Crops Analysis (VIP) -- December 3, 2013

December 3, 2013 08:44 AM
 

Corn

Price action:
Corn futures faced pressure overnight, but bargain buying took hold this morning and ultimately resulted in futures finishing high-range with gains of 5 to 6 3/4 cents. Funds bought 8,000 corn contracts (40 million bu.) today.

Fundamental analysis: Ideas the downside has been overdone, especially considering signs that export demand is being rebuilt, encouraged some corrective short-covering in the corn market today. A weaker U.S. dollar index was also encouraging to that end.

Adding to the positive tone, Informa Economics reportedly trimmed its corn production estimate for Brazil by 1.3 MMT to 88 MMT today. And crop consultant Dr. Michael Cordonnier lowered his Argentine corn estimate by 1 MMT to 24 MMT. Reports Brazil may start producing corn-based ethanol also added light support.

Technical analysis: March corn futures ended back near last week's high of $4.33. A move through this level would open upside potential to the $4.50 area, which roughly coincides with the November high. Yesterday's 2013 low of $4.18 1/2 marks support.

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.

Soybeans

Price action: Soybean futures were mixed throughout the day. In the end, nearby futures ended 1/4 to 1 1/2 cents lower, with deferreds up 1 to 7 3/4 cents. Meal favored a firmer tone on the close, with soyoil weaker amid spreading.

Fundamental analysis: Without fresh news for the market to digest, upside potential was limited. Weakness in the U.S. dollar index was a source of support for market bulls, while a 5-cent drop in Gulf basis for immediate delivery this morning limited buying enthusiasm.

On slow news days, traders have had a tendency to focus on prospects for a record South American crop and expectations producers plan to plant more soybean acres in the U.S. in the year ahead due to agronomic considerations.

Technical analysis: January soybean futures posted a 17-3/4 cent trading range for the day and ended mid-range. Today's low of $13 11 1/4 is initial support, with resistance at yesterday's high of $13.46.

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.

Wheat

Price action: Wheat futures traded higher and closed near the day's highs. SRW wheat futures finished 4 to 6 1/2 cents higher. HRW wheat futures finished 1 1/4 to 6 3/4 cents higher with nearby December futures leading gains. HRS wheat futures closed up 1 to 3 1/2 cents.

Fundamental analysis: Wheat futures traded higher through the day on export news, concerns over cold temperatures forecast for hard red winter wheat country this week and the weaker U.S. dollar index. Some crop analysts indicate about 5% of the crop may be vulnerable to winter-kill but others point out projected snowfall totals will provide protection for the crop.

Tempering gains was news the Australian Bureau of Agriculture and Resource Economics (ABARES) raised its 2013-14 Aussie wheat crop forecast to 26.213 MMT from 24.467 MMT previously, citing favorable weather in Western Australia. Meanwhile, Egypt bought 60,000 MT of Romanian wheat in its tender this morning, disappointing hopes the U.S. would get some of the business.

Technical analysis: March SRW wheat futures posted an inside day after marking a bearish reversal on Monday. This makes yesterday's high of $6.74 3/4 resistance, with yesterday's low of $6.60 1/2 as support. The bearish reversal suggests prices could test the bottom of the market's November trading range at $6.52 if $6.60 1/2 is penetrated. The next level of support on the downside is the contract low at $6.47 3/4. Hefty resistance rests at the summer triple top of $6.90.

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

Cotton

Price action: Cotton futures traded in a narrow range, with the March contract closing down 1 point while all other contracts finished 5 to 35 points higher.

Fundamental analysis: Cotton futures saw very limited action as traders balanced tight U.S. supplies against declining demand. Traders are already looking ahead to the release of the USDA's December Crop Production Report on Dec. 10. Some are expecting USDA to lower its projection of the size this year's crop.

China announced it is moving one step further in promoting production, processing and logistics of four major cotton-producing countries in Africa. The move is an extension of a cooperation program that started in 2011, which has helped cotton production in the four countries that account for about 15% of the world's cotton exports. Traders shrugged off the news as not having a major impact on the world's current supply and demand situation.

Technical analysis: March cotton futures traded in a very narrow range inside of Monday's range. The narrowing trading range is forming a tight coil with the late-November high of 79.65 cents providing resistance and support ranging from 78.00 cents down to 76.65 cents. Moves out of coil formations can be quite sharp.

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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