Crops Analysis (VIP) -- December 31, 2012

December 31, 2012 07:47 AM


Price action: Corn futures rebounded from earlier weakness to close slightly higher in all but some of the extreme far-deferred contracts. Most contracts ended near session highs in thin, holiday trade.

Fundamental analysis: Nearby corn contracts enjoyed light short-covering as traders closed their books on 2012. But without fresh positive news to draw from, buying was limited. Outside markets were also a mixed bag, as the dollar index was choppy and the Continuous Commodity Index was lower for the day.

When traders return on Wednesday, focus will be on the fiscal cliff. If a last-minute deal is reached by midnight tonight (as expected), then it could encourage a fresh round of buying to start the new year.

Technical analysis: March corn futures posted a slight upside day of trade on the daily chart, but the contract has a lot of work ahead in order to signal a near-term low has been posted. Futures remain within the boundaries of the downtrend established from the late November high. Violation of support at the December low of $6.87 1/2 and filling the early July gap area at $6.83 1/2 would make bears' next target the January high of $6.08.

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 ended roughly 5 to 12 cents lower, which was in the middle to lower end of today's range.

Fundamental analysis: Soybean futures faced heavy pressure through mid-morning as favorable Brazilian crop weather and fiscal cliff concerns weighed on the market. But selling pressure eased into the close as the bulk of the price action was end-of-year positioning and traders weren't interested in adding new short positions.

Traders brushed aside news an unknown destination bought 140,000 MT of U.S. soybeans for 2012-13. With a record South American crop forecast, traders expect demand for U.S. beans to weaken once new-crop Brazilian and Argentine supplies are in exportable position.

Technical analysis: Key near-term boundaries for March soybean futures lie at the November low at $13.56 and the December high at $15.01 1/4. Given the width of this range, the contract could hold chop sideways for an extended period without a breakout attempt.

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: Following a light, pre-holiday day of trade, wheat futures steady to slightly lower in Chicago, mixed to mostly firmer in Kansas City and slightly lower in Minneapolis.

Fundamental analysis: The bulk of today's price action centered on end-of-the-year positioning as fresh news was limited. That kept wheat futures under pressure, but also helped limit selling interest.

Weekly export inspections of 7.763 million bu. were below expectations and yet another reminder of sluggish export demand. Until there's some consistent, positive demand news, it will be hard for bulls to gain traction as the path of least resistance is down.

Technical analysis: March Chicago wheat futures respected support at last week's low of $7.64 1/2. If that level is violated, the May high at $7.54 1/2 is the next level of support. Downtrending resistance from the late-November high intersects at $7.93 1/2 Wednesday.

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 saw a choppy start, but firmed and ended with gains of 27 to 95 points.

Fundamental analysis: Cotton futures edged higher in thin-volume trade which featured end-of-the-year position squaring. Without fresh news for the market to digest, today's price action was generally lackluster. But mentions of solid export demand and expectations acreage in the U.S. is headed sharply lower in 2013 were supportive for prices.

Concerns about dipping into a recession if the U.S. economy falls over the fiscal cliff limited buying interest in the cotton pit today. But it appears an 11th-hour agreement is coming.

Technical analysis: March cotton futures posted an inside day of trade on the daily chart and finished mid-range. The contract continues within the boundaries of the uptrend established from the November low and needs closes above last week's high of 77.10 cents and then the August high of 78.02 cents to open significant upside potential.

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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