Crops Analysis (VIP) -- December 16, 2013

December 16, 2013 09:13 AM
 

Corn

Price action:
Corn futures spent very little time in positive territory today. Futures ended mid-range with losses of 2 to 2 1/2 cents.

Fundamental outlook: Corn moved off session lows as soybean futures turned higher, but spreading with soybeans kept corn under pressure. Additional pressure came from concerns about exports. Traders are uncertain what the impacts will be to news that Mexico will restart its import tariffs on corn imports. It's unclear if the tariffs will apply to U.S. corn due to NAFTA. The ongoing situation with China rejecting shipments due to the presence of unapproved GMO material also weighed on futures.

With funds still heavily short the market, there is still opportunity for short-covering as traders even positions and close their books for the year. But so far, periods of short-covering have been limited.

Technical outlook: March corn futures posted a downside day of trade on the daily chart and closed mid-range. Today's low of $4.20 1/2 is initial support, followed by the December low of $4.18 1/2. Resistance is at last week's high of $4.40 3/4.

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 finished 10 to 11 1/2 cents higher in the front four contracts with deferreds closing 3 to 7 cents higher. Contracts tended to close in their upper third of today's trading range. Funds bought 6,000 contracts (30 million bu.) today.

Fundamental outlook: Soybean futures opened under pressure on reports a case of H7N9 bird flu was confirmed by Chinese health officials. Traders worried an outbreak of the disease could slow feed demand if it is not an isolated incident. But positive demand news and bargain hunters soon appeared and lifted futures.

Early strength came from the weaker U.S. dollar index, which makes U.S. dollar-based soybeans more attractive on the global market. USDA reported 62.527 million bu. passed inspections for the week ending Dec. 13, up 2 million bu. from the previous week and well above expectations. In addition, NOPA members reported November soybean crushings totaled 160.145 million bu., down slightly from expectations of 161.3 million bu. but the largest crush since January 2010. Continuing strength in the Gulf soybean basis also had traders thinking additional export business may be in the works.

Technical outlook: January soybean futures tested support at $13.20, just above last week's lows and the November-December uptrend, and moved higher. They found resistance at $13.40, near recent highs. This keeps futures trapped in a 20-cent wide trading range. A move through either the top or bottom of the trading range would likely trigger a wave of stops, sending futures farther in that direction.

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 faced pressure throughout the day and most contracts settled at or near session lows. The SRW market ended 7 to 8 1/4 cents lower on the day while HRW wheat closed mostly 6 to 7 cents lower. HRS wheat saw losses around 5 to 6 cents.

Fundamental outlook: Technical selling weighed heavily on the wheat market today as traders pushed the market to new contracts lows. Export demand concerns along with weakness in the corn market gave traders incentive to exit positions. Today's weekly export inspections tally met pre-report expectations, but the tally was down from the week prior and total inspections were far from impressive. In addition, production updates for Russia and the European Union favored market bears.

Plus, market action in recent sessions has shown wheat needs support from corn to rally. This is not likely to return so long as Chinese corn order cancellations in association with GMO content findings pressure the market.

Technical outlook: March SRW wheat futures hit a new contract low and moved to their lowest level on the weekly continuation chart since June 2012. That means next support is at the $6.00 level, followed by the May double-bottom of $5.92 1/4.

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 traded on both sides of unchanged today, but the market ended steady to 51 points higher on the day, which was generally a high-range close.

Fundamental outlook: Cotton futures were pressured at times today by news China's cotton imports for the month of November declined to 173,100 MT, which was a 43% decline from year-ago. For the first 11 months of the year, China's cotton imports are down 23.1%. In addition, Chinese purchases for state reserves have picked up after a slow start. The country has now stockpiled 3.95 MMT for 2013-14, which is just shy of 4.02 MMT purchased at this time last year.

But the market was encouraged by news China's finance ministry today said it would raise the benchmark for calculating the sliding scale tax on cotton imports outside of the quota as of Jan. 1, suggesting it would not cap imports in 2014. Adding to the positive tone was news China Cotton Association trimmed its domestic cotton production forecast by 160,000 MT to 6.77 MMT, which would be a 12.5% decline over year-ago. Also, the technicals of the market clearly favor market bulls.

Technical outlook: March cotton futures matched Friday's high of 83.42 cents today, marking this level as tough near-term resistance, followed by the 84.00-cent mark. Tough support stands at the June low of 81.64 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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