Crops Analysis (VIP) -- December 12, 2013

December 12, 2013 08:53 AM
 

Corn

Price action:
Corn futures traded lower through the day but traders trimmed early losses for a midrange close. Futures closed 5 to 5 3/4 cents lower, with the exception of the December contract, which finished 3 cents lower.

Fundamental analysis: The stronger U.S. dollar and technically related selling kept prices under pressure through the day. News a group of lawmakers introduced a bill to eliminate the corn ethanol mandate also added to the negative tone.

The market shrugged off strong corn export sales of 695,400 MT for 2013-14 and 109,400 MT for 2014-15 the week ended Dec. 5. The figures were slightly above expectations. USDA also announced an 120,000-MT corn sale to unknown destinations for 2013-14 delivery this morning.

Technical analysis: March corn futures again failed to penetrate resistance at $4.40 and traded lower, taking out support at this week's lows. That move uncovered sell stops initially but failed to attract followthrough selling, which prompted futures to trim losses. Today's close left futures trapped in the middle of the narrow 10-cent trading range seen since Dec. 4.

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.

Soybeans

Price action: Soybean futures faced light pressure overnight and selling picked up as the day progressed. The market ended 8 3/4 to 20 1/4 cents lower on the day, with nearby contracts sustaining the heaviest losses. Soymeal and soyoil futures also posted moderate to sharp losses.

Fundamental analysis: Strength in the U.S. dollar index encouraged traders to take advantage of yesterday's gains by booking profits. This, in turn, gave way to some technical-based pressure as sell stops were triggered. These losses came despite strong weekly export sales data from USDA, signaling a new source of support is needed.

Support is unlikely to come from either corn or wheat as these markets remain in a long-term downtrend. This along with expectations for a record-large South American crop could make it tough for soybeans to sustain their recent uptrend.

Technical analysis: January soybeans erased all of this week's gains today but the contract did stop short of uptrending support drawn off the lows since November, which intersects around $13.04 tomorrow. Below that, $13.00 is tough psychological support. Yesterday's high of $13.53 1/2 is initial resistance.

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.

Wheat

Price action: Wheat futures fell to new contract lows today and closed low-range. SRW wheat finished 3 3/4 cents to 7 3/4 cents lower with nearby contracts leading the decline. HRW wheat closed mostly 3 3/4 to 6 1/2 cents lower. The December contract that expires tomorrow collapsed 27 1/4 cents. HRS futures finished 3 to 6 1/4 cents lower.

Fundamental analysis: Wheat futures fell on the stronger U.S. dollar index today. The stronger dollar adds to trader concerns about the competitiveness of U.S. wheat. Meanwhile, the market is still absorbing USDA's increase in global wheat stocks. The increase in supplies means it will be more difficult for U.S. wheat to gain market share.

Weekly wheat export sales of 372,200 MT for 2013-14 were within the guess range, but those expectations were very low. The market also brushed off news Japan bought 78,912 MT of U.S. wheat in its weekly tender as this is routine business.

Technical analysis: SRW March wheat futures posted a new contract low and closed under Tuesday's and Wednesday's lows. That makes the $6.35 to $6.40 area resistance. March futures need a close above $6.45 to hint at a market low. There is support down to $6.23.

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.

Cotton

Price action: Cotton futures enjoyed light followthrough buying today, which helped futures to settle steady to 57 points higher on the day, which was good for a high-range close.

Fundamental analysis: Cotton futures enjoyed strong gains yesterday and the market saw both followthrough buying and bouts of profit-taking today as some traders took advantage of recent price gains and strength in the U.S. dollar index. Ultimately, though, bulls had the advantage at the close and followthrough buying after yesterday's breakout gives a strong signal a low is in place.

Weekly cotton export sales of 174,100 RB for 2013-14 were somewhat disappointing as this represents a 30% decline from the week prior and a 46% drop from the four-week average. But traders are not overly concerned about this as a pullback in sales around the holidays is not unusual.

Technical analysis: March cotton futures settled above the 83.00-cent mark, turning that level into support. Today's strong finish will have bulls eyeing the Oct. 18 high of 85.47 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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