Crops Analysis (VIP) -- December 18, 2012

December 18, 2012 09:09 AM
 

Corn

Price action: Corn futures were lower most of the day but came off session lows into the close for a mixed finish. March through July futures ended 3 1/4 to 4 cents lower, with September steady. December 2013 through 2014 contracts ended around 1 cent higher.

Fundamental analysis: Early pressure came on spillover from sharp losses in soybean futures, but sharp weakness in the U.S. dollar index triggered some short-covering in the corn market into the close. Early pressure was also tied to improved moisture chances for the Corn Belt, although much more is needed through the winter to return soil moisture conditions to normal for spring planting.

However, if soybean futures continue to see profit-taking pressure, it will be difficult for corn futures to hold above the September lows. Violation of this support would do technical chart damage.

Technical analysis: Support for March corn futures begins at the November low of $7.14 1/4 and extends to the September low of $7.08 3/4. If violated, bears' next target would be the bottom of the early July gap at $6.83 1/2.

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 faced pressure throughout today's session and softened into the close to end 22 3/4 to 30 1/4 cents lower in the January through May contracts, while deferred months saw losses of 9 to 19 1/4 cents. Soymeal and soyoil saw heavy spillover pressure.

Fundamental analysis: News China and unknown destinations canceled 300,000 MT and 120,000 MT of soybean orders, for 2012-13, respectively, weighed heavily on the soybean market today. And sales of 110,000 MT to unknown destinations did little to offset this news. The market also ignored firmer Gulf basis levels today that signal tight supplies as well as concerns about the eventual closure of the Mississippi River.

A wetter five-day forecast for Brazil and more precip expected for the Midwest this week added incentive for traders to reduce risk ahead of what will be an extended holiday break from the markets for some.

Technical analysis: January soybean futures today penetrated support at the 40- and 50-day moving averages, which opens downside risk to the psychological $14.00 mark, followed by the November low of $13.72 1/4. Yesterday's high of $15.08 3/4 is 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.

 

Wheat

Price action: Wheat futures faced pressure early in today's session, but the market rebounded into the close to end with slight gains at all three locations in nearby contracts. Deferred months ended mostly slightly lower.

Fundamental analysis: Spillover from corn and especially soybeans weighed on the wheat market today as wheat's fundamentals are not such that it can rally on its own. Also, the forecast for precip (mostly snow) in the Central Plains and Midwest is favorable for the crop.

But some light short-covering boosted futures late in today's session thanks to dollar weakness and ideas the downside has been overdone. Also, current lower prices may help U.S. wheat to finally see an export demand boost as a result of dwindling Black Sea region supplies.

Technical analysis: March Chicago wheat futures matched last week's low of $8.01 1/2 before rebounding to end with slight gains for the day, marking it as strong support. Nevertheless, the market remains in a downward posture, with support layered from today's low to the 62% retracement of the mid-June to August rally at $7.75 3/4.

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 ended mixed, with nearbys slightly higher and deferreds slightly lower amid bull spreading.

Fundamental analysis: Price action was choppy as traders have little fresh news to digest and traders have begun to more actively even positions ahead of the holidays. Many traders will take an extended leave from the market until the first of the year, which contributes to choppy trade in futures. Weakness in the U.S. dollar index contributed to firmness in nearby futures, although buying was not widespread across commodity markets.

Technical analysis: March cotton futures briefly traded above yesterday's high, with today's high of 76.29 cents as initial resistance, followed by the October high of 76.39 cents. Uptrending support drawn off November and early December lows currently intersects at 75.13 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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