Crops Analysis (VIP) -- December 26, 2012

December 26, 2012 09:01 AM
 

Corn

Price action: Corn futures started the day firmer but quickly softened on spillover from soybean futures. March through September futures ended 9 to 11 cents lower, with deferreds mostly 7 cents lower.

Fundamental analysis: The inability of corn futures to hold early gains or find sustained buying from positive outside markets signals there is more near-term downside risk for the market. Traders are hesitant to extend long positions as they wait on Congress to agree on a fiscal cliff solution. Traders are also noting this afternoon that basis at the Gulf was slipping, although others expect demand for U.S. corn to soon improve given the recent price slide.

Technical analysis: March corn futures posted a downside day of trade on the daily chart, but held above last week's low of $6.87 1/2, which is just above key support at the bottom of the early July gap area at $6.83 1/2. Meanwhile, December 2013 corn futures slipped below the November low at the psychological $6.00 level. Next support is the halfway point of the rally from the June low to the September high, which is at $5.88.

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 opened firmer on fresh demand news, but quickly softened. January through September futures ended 12 to 17 1/2 cents lower, with deferreds 8 1/4 to 9 1/2 cents lower.

Fundamental analysis: Early buying came on help from positive outside markets and fresh demand news, but buying was not lasting as traders worked to further lighten their long exposure to the market given concerns over the impasse of fiscal cliff negotiation. This morning, USDA announced a 115,000 MT soybean sale to China for 2012-13 and a 108,000 MT sale to an unknown destination for 2012-13. While this signals China is in need of soybeans after making hefty cancellations last week, traders expect their attention to soon shift to Brazilian supplies as they become available later next month. Additional pressure came from more rains in the five-day forecast for key growing areas of Brazil.

Technical analysis: January soybean futures posted a bearish reversal on the daily chart and a low-range close, which gives bears the upper hand heading into overnight trade. Near-term boundaries are support at last week's low of $14.02 3/4 and resistance at last week's high of $15.08 3/4.

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 in the wheat pit quickly gave way to profit-taking and spillover from neighboring pits. Chicago and Kansas City wheat ended around 18 to 20 cents lower, with Minneapolis down 8 to 12 1/4 cents.

Fundamental analysis: As corn and soybean futures extended losses, wheat followed suit as it remains in a follower's role and there's little fresh positive news for traders to absorb. The U.S. has seen a recent uptick in export demand, but today traders were discouraged by news Egypt has raised its export cap to 2.5 MMT from 2 MMT.

Positive outside markets provided limited early support in the wheat pit, but traders turned their focus to concerns about the pending fiscal cliff, which led to "risk-off" trade.

Technical analysis: March Chicago wheat moved to the contract's lowest level since late June and is now hovering above the psychological $7.70 level. The next level of key support lies 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 were supported by a generally positive tone in outside markets and ended slightly higher. Today's high-range close will give bulls more momentum on tomorrow's open.

Fundamental analysis: While the dollar was choppy today, bears held the advantage, which lifted crude oil futures sharply. Without other fresh news to digest, cotton futures were directed by this positive development. Traders also worked to make cotton more attractive relative to the grain markets, particularly soybeans as those two bid for acres. Recent heavy losses for the grain and soy markets have made this an easier task.

Technical analysis: March cotton futures posted an upside day of trade on the daily chart, with next resistance lying at the summer high of 78.02 cents. Closes above this level are needed to open additional near-term upside potential. Failure to clear this level would signal an eventual return to support near 71.00 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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