Crops Analysis (VIP) -- April 3, 2013

April 3, 2013 09:49 AM
 

Corn

Price action: Corn futures ended 1 to 4 cents higher in most contracts, which was in the upper end of today's range and near session highs in some contracts.

Fundamental analysis: Corn futures actively traded on both sides of unchanged today as neither buying nor selling interest was overly strong. In the end, light short-covering was enough to push the market mildly higher. Ideas the downside was overdone recently, strong spillover from the wheat market and a weaker dollar helped fuel the light corrective buying.

But the upside remains limited as traders still have the bearish March 1 corn stocks figure on their minds. Plus, traders are anticipating a big recovery in production this year.

After three days of heavy selling, funds took a break today and were not believed to be net buyers or sellers for the day.

Technical analysis: May corn futures are pivoting around Monday's low. A brief consolidation without an appreciable recovery after the sharp price drop would suggest the contract is setting up to move the next leg lower. The next level of strong daily chart support is at $6.15, with support layered heavily from that level to the May 2012 low at $5.20 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 were choppy overnight, but weakened with the start of open-outcry trade and extended losses. Futures came slightly off session lows into the close but still posted losses in the lower to mid-teens. Meal and soyoil saw spillover pressure from soybeans and sharp weakness in crude oil futures.

Fundamental analysis: Soybean futures were vulnerable to followthrough selling pressure today, especially since traders expect the world's demand needs are shifting to South America. Gulf soybean basis firmed 2 cents for immediate delivery this afternoon, but demand for U.S. soybeans is expected to be scattered throughout spring and summer. There is also concern that confirmation of bird flu in China will reduce poultry numbers and eventually reduce feed demand, but those concerns are premature.

Technical analysis: May soybean futures moved to their lowest level since mid-January. The low-range close gives bears momentum heading into the overnight session and makes their next downward target the November low of $13.37 3/4. Violation of that support would open significant near-term downside risk.

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: Wheat futures extended gains into the close to finish sharply higher. Chicago wheat was mostly 20 to 25 cents higher, while Kansas City and Minneapolis wheat posted gains in the mid- to upper teens.

Fundamental analysis: Concerns about the winter wheat crop gained momentum today as traders say they are disappointed by the recent rain event across the Central and Southern Plains. More attention is being placed on the crop after USDA began its weekly crop condition updates on Monday, which showed it in worse shape than traders expected.

Weakness in the U.S. dollar index today was also supportive for wheat today, especially given a wave of fresh demand potential. Specifically, traders noted that U.S. wheat prices are significantly cheaper than Indian supplies and there was chatter China and possibly Russia bought U.S. wheat.

Funds were active buyers, purchasing an estimated 11,000 contracts (55 million bu.) of wheat.

Technical analysis: May Chicago wheat futures posted an upside day of trade on the daily chart. The high-range close gives bulls the upper hand heading into overnight trade. But the contract must at least close above last week's high of $7.41 3/4 to signal a low has been posted. Contract-low support lies at $6.59 3/4.

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 closed 34 to 83 points higher, which was anywhere from a low- to high-range finish.

Fundamental analysis: A weaker U.S. dollar supported the cotton market today. Traders were also reluctant to sell ahead of USDA's weekly export sales figure tomorrow morning. While the U.S. has firmed and cotton futures have risen sharply, weekly export sales have shown no significant decline in demand.

An expected sharp drop in planted cotton acres this year also remains supportive. Because of that, traders expect cotton stocks to tighten in 2013-14, limiting selling interest.

Technical analysis: May cotton futures continue to have a bullish technical posture, as the uptrend remains firmly intact. The only potential troubling sign is increased volatility amid the recent price consolidation, which can be a sign of a market that's topping.

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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