for crop scouts to fully diagnose crop concerns. Another freeze event is possible through parts of the Plains later this week as a cold front passes through the region.

Technical analysis: July Kansas City wheat futures must push through the last correction high at the March 28 high of $7.83 1/2 to open the door to an extended rebound. On such a move, old support at the January low of $8.03 1/2 would be bulls' next target.

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 futures ended 94 to 165 points higher through the July 2014 contract. That was in the upper end of today's range but off session highs.

Fundamental analysis: Cotton futures were supported by strong gains in the grain and soy complex. Additional support came from sharp losses in the U.S. dollar index. Both encouraged traders to cover short positions and even sparked some bargain buying.

Funds, who have been active sellers of cotton recently, were on the long side of the market today. It will take sustained fund buying for the market to definitively put in a low.

Technical analysis: July cotton futures closed above downtrending resistance drawn off the March highs, but failed to violate the slightly less steep downtrend from the March and April highs. The contract must post consecutive higher closes above the downtrend from the March and April highs to spark an extended corrective rebound.

Hedgers: 50% of expected 2013-crop production is hedged in December cotton futures at 83.87 cents. 50% of expected 2013-crop production is also sold via cash forward contract for harvest delivery. 100% sold on old-crop in the cash market.

Cash-only marketers: 85% sold on old-crop. 50% of expected 2013-crop production is sold via cash forward contract for harvest delivery.

 

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