Crops Analysis (VIP) -- December 10, 2013

December 10, 2013 08:40 AM


Price action:
Corn futures settled 1 to 2 1/4 cents lower through the July 2015 contract.

Fundamental analysis: USDA's corn carryover projection was cut more than expected to 1.792 billion bu. in the Supply & Demand Report. But that failed to spark buying interest as it was really a reminder that supplies will be plentiful through the current marketing year -- they just aren't expected to be quiet as heavy as previously thought.

Spillover pressure from the wheat market and a downturn in soybean futures after USDA's data was released also weighed on corn futures today. Corn will likely need help from beans and wheat for the market to embark on an extended price recovery.

Technical analysis: March corn futures are signaling bottoming action may be in the works. But the contract must push above the November high of $4.49 1/2 and old support at $4.59 to spark any meaningful chart-based buying. Contract-low support is at $4.18 1/2.

Hedgers: 25% of 2013-crop production is sold via cash forward contract for harvest delivery.

Cash-only marketers: 25% of expected 2013-crop production is sold via forward contract for harvest delivery.




Price action: Soybean futures were highly volatile today. After a stronger start to the daytime session, futures softened after the release of the USDA reports, but then trimmed losses into the close to finish 4 3/4 to 8 1/2 cents lower.

Fundamental analysis: USDA trimmed 2013-14 soybean carryover more than expected to a very tight 150 million bushels. But USDA also raised its global 2013-14 carryover peg to show supplies are in a period of rebuilding. USDA raised its U.S. export projection from last month, reminding the market of China's large appetite for soybeans, although it sees total exports from South America (Argentina, Brazil and Paraguay) 19.06 MMT more than the U.S. tally in 2013-14.

Traders continue to keep a close eye on South American weather conditions, as heavy rains in Mato Grosso are raising concern about the spread of rust (see "Evening Report" for more). But favorable conditions are expected across most areas of South America for the near-term

Technical analysis: January beans posted a higher-high of $13.53 1/2 before diving into negative price territory. Futures respected uptrending support drawn off November reaction lows to maintain a positive technical bias on the charts.

Hedgers: Get to 100% sold in the cash market on 2013-crop production. We'll manage risk on the board the remainder of the marketing year.

Cash-only marketers: Get to 75% sold on 2013-crop production.




Price action: Wheat futures saw pressure build throughout the day. HRW and SRW wheat posted losses of 8 1/2 to 11 3/4 cents for the day, while HRS wheat finished 5 3/4 to 9 1/4 cents lower.

Fundamental analysis: Wheat futures softened following the release of Supply & Demand Report data that favored market bears. This, in turn, triggered sell stops as a number of contracts moved through contract-low support.

USDA raised its 2013-14 carryover projection for wheat by 10 million bu. to 575 million bu., whereas traders had anticipated a 12-million-bu. reduction from November. Global wheat carryover also came in heavier than anticipated. Plentiful global wheat supplies were the source of much of the price pressure. Spillover from the corn and soybean markets added to the negative tone.

Technical analysis: SRW March wheat hit a new contract low of $6.35 today, which is now initial support. Bears' next target is on the weekly continuation chart at the August low of $6.23. The $6.50 area that roughly coincided with the previous contract low is now resistance.

Hedgers: 75% sold on 2013-crop in the cash market. No 2014-crop sales are advised.

Cash-only marketers: 50% sold on 2013-crop. No 2014-crop sales are advised at this time.




Price action: Cotton futures faced pressure early today, but the market improved this morning and it maintained those modest gains into the close. Futures posted gains of 17 to 33 points on the day, which was good for a high-range close.

Fundamental analysis: USDA's changes to both its Supply & Demand and Crop Production Reports relative to cotton were fairly minor, resulting in a muted response from the marketplace. USDA lowered its national average cotton yield estimate by 2 lbs. from November to 806 lbs. per acre, which resulted in USDA lowering its production estimate by 36,000 bales from the month prior. The department left its cotton carryover projection for 2013-14 unchanged at 3 million bales.

While U.S. supplies remain well below year-ago, global supplies are ample. In fact, USDA raised its world cotton carryover projection from last month to a record 96.42 million bales.

The key to the longer-term price outlook for the cotton market remains Chinese demand. USDA left its 2013-14 Chinese cotton import forecast at 11 MMT today.

Technical analysis: March cotton futures closed at the contract's highest level since October today. Bulls' next target is the 81.64-cent area, which acted as tough support the bulk of this year. Support is layered from the psychologically significant 80.00-cent area to the November low of 76.65 cents.

Hedgers: 50% of expected 2013-crop is sold in the cash market.

Cash-only marketers: 50% sold on 2013-crop production.


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