Crops Analysis (VIP) -- December 12, 2012

December 12, 2012 08:52 AM


Price action: Corn futures settled 1 3/4 to 3 1/4 cents lower, which was near the middle of today's trading range.

Fundamental analysis: Corn futures tried at times today to work higher, but spillover pressure from wheat kept pressure on the market. The other limiting factor remains sluggish demand. While South Korea bought 238,000 MT of corn overnight, the purchases were South American and South African origin. Also, weekly ethanol production declined again this week and the four-week average is running 12.5% below year-ago. Of course, as corn futures move toward the bottom of the extended, choppy range, there's an increased likelihood a pickup in corn demand could be seen.

Helping limit selling pressure in the corn market today was a weaker U.S. dollar. The dollar extended losses following the Federal Open Market Committee meeting at which the Fed pledged to continue its economic stimulus efforts through continued asset purchases, which helped lift corn futures off session lows.

Technical analysis: Key support for March corn futures lies at the bottom of the extended, choppy range at $7.08 3/4. Prior to that, however, is the November low at $7.14 1/4.

Hedgers: 100% sold on 2012-crop in the cash market -- 10% for March 2013 delivery. No 2013-crop sales recommended yet.

Cash-only marketers: 75% sold on 2012-crop --10% for March 2013 delivery; 15% for May 2013 delivery. No 2013-crop sales recommended yet.




Price action: Soybean futures faced pressure throughout the morning, but light short-covering helped nearby futures to move into positive territory after midday. January beans settled around a penny higher for the day while deferred months closed 3/4 to 5 1/4 cents lower.

Fundamental analysis: Soybean futures faced light followthrough selling early in today's session as traders remained unimpressed with USDA's balance sheet adjustments yesterday that did not include an increase to its export forecast, though it did increase its crush projection and lowered carryover. Improved conditions in southern Brazil and a favorable evaluation of the Argentine crop by the country's ag minister also made it difficult for beans to find buyers.

But improved outside markets following the release of a FOMC statement that, generally speaking, gave the market what it expected/wanted in terms of bond buying and interest rates encouraged some light short-covering ahead of the close.

Technical analysis: January soybean futures settled high-range and within the contract's uptrending channel from the November low. Uptrending support drawn off the lows since mid-November intersects around $14.61 1/2 tomorrow. Last week's high of $14.98 1/4, closely followed by $15.00 mark near-term resistance.

Hedgers: 100% sold on 2012-crop in the cash market. No futures/options positions at this time. No 2013-crop sales advised yet.

Cash-only marketers: 75% sold on 2012-crop production for harvest delivery. No 2013-crop sales advised yet.




Price action: Wheat futures saw periods of short-covering early today on ideas yesterday's sharp losses were overdone. But wheat softened into the close to finish 7 to 11 cents lower in Chicago; double-digit lower in Kansas City; and roughly 6 to 7 cents lower in Minneapolis.

Fundamental analysis: Early short-covering gave way to selling as traders still have yesterday's USDA Supply & Demand Report on their minds. The report was a "game changer" as USDA raised carryover back above the last marketing year as it lowered its export projection by 50 million bushels. With the U.S. still not showing a competitive edge in the global market, traders are opting to shed their long exposure to the market.

Positive outside markets' inability to lift wheat futures also signals an increasingly bearish attitude among wheat traders.

Technical analysis: March Chicago wheat futures have posted three consecutive downside days of price action on the daily chart that have done major technical chart damage; the contract is now hovering near $8.10. Next support lies at the halfway point of the rally from the May low to the August high, which lies near $8.00. Meanwhile, futures have moved into severely oversold territory according to the 9-day Relative Strength Index, which signals a time or price correction is due.

Hedgers: 75% sold on 2012-crop in the cash market. No 2013-crop sales advised yet.

Cash-only marketers: 75% of 2012-crop is sold. No 2013-crop sales advised yet.





Price action: Cotton futures saw a choppy day of trade, but ended marginally to slightly higher to post a high-range close.

Fundamental analysis: Firmness in the U.S. stock market and a weaker U.S. dollar helped cotton futures gain some momentum into the close. Traders also have yesterday's USDA reports on their minds, in which USDA tightened carryover more than expected by raising its export projection. As a result, cotton futures have posted consecutive upside days of price action on the charts.

Technical analysis: Next resistance for March cotton stands at the October high of 76.39 cents, but to move above the long-lasting consolidation range, the contract needs closes above the August high of 78.02 cents. Meanwhile, support begins at the November low of 69.79 cents and extends to the June low of 66.85 cents.

Hedgers: 50% priced on expected 2012-crop production via cash forward contract for harvest delivery. A breakout from that range is needed to spark a trending move.

Cash-only marketers: 50% priced on expected 2012-crop production via forward contract for harvest delivery.


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