Price action: Corn futures favored a weaker tone in mixed trade ahead of USDA's reports, but firmed and closed 6 1/4 to 10 1/2 cents higher and posted key bullish reversals in new-crop contracts. Funds bought 14,000 (70 million bu.) corn contracts today.
Fundamental analysis: Futures started the day lackluster as traders were hesitant to rebuild a long position ahead of USDA's data. But some early support came after USDA announced Mexico bought 252,153 MT of U.S. corn for 2013-14, to suggest prices are rebuilding demand.
But a surprising cut to the size of the 2013 U.S. corn crop helped to springboard futures into positive territory. USDA trimmed the size of the crop by 187 million bu. from last month to 13.763 billion bushels and trimmed new-crop carryover by 122 million bu. to 1.837 billion bushels. Additionally, USDA trimmed old-crop carryover more than expected to 719 million bushels.
Traders are also keeping an eye on the weather, as conditions are expected to be less than ideal for the filling crop the last half of August. Below-normal precip across the Corn Belt into next week is especially concerning for drought areas of the western Belt.
Technical analysis: December corn futures posted a bullish reversal. After dipping to a contract low of $4.46 1/2 the contract posted a daily high of $4.69 1/4, which is initial resistance. Followthrough from today's gains would be a clue a near-term low is in the works.
Hedgers: 100% sold on 2012-crop in the cash market. 25% of expected 2013-crop production is sold via cash forward contract for harvest delivery.
Cash-only marketers: 100% sold on old-crop. 25% of expected 2013-crop production is sold via forward contract for harvest delivery.
Price action: Soybean futures extended early gains on the release of USDA's August crop reports. Futures ended near session highs with gains of 33 to 43 cents, with November beans leading the charge. Funds bought an estimated 11,000 contracts (55 million bu.) of soybeans today.
Fundamental analysis: Soybeans initially benefited from short-covering and USDA's announcement of a 713,000-MT new-crop bean sale to China and a 140,000-MT sale to unknown destinations. The market extended these gains after the release of friendly Crop Production and Supply & Demand Reports. USDA's first survey-based soybean yield estimate of the year came in at 42.6 bu. per acre (down 1.9 bu. from the July projection) and showed a drop of 540,000 harvested bean acres from the June Acreage Report; this resulted in a bean crop estimate of 3.255 billion bu., which was 81 million bu. below the average pre-report guess.
USDA left its 2012-13 carryover peg at 125 million bushels. But the agency's 2013-14 carryover projection came in 43 million bu. below the pre-report guess and 75 million bu. below its July projection, largely due to the smaller-than-anticipated crop estimate.
Technical analysis: November soybeans are strongly suggesting the contract has put in a near-term low, as it has recovered back to the July low of $12.25 after hitting a low of $11.62 1/2 last week. Bulls' next target is the $12.48 area that acted as both support and resistance from February through April.
Hedgers: 100% sold on 2012-crop in the cash market. 20% forward priced on expected 2013-crop production for harvest delivery.
Cash-only marketers: 100% sold on old-crop. 20% of expected 2013-crop production is sold via forward contract for harvest delivery.
Price action: SRW wheat futures closed mostly 1 to 5 cents higher, HRW futures finished 3 to 4 cents higher and HRS futures ended fractionally to 4 3/4 cents higher in all but some of the extreme far-deferred contracts.
Fundamental analysis: Wheat futures were lower ahead of USDA's reports this morning, but strong spillover from soybeans and corn pulled the wheat market slightly higher. USDA's wheat numbers were mostly neutral, though the domestic 2013-14 wheat carryover figure came in well below expectations, which also added to the friendly report reaction.
A recent concern among wheat traders has been strong competition from the Black Sea region as exporters there are willing to undercut the U.S. on price. But USDA raised its wheat export forecast this morning due to strong demand to start the 2013-14 marketing year.
Technical analysis: September SRW wheat futures posted a new contract low today prior to modestly bouncing. To trigger an extended price recovery, the contract must push above the last correction high at $6.67 1/2 and support-turned-resistance at $6.73 3/4.
Hedgers: 50% of 2013-crop is sold in the cash market. 100% sold on of 2012-crop.
Cash-only marketers: 25% of 2013-crop is sold. 100% sold on 2012-crop.
Price action: Cotton futures closed 39 to 115 points higher, which was high-range in all but the lead-month October contract.
Fundamental analysis: Cotton futures were lower ahead of USDA's Crop Production and Supply & Demand Reports, but the tide shifted in bulls' favor after the report data was released. USDA's domestic cotton crop estimate came in roughly 450,000 bales lower than last month's projection and 640,000 bales less than traders expected. Plus, USDA trimmed its domestic new-crop cotton carryover projections from month-ago.
In addition to today's report figures, traders are keeping an eye on crop conditions in Texas and China, as both are experiencing hot, dry conditions that is hurting yield potential. USDA's Texas cotton yield estimate is 27 lbs. per acre below year-ago, while a lower Chinese cotton crop estimate "reflects unfavorable weather in parts of Xinjiang, north-central China and in Hunan province."
Technical analysis: December cotton futures posted a bullish reversal that resulted in an upside breakout from the extended, sideways range. The June high of 89.56 cents is now support, though a quick close below that level would signal the upside breakout was a bull trap.
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 2012-crop in the cash market.
Cash-only marketers: 50% of expected 2013-crop production is sold via cash forward contract for harvest delivery. 100% sold on 2012-crop.