Crops Analysis (VIP) -- December 24, 2013

December 24, 2013 07:09 AM


Price action:
Price action was predictably light and choppy today ahead of the Christmas holiday. Corn futures ended narrowly mixed.

Fundamental analysis: Fresh news was limited today and traders showed no willingness to add fresh positions or cover existing positions ahead of the one-day holiday break, which will be an extended break for many. When some traders return on Thursday, their focus will be on Argentine weather, though that's seen as a bigger deal in the soybean market at the moment.

Funds continue to hold a sizable short position in corn, though there's been no urgency to cover shorts thus far. As we officially get into year-end trade after Christmas, it's likely going to take active fund short-covering to give the market sustained support.

Technical analysis: Near-term boundaries for March corn futures are the contract low at $4.18 1/2 and the Dec. 10 high at $4.40 3/4. But the contract likely needs to push above $4.50 to signal a post-harvest low is place and an extended correction is underway.

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.




Price action: Soybean futures closed slightly higher through the July contract while deferred contracts posted similar losses. Most contracts settled high-range. Funds reportedly bought 2,000 contracts (10 million bu.) today.

Fundamental analysis: Soybean futures moved higher today on news of overnight export sales and technical short-covering ahead of the holiday. Soybeans gained support on USDA's announcement that 185,000 MT of soybean sales were made to unknown destinations, with 65,000 MT for 2013-14 and 120,000 MT for 2014-15. The department also announced a sale of 114,000 MT of soybeans to Egypt for 2013-14. But deferred futures were tempered by forecasts of 0.5 to 1.5 inches of rain to spread across dry areas of Argentina which have been stressed by high temperatures of late.

Technical analysis: January soybean futures marked a 13-cent trading range today. The $13.20 to $13.12 1/4 area represents support, with resistance up to the Dec. 10 high of $13.53 1/2.

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.




Price action: Wheat futures faced light pressure today and the market softened heading into the close to finish roughly 2 to 4 cents lower.

Fundamental analysis: Strength in the U.S. dollar index and the definitively downtrending posture of the wheat market gave bears an edge in thin holiday trading volume today. The market remains concerned about export demand prospects for U.S. wheat. Yesterday's export inspections report failed to impress and today's tender by India to export wheat reminded that the U.S. faces tough competition on the global market. Friday's export sales report will provide another read on the export demand front.

Meanwhile, the market has displayed very little concern about extreme cold on the Plains as snow or ice is protecting the bulk of the crop against winterkill and conditions are starting to moderate.

Technical analysis: March SRW wheat futures hit yet another contract low of $6.05 3/4 today, setting the stage for a test of psychological support at $6.00. The contract must rally all the way back to the $6.50 area to definitively signal it has put in a low. This level coincides with the 38% retracement of the slide since October.

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.




Price action: Cotton futures spent most of the the day in positive territory, but the market see-sawed heading into the close. A late runup to session highs triggered profit-taking that was amplified by thin holiday trading volume. December and February futures ended low-range with losses of 5 to 34 points, while deferred months closed high-range with gains of 42 to 61 points.

Fundamental analysis: Cotton futures enjoyed corrective short-covering for most of the day amid ideas the downside was overdone yesterday. Fundamentally speaking, fresh news has been limited this week, leaving traders to focus on technical-based trading. Futures rallied to start the month but the runup has recently showed signs of stalling as the market consolidates.

Strength in the U.S. dollar index added incentive for traders to book profits in nearby contracts ahead of the close.

Technical analysis: March cotton futures tested but closed above psychological support at 82.00 cents, after which support stands at Monday's low of 81.42 cents. Friday's high of 83.85 cents is initial resistance.

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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