Crops Analysis (VIP) -- December 4, 2012

December 4, 2012 09:08 AM
 

Corn

Price action: Corn futures saw a choppy day of trade and ended split with December through May futures slightly lower and deferred months mostly slightly higher.

Fundamental analysis: Traders focused on booking profits in the corn market today after gains yesterday and amid broad risk aversion today. Further, news Taiwan bought corn from Brazil reminded traders that high U.S. corn prices have curtailed demand.

But news Informa Economics reportedly lowered both its Brazilian production estimate by 600,000 MT to 66.2 MMT and its Argentine production estimate by 1 MMT to 27 MMT did encourage some light short-covering as the market is counting on a large South American crop to ease the tight supply situation.

Technical analysis: March corn futures were little changed today, leaving near-term boundaries intact. Support is at the November low of $7.14 1/4, while resistance is at last week's high of $7.67 1/2.

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 capped off a choppy day of trade by closing mixed, with nearbys steady to higher and deferred months lower. Meal favored a firmer tone on the close, with soyoil weaker.

Fundamental analysis: Weakness in the U.S. dollar index helped to limit price pressure on soybeans, but concerns about the lack of significant progress in fiscal cliff negotiations led to a generally risk-off atmosphere in commodity markets today.

Soybeans were also pressured by news Taiwan passed on a tender to purchase U.S. soybeans due to high prices, but concerns about dry areas in Southern Brazil limited pressure. See "Evening Report" for an update on South American crop estimates.

Technical analysis: January soybean futures saw trade below the $14.40 level, but ended mid-range and challenged resistance at yesterday's high of $14.62 3/4. But to signal the market has posted a near-term low, futures need to return above the psychological $15.00 level. Key support lies at the November low of $13.72 1/4.

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: Wheat futures were choppy today, but by the close were weaker as traders shed risk. Chicago and Minneapolis ended mostly around 2 to 4 cents lower, with Kansas City down mostly 3 to 5 cents.

Fundamental analysis: Periods of price strength in the early going were attributed to weakness in the U.S. dollar index, as traders view the euro-zone as "stable" for now. But traders were hesitant to extend long positions due to little progress being made in fiscal cliff negotiations.

But following yesterday's news that Egypt included the U.S. on its recent purchase due to the tightening of Black Sea region supplies, traders are more hopeful demand for U.S. wheat is on the mend. But traders want proof of strengthening U.S. demand before pushing prices too far to the upside given that futures are already historically high.

Technical analysis: March Chicago wheat futures posted a downside day of trade on the daily chart, but finished off the session low. Futures could correct to the November low of $8.45 without doing any technical chart damage. Resistance begins at last week's high of $8.95 1/2 and extends to the November high of $9.29 3/4.

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 faced pressure most of the day and ended with losses of 8 to 108 points, with nearby contracts posting the heaviest losses.

Fundamental analysis: General risk aversion across the commodity sector today encouraged profit-taking in the cotton market after recent gains. But both the market's upside and downside remain limited for the time being as expectations for consistent Chinese demand for U.S. cotton supplies are countered by recognition that supplies are adequate.

Indeed, Informa Economics reminded the market of the ample supply situation when it reportedly said it expects USDA to raise its cotton production estimate by 100,000 bales from November to 17.55 million bales. But the firm also reportedly lowered its world 2012 cotton production forecast by 761,000 bales from November to 118.4 million bales.

Technical analysis: March cotton futures posted a downside day of trade but stopped short of uptrending support drawn off the lows since November. It intersects around 72.45 cents tomorrow. Yesterday's high of 74.41 cents is near-term resistance, followed by the October high of 76.39 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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