Crops Analysis (VIP) -- August 29, 2013

August 29, 2013 09:51 AM
 

Corn

Price action: Corn futures spent the day chopping around unchanged. September corn settled 7 cents lower for the day, while the rest of the market ended fractionally to 3 1/2 cents higher.

Fundamental analysis: Fund activity has signaled that they are still convinced the Midwest will grow a large corn crop, despite ongoing near- to record-high temps with little rain in the forecast. Today's drought monitor update showed drought is expanding in the Corn Belt with most to all of Minnesota, Iowa, Nebraska and Illinois in some form of drought. Also pressuring September futures is the fact southern growers are beginning to ship their corn crop north to ease tight supplies.

Another limiting factor for the corn market is concern the recently improved export demand will soften as prices rise, as was the case in 2012. This morning's weekly export sales report signaled solid new-crop demand the week ended Aug. 22.

Technical analysis: December corn tested but failed to close Monday's upside gap. To do so, the market must fall to $4.74 1/2. Resistance is layered from the psychological $5.00 mark to Monday's high of $5.08 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 closed 3 to 10 1/2 cents lower today as prices slumped into the close on what was considered improving weather forecasts. The September contract, which goes into delivery Friday, finished 3 cents lower while November futures closed mid-range to end 4 1/4 cents lower.

Fundamental analysis: Weather continued as the key driving force in the market although position squaring ahead of the long Labor Day weekend and month-end brought some selling pressure into the market in late trading.

The drought monitor released today confirmed the expansion of the drought with 100% of Iowa now rated with some level of drought and moderate drought conditions listed for western Illinois. Forecasts remain mostly hot and dry through the weekend, but some forecasts released late in the session call for slightly cooler temperatures and increased chances for precipitation for areas of the Midwest.

USDA's weekly export sales report brought some support early in the day's trade as it showed sales of 673,800 MT for 2013-14.

Technical analysis: November soybean futures quickly found support at the $13.60 area, just underneath yesterday's low. But it also ran into resistance underneath yesterday's high of $13.87 3/4. The key area of support starts at the top of Monday's gap at $13.48 and runs down to the bottom of the gap at $13.31 1/2. The longer the gap remains open, the most positive the outlook. If the gap fills, this week's rally will be shrugged off as a bull trap. A close above Tuesday's high of $14.09 1/2 would rekindle bullish enthusiasm.

Hedgers: 50% of expected 2013-crop production is sold via a forward-price cash 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 a forward-price cash contract for harvest delivery. 100% sold on 2012-crop in the cash market.

 

Wheat

Price action: Wheat futures favored a weaker tone throughout the day and posted a low-range close. SRW futures ended 5 1/4 to 7 cents lower, with HRW down 5 1/4 to 8 3/4 cents. HRS futures ended with losses of 4 1/4 to 10 cents.

Fundamental analysis: Early pressure was tied to strength in the U.S. dollar index, as the situation is Syria has created a "risk-off" atmosphere in the markets and U.S. GDP data topped expectations. The lack of strong buying in the neighboring corn and soybean markets added to the negative tone.

The weekly export sales report was neutral for the market, but it reflected solid demand. Sales of 551,300 MT were within expectations and up 12% from the previous week. Traders will be interested to see the impacts of a strengthening dollar on next week's report.

Technical analysis: December SRW wheat futures posted a downside day of trade on the daily chart. The low-range close gives bears momentum heading into the overnight session. Near-term boundaries are contract-low support of $6.35 1/2 and Monday's high of $6.76 1/2.

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.

 

Cotton

Price action: Cotton futures were mixed today, but in the end nearby futures built on yesterday's losses and ended around 40 points lower. Far deferred futures ended around 40 points higher amid bull spread unwinding.

Fundamental analysis: Some early short-covering gave way to stepped up selling given strength in the U.S. dollar, which makes U.S. cotton less desirable on the global market. This morning's weekly export sales report added to the negative tone, as it showed sales of just 68,800 running bales (RB) for 2013-14 and 2,200 RB for 2014-15. Export commitments are running 22% behind year-ago, which is around three percentage points slower than what's needed to reach USDA's export forecast.

Technical analysis: December cotton futures posted a downside day of trade on the daily chart, posting its lowest close since June 24. Bears' next target is the June low of 81.72 points. Initial resistance is at Monday's high of 85.54 points.

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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