Crops Analysis (VIP) -- April 8, 2013

April 8, 2013 07:00 AM
 

Corn

Price action: Corn futures ended mixed, with old-crop futures 1 3/4 to 4 1/2 cents higher, September corn 3/4 cent lower, and new-crop futures closing mostly 3 to 4 cents lower amid bull spreading.

Fundamental analysis: Old-crop corn futures benefited from short-covering, spurred by ideas recent losses are overdone. But upside potential was limited as traders expect Wednesday's updated 2012-13 carryover projection will reflect the higher-than-expected March 1 grain stocks peg. Without a flurry of fresh demand news, it will be difficult for bulls to gain enough traction to actively rebuild long positions.

New-crop futures deteriorated on forecasts for a more active precip pattern for the week. The current warmup is also beneficial for cold soils, although another blast of cold temps is expected later this week, which doesn't bode well for a timely start to the planting season.

Technical analysis: December corn futures posted a mid-range close and remain confined within the boundaries of last week's trading range. Near-term support is at last week's low of $5.25 1/2. To signal a near-term low has been posted, the contract needs to climb back above the March high of $5.73 3/4.

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 high-range with gains of 12 to 16 1/4 cents in old-crop contracts, while new-crop beans reversed early losses to close 4 to 5 cents higher. Soymeal was mixed on bull spreading, while soyoil posted moderate gains.

Fundamental analysis: Ideas the downside has been overdone considering basis strength and uncertainty about whether USDA's Supply & Demand Report Wednesday will confirm heavier old-crop supplies than earlier thought encouraged some short-covering today. Pre-report expectations are for USDA to raise its carryover projection by 12 million bu. from last month to 137 million bu., but traders are unwilling to be caught on the wrong side of the market in case of a surprise.

Also, concerns with the Chinese bird flu situation faded today as it appears the situation is relatively contained for now and fears about diminished crush demand were likely overstated.

Buying interest in new-crop contracts was limited by rain in the forecast for the Corn Belt that further delays the start of corn planting, upping the chances some intended acres could eventually be switched to beans, although it's too early for this talk.

Technical analysis: May soybean futures finished high-range, which should give bulls the advantage in the overnight session; their initial target is the psychological $14.00 mark, closely followed by the February low of $14.17 3/4. Strong support is layered from the July low of $13.45 to the November low of $13.37 3/4.

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: Wheat futures settled mostly 11 to 13 cents higher in Chicago, mostly 15 to 19 cents higher in Kansas City and mostly 6 to 12 cents higher in Minneapolis. That was an upper-range close, but off session highs at all three exchanges.

Fundamental analysis: Kansas City futures led gains in the wheat market today amid concerns about potential freeze damage to the HRW wheat crop later this week. Midday weather forecasts confirmed sub-freezing temps are likely Tuesday night/Wednesday morning with some models trending a little cooler than earlier reads. The area most at risk of potential damage is southwestern Kansas, Oklahoma and potentially far northern Texas. Additional weather support came from forecasts calling for cold, wet conditions across the Northern Plains, which will keep spring wheat planting on hold.

Confirmation that China bought 14 to 16 cargoes of U.S. SRW wheat late last week was also supportive today, although this was largely "in" the market. Still, strong demand signals wheat prices dropped to a level that attracted value buying.

Technical analysis: May Chicago wheat futures have now retraced more than 62% of the March 28/April price plunge. The March 28 high of $7.41 3/4 is tough near-term resistance, followed by the January low at $7.45 1/4. Strong support is at the April 1 low of $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 66 to 141 points lower today, with the May through October contracts pacing losses. All contracts closed low-range.

Fundamental analysis: Cotton futures were pressured by a firmer U.S. dollar and followthrough selling following disappointing economic data late last week. The firmer dollar could curb export demand for U.S. cotton, while sluggish U.S. economic data raises questions about domestic consumption.

Fund-based selling also weighed on the market today. After building a large net long position on the strong price rally, funds are showing signs they will lighten their market length.

Technical analysis: May cotton futures dropped to the lowest level since March 4. Support lies at the old consolidation range from 85.24 cents to 81.35 cents. Violation of support at the bottom of this range would confirm a top.

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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