Crops Analysis (VIP) -- August 2, 2012

August 2, 2012 10:08 AM
 

Corn

Price action: Corn futures settled fractionally to 6 1/2 cents lower through the September 2013 contract, which was mid-range. Far-deferred contracts closed 2 to 3 cents higher and on or near session highs.

Fundamental analysis: Corn futures faced more profit-taking today despite bullish demand news. USDA reported Mexico bought 1.516 million metric tons of corn -- 982,980 metric tons (MT) for 2012-13 and 533,400 MT for 2013-14. That suggests at least Mexico is concerned about still-higher corn prices. Weekly export sales came in above low expectations, but they weren't strong enough at 178,400 MT for 2011-12 and 23,000 MT for 2012-13 to be considered price-supportive.

Support from the Mexican corn purchase was more than offset by negative outside markets as the U.S. dollar was stronger and the commodity sector and stock market faced heavy pressure. Forecasts also call for decent rain chances the next several days. While any rains would be too late to have much positive impact on corn, it's hard to attract buying when the forecast is wet.

Technical analysis: December corn futures posted an inside day of trade on the daily chart. Key near-term resistance is at the contract high of $8.20 1/2, while support lies at the July 24 spike low at $7.45 1/2.

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: August through March soybean futures closed 8 1/2 to 29 1/4 cents lower, with far-deferred futures ending narrowly mixed. Meal and soyoil also ended lower.

Fundamental analysis: Focus was on negative outside markets and forecasts for beneficial rains across the Corn Belt the next five days, although rains are expected to favor northern locations. Rains at this time of year are critical for the pod-filling stage.

Traders were also disappointed by this morning's weekly export sales data, as soybean sales came in below expectations at 194,000 MT for 2011-12 and 52,400 MT for 2012-13. But China and unknown destinations were noted buyers. Gulf basis softened by a nickel for immediate shipment, signaling demand has softened.

Technical analysis: November beans posted an inside day of trade on the daily chart and ended mid-range. Near-term boundaries are support at last week's low of $15.36 and resistance at the contract high of $16.91 1/2.

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 closed 14 to 18 cents lower in Chicago, 11 to 15 cents lower in Kansas City and mostly 2 to 11 cents lower in Minneapolis. Most contracts at all three exchanges ended in the lower part of today's range.

Fundamental analysis: Heavy spillover from outside markets triggered selling pressure in wheat futures today. With the corn market under pressure, wheat traders had no strong reason to buy. Instead, they took more profits out of the market as they capitalize on the strong rally.

Weekly export sales of 516,200 metric tons (MT) for 2011-12 and 4,500 MT for 2012-13 were within expectations.

Technical analysis: Bulls must defend last week's low at $8.52 3/4 in September Chicago wheat futures. Violation of that support would open the door to potentially strong chart-based selling. Next strong chart support would be at the bottom of the July 5 gap at $8.00 3/4.

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 16 to 61 points higher, which was in the upper end of today's narrow trading range.

Fundamental analysis: Weekly export sales of a combined 208,800 running bales for 2011-12 and 2012-13 were a solid figure, but not enough to spark active buying interest. That was countered by negative outside markets as the U.S. dollar was firmer and the commodity sector was under heavy pressure. Traders remain content to bide their time ahead of USDA's crop estimate on Aug. 10.

Technical analysis: December cotton futures continue to chop sideways. In fact, the trading range is narrowing. Until the contract breaks out of the established trading range, there won't be strong conviction to buy or sell.

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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