Crops Analysis (VIP) -- December 19, 2012

December 19, 2012 08:54 AM
 

Corn

Price action: Corn futures saw mixed trade early this morning, but that was short-lived. Profit-taking increased as the day progressed and futures ultimately ended with losses of 16 to 17 cents through the July contract, with deferred months roughly 4 to 11 cents lower.

Fundamental analysis: Corn futures initially held up well in the face of heavy spillover pressure from soybeans thanks to recently firmer Gulf basis levels that reminded the market of tight supplies and shipping troubles on the Mississippi River. But profit-taking in the corn market picked up after Informa Economics reportedly pegged U.S. 2013 planted acreage at 99.026 million, which would be up more than 2 million acres from last year and is up 1.326 million acres from the firm's November projection.

Adding fuel to bears' fire, the first winter storm event of the season is expected to dump significant precip on the Corn Belt tonight and tomorrow. The resulting profit-taking pushed corn through key levels of support, triggering sell stops.

Technical analysis: March corn futures broke through support at the November low of $7.14 1/4 and then the September low of $7.08 3/4. If followthrough selling tomorrow pushes the contract through the psychological $7.00 level, it would confirm a major downside breakout has occurred and open downside risk to the bottom of the July 5 upside 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 saw followthrough pressure from yesterday's losses to end 20-plus cents lower in the January through May contracts. July and August futures posted losses in the teens, with far-deferred futures seeing lighter losses.

Fundamental analysis: Traders still have yesterday's news of soybean sales cancellations from China on their minds. This, combined with improved growing conditions in Brazil, is reason enough for traders to lighten their long exposure to the market ahead of the holidays.

The market will receive fresh export news via the weekly export sales data tomorrow, which will provide some guidance to the pace of exports. But the general thought of the market now is that China will either rebook U.S. soybeans at lower prices or will soon switch to Brazilian supplies as early harvest there will begin in January.

Technical analysis: January soybean futures posted another big downside day of trade on the daily chart, but support at $14.30 held today. If violated tomorrow, bears' next target would be the November low of $13.72 1/4. The inability of the contract to close above $15.00 earlier this week has also contributed to profit-taking pressure.

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: Early gains gave way to profit-taking, and wheat futures ended roughly 5 to 7 cents lower in Chicago and Minneapolis and mostly 2 to 3 cents lower in Kansas City.

Fundamental analysis: Early support was tied to ideas the recent sharp price slide has made U.S. wheat more attractive on the global market. This morning USDA announced Egypt purchased 110,000 MT of HRW wheat for 2012-13, which was followed by news Egypt's state-owned buyer (GASC) purchased 180,000 MT of SRW wheat for February shipment. But as corn and soybean futures extended losses, buying in the wheat pit dried up.

Key tomorrow will be if corn sees followthrough from today's sharp losses or if short-covering occurs, as price action in wheat will likely remain closely tied to that of corn.

Technical analysis: March Chicago wheat futures briefly traded above resistance at $8.20, but then softened and posted a low-range close. Initial support tomorrow is at yesterday's low of $8.01 1/2. Violation of that level could trigger sell stops, with the next key support level at the May high of $7.54 1/2.

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 near the top of their narrow daily trading range with March futures up 2 points and deferred months 5 to 55 points lower.

Fundamental analysis: Cotton futures lacked fresh fundamental news today, and thus were vulnerable to light profit-taking amid spillover pressure from a broad move to reduce risk in the grain and soybean markets today. But this pressure was limited by weakness in the U.S. dollar index. News Informa Economics reportedly expects 2013 cotton planted acreage of 10.065 million helped the market to end high-range as this is 2.056 million acres below last year's plantings. But as this projection was little changed from the firm's November estimate, support was limited.

Technical analysis: March cotton futures remain within their gradually uptrending channel, with near-term resistance at yesterday's high of 76.29 cents and support drawn off the November and December lows intersecting around 74.09 cents tomorrow.

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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