Crops Analysis (VIP) -- December 17, 2012

December 17, 2012 08:30 AM
 

Corn

Price action: Corn futures softened with the start of open-outcry trade and ended near session lows with losses of 5 1/4 to 6 3/4 cents.

Fundamental analysis: Early short-covering which supported corn futures through the overnight and early morning hours dried up once pit trading started and focus shifted back to sluggish demand. While weekly export inspections were mildly stronger than expected, the export pace remains a concern as its running below the "required" pace. Domestic demand is also a concern.

Excessive moisture and flooding in Argentina are also a concern on the supply side, although it's uncertain how this will ultimately impact corn plantings and yields. As a result, more of traders' attention is on the demand side of the market for now.

Technical analysis: March corn futures are trading in the bottom end of the extended, sideways range. Last week's low at $7.15 is initial support, followed by the November low at $7.14 1/4. Key support stands at the September low of $7.08 3/4. How the contact performs around this near-term support will determine if it remains in the sideways range or posts a downside breakout.

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.

 

Soybeans

Price action: Soybean futures softened with the start of open-outcry trade after seeing gains overnight. Futures ended near session lows, with January up 1/4 cent. March through August futures ended 1/4 to 4 1/4 cents lower, with far-deferreds steady to around a penny higher.

Fundamental analysis: Soybean futures saw profit-taking set in with the start of pit trading, but pressure was limited by ongoing strong demand. This morning USDA announced daily sales of 151,000 MT to unknown destinations, with 91,000 MT for 2012-13 and 60,000 MT for 2013-14. However, the export inspections report released later in the morning showed inspections of 36.990 million bu., which came in below traders' expectations. Still, the daily sale suggests China remains on its bean-buying binge.

Futures were also pressured by weekend rains across the Corn Belt, although much more precip is needed this winter to erase the drought -- especially in the western Corn Belt.

Technical analysis: January soybeans posted a daily high of $15.08 3/4, which is initial resistance. Futures have yet to close above the $15.00 level, which suggests it remains important resistance. Futures remain in the uptrend established from the November low, with uptrending support currently intersecting near $14.80.

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.

 

Wheat

Price action: Wheat futures softened with the start of open-outcry trade to finish mostly 6 cents lower in Chicago and Minneapolis, with Kansas City down 6 1/4 to 8 1/4 cents.

Fundamental analysis: Due to a lack of fresh demand news, wheat was influenced by weakness in the corn market as it works to find a price that attracts demand. Traders ignored this morning's weekly export inspections report, which showed inspections above expectations at 16.355 million bu., as traders want to see consistent demand improvement before they reestablish long positions.

Additional pressure came from weekend rains in areas of the Central and Southern Plains. Widespread rains were seen in Kansas and more is in the forecast through midweek. See "Evening Report" for more.

Technical analysis: March Chicago wheat futures saw trade above resistance at Friday's high in overnight trade, but then drifted lower to pivot around support at Friday's low of $8.06 1/4. Violation of support at last week's low of $8.01 1/2 could trigger sell stops as it would do more technical chart damage.

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.

 

Cotton

Price action: Cotton futures settled 31 to 76 points higher through the March 2014 contract, which was generally mid-range for the day.

Fundamental analysis: Cotton futures were able to extend the recent price recovery despite lackluster outside markets and pressure on grains. Fresh news was also limited today, signaling the bulk of today's price strength was technical-based as futures continue to benefit from light short-covering as traders close out positions for the year.

Technical analysis: March cotton futures continue to climb near the October high at 76.39 cents, which is a key near-term technical level. A push above that mark would open the upside to tougher resistance at the 78.00-cent level. Failure to clear the October high would point the contract toward support in the 71.00- to 70.00-cent area.

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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