Crops Analysis (VIP) -- August 1, 2013

August 1, 2013 09:54 AM
 

Corn

Price action: Corn futures were under pressure throughout the day and posted low-range closes. The September contract finished 11 1/2 cents lower while new-crop contracts closed 10 to 12 cents lower.

Fundamental analysis: Traders opened the first day of trading in the new calendar month with a decidedly bearish tone. The continuing benign current weather and forecasts for more non-threatening cool temps and rising chances for precipitation has traders selling futures and looking past positive export news. It now appears it would take a threat of an early frost to get traders to focus on the late development of this year's crop.

USDA announced weekly export sales of 1.091 MMT, which was well above expectations. In addition, USDA announced weekly old-crop sales of 134,000 MT.

Funds continue to add to their short position. They reportedly sold 15,000 contracts (75 million bu.) of corn today.

Technical analysis: December corn futures broke recent short-term support and plunged to the lowest level since Nov. 17, 2010 today. That day's low of $4.60 is next support, followed by the psychological $4.50 mark. Resistance starts at $4.71 1/4.

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.

 

 

Soybeans

Price action: Soybean futures finished mostly 11 to 16 1/4 cents lower. The lead-month August contract, which is in delivery, led price declines. Meal futures also posted losses, while soyoil finished higher on spread unwinding with beans and meal.

Fundamental analysis: Weather provided much of the pressure today as forecasts continue to call for below-normal temps and multiple rainfall chances. The coming rain event over the next 24 hours is expected to produce needed rains over Nebraska and western Iowa. Additional pressure stemmed from technical-based selling and sharp pressure on the U.S. dollar index.

Traders brushed aside very strong weekly export sales. USDA reported sales of 1.031 MMT for 2013-14 and also 78,500 MT for 2012-13. China accounted for 558,000 MT of new-crop soybean purchases the week ended July 25. While the strong new-crop sales signal prices have dipped to "value" levels, traders are intently focused on hopes for big new-crop supplies.

Funds were active on the short side of the market, selling an estimated 8,000 contracts (40 million bu.) of soybeans today.

Technical analysis: November soybean futures closed below the psychological $12.00 mark and got within 6 cents of key support at the April low of $11.86 1/2. Next strong daily support below that level is at $11.40.

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.

 

 

Wheat

Price action: SRW wheat futures closed around 6 cents lower, while HRW and HRS futures finished narrowly mixed.

Fundamental analysis: After recently trying to pull corn and beans higher, SRW wheat futures succumbed to heavy spillover pressure from those markets today. Strong gains in the U.S. dollar index also weighed on wheat futures today. While market fundamentals have improved, wheat doesn't have the strength to stand on its own in days like today when price action in other markets is going against bulls.

HRW and HRS futures were able to better fight off the spillover pressure, partly as traders unwound long SRW positions against the other flavors.

Weekly wheat export sales were right in the middle of the pre-report guess range at 596,900 MT. China was a buyer of 129,900 MT of U.S. wheat, with 110,000 MT being switched from unknown destinations.

Technical analysis: September Chicago futures avoided posting a bearish reversal after flirting with that through the session. The contract stopped 1/4 cent shy of matching the contract low before mildly bouncing to a mid-range close.

Hedgers: 50% of 2013-crop is sold in the cash market. 100% sold on of 2012-crop.

Cash-only marketers: 25% of 2013-crop sale is sold. 100% sold on 2012-crop.

 

 

Cotton

Price action: Cotton futures ended narrowly mixed and near session highs.

Fundamental analysis: Cotton futures were under pressure for much of the session as weekly export sales were disappointing and the U.S. dollar index was sharply higher today. But a late paring of gains suggests traders aren't willing to break futures out of their established short-term trading ranges.

USDA reported weekly export sales of 33,600 bales for 2012-13 and 43,700 bales for 2013-14. Sales reductions by China of 34,400 bales were noted for 2013-14.

Technical analysis: Initial support and resistance for December cotton futures are the July low and high at 83.58 cents and 87.11 cents, respectively. Broader trading boundaries are provided by the June low and high at 81.72 cents and 89.56 cents, respectively.

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.

 

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