Crops Analysis (VIP) -- December 27, 2012

December 27, 2012 09:40 AM


Price action: Corn futures favored a weaker tone through the day and settled near session lows with losses of 1 3/4 to 3 1/4 cents.

Fundamental analysis: Corn futures softened as the dollar index strengthened. A general risk-off trade of trade was seen across the commodity markets as investors are concerned about the inability of Congress to strike a fiscal cliff deal.

Additional pressure came from softening of Gulf and interior basis levels. Gulf basis for nearby delivery softened 1 to 2 cents and inland, cash sources say a pick-up in forward contract grain resulted in softer basis levels. Lackluster export demand is also responsible for softer basis levels.

Technical analysis: December 2013 corn posted back-to-back closes below the psychological $6.00 level. Next support is at the halfway point of the rally from the June low to the September high 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.



Price action: Soybean futures saw two-sided trade, but favored a weaker tone due to concerns about going over the fiscal cliff. January through August beans ended 1/4 to 5 3/4 cents lower, with deferreds ending 1 to 3 1/4 cents higher amid bull spreading unwinding.

Fundamental analysis: Early buying came amid short-covering and weakness in the dollar, but as the dollar firmed traders began to shed risk due to concerns fiscal cliff talks have stalled. Traders are also taking a cautious tone as they prepare for tomorrow's weekly export sales that will include cancellations from China.

Additional pressure comes from more rain in the near-term forecast for dry areas of Brazil, which will help with establishment of the later-planted crop and pod fill of the early developing crop.

Technical analysis: January soybean futures posted a slight downside day of trade on the daily chart but didn't stray too far from unchanged in either direction today. Near-term boundaries are support at last week's low of $14.02 3/4 and resistance at the $15.00 level.

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.


Price action: Wheat futures faced pressure for most of today's session and ended mostly fractionally to 2 1/4 cents lower in Chicago, around a penny lower in Kansas City and 3 3/4 to 7 cents lower in Minneapolis. This was a mid-range close for most contracts.

Fundamental analysis: Wheat futures saw brief trade on the positive side of unchanged this morning, but this swiftly gave way to profit-taking and bears maintained a slight upper hand for the most of today's session. Risk aversion was the story for most of the commodity sector today as traders are unwilling to the add risk until the fate of the U.S. economy relative to the fiscal cliff is known.

Rain in the forecast for the Southern and Central Plains made it difficult for wheat to find buyers today, though much more is needed to relieve widespread drought in winter wheat country.

Technical analysis: March Chicago wheat futures hit a new six-month low today and the contract appears headed for a test of support at the May high of $7.54 1/2, followed by the June high of $6.69 1/4. The psychological $8.00 level marks near-term resistance.

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.



Price action: Cotton futures extended early losses but ended off session lows to finish mid-range with losses of 23 to 100 points.

Fundamental analysis: Without fresh news for the market to digest, cotton took its cue from outside markets. The U.S. dollar index was choppy today, but as it firmed a general risk-off atmosphere in the commodity markets ensued. Traders also pointed to long liquidation for today's softer tone as the market failed to find strong followthrough buying after yesterday's gains.

Traders will have fresh news in the form of the weekly export sales data tomorrow to provide some direction ahead of the weekend. The recent strong sales pace has largely been behind the uptrend established from the November lows. Key will be if this trend continues.

Technical analysis: March cotton futures briefly traded above yesterday's high and then sank to move below yesterday's low to post a bearish reversal for the day. Followthrough pressure tomorrow would signal a near-term high may be in the works.

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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