Crops Analysis (VIP) -- April 2, 2013

April 2, 2013 09:55 AM
 

Corn

Price action: Corn futures saw two-sided trade today and ended narrowly mixed for the day.

Fundamental analysis: Corn futures enjoyed some corrective short-covering today as traders opted to take a step back and gauge whether prices have dipped far enough to spur fresh demand. Firmer Gulf basis levels for near-term delivery this morning and talk Asian feed buyers are upping their purchases indicates the price break may have been enough to bring end-users back to the table. Nevertheless, funds sold another 6,000 contracts (30 million bu.) of corn today, which capped the upside.

While corn plantings are expected to be the highest since 1936 this growing season, persistent chilly temps and areas of drought across the Corn Belt mean a bumper crop that is needed to ease the supply situation is by no means a "sure thing." As a result, selling interest was limited in new-crop futures today.

Technical analysis: May corn futures hit a new multi-month low of $6.34 today. The contract did settle well off this new level of support, however. May corn futures have a long ways to go to challenge near-term resistance that is layered from the January low around $6.78 1/2 that coincides with the bottom of the April 1 downside gap, to the top of this gap at $6.95 1/4.

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 settled mixed, with old-crop contracts 1 1/2 to 3 1/4 cents higher and new-crop contracts mostly 1 3/4 to 4 cents lower.

Fundamental analysis: Soybean futures were solidly higher through the overnight hours amid corrective short-covering. But buying interest faded around the start of pit trade as soyoil and corn weakened, and the market favored the downside until some corrective buying resurfaced late. The lack of committed buying interest today signals the upside is limited to corrective buying unless bullish news surfaces.

New-crop contracts ended mostly lower and are threatening to break key support amid expectations production will increase this year. While USDA's survey work indicated producers plan to seed slightly fewer acres to soybeans, there's a general belief planted soybean acreage will increase from year-ago.

Technical analysis: Key support for November soybean is the February low at $12.47 1/4. The contract traded below that level today, but rebounded to close just above it. A close below this support would open downside risk to at least $12.25 1/4.

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: Chicago wheat futures ended roughly 6 to 18 cents higher, Kansas City wheat mostly 7 to 14 cents higher and Minneapolis wheat mostly 5 to 10 cents higher.

Fundamental analysis: Wheat futures were primarily supported by short-covering today amid ideas sharp price pressure the past two sessions was overdone. But buying interest was held in check as corn softened after earlier corrective gains and the U.S. dollar index was firmer. A lack of fresh export demand news despite the recent sharp price break also has traders wondering if it will take even steeper price declines before end-users actively book supplies.

The initial winter wheat crop ratings of the spring when plugged into our weighted Crop Condition Index showed both the HRW and SRW crops deteriorated over winter, which was also mildly supportive today. But heavy rains in parts of the Plains today limited this support.

Talk China may turn to U.S. HRS supplies due to quality/performance concerns with Canadian spring wheat was supportive for Minneapolis futures today, which allowed that market to lead gains for much of the day.

Technical analysis: After two days of sharp price pressure, July Chicago wheat futures could only muster a modest inside day up. To give the first clue a low may be in the works, the contract must close back above the March low at $6.86.

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 traded in a wide range today and ended in the upper half of it with gains of 61 to 150 points. Nearby contracts led to the upside.

Fundamental analysis: Bulls had the upper hand in the cotton market today as traders remain concerned about expectations for cotton plantings to decline notably from last year. Next week, USDA will issue its first report on planting progress.

Ongoing export demand strength in spite of lofty prices is also an underlying source of support. China remains the key to global cotton trade.

Technical analysis: Traders remain watchful for a top in cotton as the market as volatility has increased as futures consolidate. Near-term support for May cotton futures is the March low of 86.12 cents, followed by the 38% retracement of the November to March rally at 85.20 cents. The psychological 90.00-cent area marks resistance.

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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