Crops Analysis (VIP) -- August 20, 2012

August 20, 2012 09:55 AM
 

Corn

Price action: Corn futures firmed as the day progressed to finish with gains of 12 1/4 to 16 3/4 cents, with nearbys leading to the upside.

Fundamental analysis: Talk of worse-than-expected samples from the first day of the Pro Farmer Midwest Crop Tour encouraged traders to build more premium into prices, especially as there are signs more rationing may be needed to stretch the "small" crop (Visit www.profarmer.com tonight for official Tour results). This morning USDA announced Mexico purchased 99,000 metric tons (MT) of corn for 2012-13 and 22,000 MT for 2013-14. Plus, weekly corn export inspections came in near the top of expectations.

Technical analysis: December corn futures are making their way toward strong resistance at contract high of $8.49. The psychological $8.00 level is support.

Hedgers: 100% sold on 2011-crop in the cash market. 40% of expected 2012-crop production is covered in Dec. $6.50 put options for 31 1/2 cents. 35% cash forward sold on expected 2012-crop production -- 25% for harvest delivery; 10% for March 2013 delivery.

Cash-only marketers: 100% sold on 2011-crop. 35% forward priced on expected 2012-crop production -- 10% for harvest delivery; 10% for March 2013 delivery; and 15% for May 2013 delivery.
 

Soybeans

Price action: Soybean futures ended just off their highs with gains of 24 to 37 3/4 cents in the September through March contract. Farther deferred months ended with gains in the teens. Soymeal and soyoil enjoyed strong spillover support.

Fundamental analysis: Talk of varied pod counts from the first day of the Pro Farmer Midwest Crop Tour encouraged traders to buy soybeans as this adds to concerns about supplies that USDA already estimates will be small.

Plus, exporters have yet to put the brakes on bean purchases. Today's weekly soybean export inspections of 21.426 million bu. topped expectations by a wide margin and gained on last year's pace. Inspections are running 9.5% below year-ago; USDA forecasts 2011-12 exports at 10.1% behind year-ago.

Technical analysis: Bulls' initial target for November soybean futures is the contract high of $16.91 1/2, closely followed by the psychological $17.00 mark. Support is layered from $16.00 to the Aug. 8 low of $15.55 1/4.

Hedgers: 100% sold on old-crop in the cash market. 25% of expected 2012-crop production is covered in Nov. $14.00 put options for 42 3/8 cents. 50% of expected 2012-crop production is sold via cash forward contract for harvest delivery.

Cash-only marketers: 100% sold on old-crop. 50% sold on expected 2012-crop production for harvest delivery.
 

Wheat

Price action: Wheat futures were choppy today, but firmed late on spillover from strength in the corn and soybean pits. Chicago wheat ended 5 to 14 3/4 cents higher, with Kansas City up 2 1/4 to 6 1/2 cents and Minneapolis ended 2 1/4 to 5 1/4 cents higher.

Fundamental analysis: A weaker U.S. dollar index was also supportive for wheat today, as it encouraged traders to follow corn and soybean futures higher. Also supportive was news that SovEcon has cut its Russian wheat forecast to 39 million metric tons (MMT) to 41 MMT from 40.5 MMT to 42.5 MMT previously, due to disappointing early harvest results.

Wheat needs a dose of fresh demand news to keep pace with corn futures, as U.S. wheat is higher priced on the global market.

Technical analysis: September Chicago wheat saw trade above Friday's high of $8.80 and closed just beneath that level. Key resistance stands at the Aug. 10 high of $9.31 3/4 and support lies at last week's low of $8.38 1/4.

Hedgers: 75% cash sold on 2012-crop for harvest delivery. 100% sold on 2011-crop in the cash market.

Cash-only marketers: 75% of 2012-crop production is sold for harvest delivery. 100% sold on 2011-crop.
 

Cotton

Price action: Cotton futures ended high-range with strong gains of 100 to 153 points.

Fundamental analysis: Cotton futures enjoyed spillover support from the corn and soybean market today along with a lower dollar index. Plus, dryness in the southern U.S. is garnering some increasing attention. Monsoon rains in India have been disappointing this growing season, so global cotton stocks are no longer expected to be burdensome. This makes the U.S. crop more important. Traders will watch this afternoon's Crop Condition Report for a better read on its condition. Last week, USDA rated it 42% "good" to "excellent."

Technical analysis: December cotton futures continue to make their way toward resistance at the August high of 77.07 cents. Uptrending support drawn off the June to August lows intersects at roughly 71.97 cents tomorrow.

Hedgers: 100% sold on old-crop in the cash market. 50% priced on expected new-crop production via cash forward contract for harvest delivery.

Cash-only marketers:s100% sold on old-crop. 50% priced on expected new-crop production via forward contract for harvest delivery.

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