Crops Analysis (VIP) -- December 5, 2013

December 5, 2013 08:50 AM


Price action:
Corn futures were on the defensive today, finishing 1 1/2 to 3 cents lower through the July 2015 contract. Most contracts posted mid-range closes. Funds reportedly sold 4,000 contracts (20 million bu.) of corn today. Futures will struggle to rally unless funds actively exit their large short position.

Fundamental analysis: Corn futures opened weaker on a disappointing export sales report issued by USDA prior to the opening of the day session. USDA said weekly export corn sales totaled only 593,600 MT for 2013-14, which was well under expectations. The market was already under pressure during the overnight as traders continue to worry China will reject additional loads of U.S. corn for containing a GMO variety not approved by their government. And traders were disappointed by the lack of followthrough buying in the overnight session following Wednesday's gains.

In addition, futures were pressured by news China's state-run China National Grain and Oils Information Center (CNGOIC) now pegs its corn production at 217.51 MMT this year -- an increase of 4.6% over year-ago and well above USDA's November projection of 211 MMT. CNGOIC forecasts 2013-14 Chinese corn consumption at 199.79 MMT, up 5.2% from 2012-13. The market also absorbed news that Brazilian analytical firm Agroconsult now pegs that nation's corn crop at 76.1 MMT, up from its previous projection of 75.7 MMT.

Technical analysis: March futures posted an inside day versus Wednesday's relatively expanded trading range. Current trading action hints that a market bottom may be in the works, but it will take a close above $4.50 to turn traders' heads.

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.




Price action: Soybean futures spent most of the day on the defensive but firmed enough near the close to finish the day mixed -- 2 1/4 cents lower to 1 3/4 cents higher. Futures closed near the highs of the day. Funds were reportedly flat (neither net buyers nor net sellers) today.

Fundamental analysis: Soybean futures opened weaker on spillover from the lower start in corn and wheat futures. The trade received positive news from USDA, which reported weekly export soybean sales totaled 805,200 MT for 2013-14 and 355,600 MT for 2014-15. These were at the top end of pre-report expectations. In addition, USDA also announced a daily 110,000-MT soybean sale to China for 2014-15.

Traders, already concerned about prospects for a record large South American soybean harvest, received more confirmation of fact from private Brazilian firm Agroconsult. The firm raised its crop estimate to a record 90.7 MMT from 86 MMT previously.

Technical analysis: March soybean futures posted an inside day with prices finding support above yesterday's low and resistance just under Wednesday's high. There is resistance up to $13.27 with the $13.40 level the next area of resistance. There is support at $12.80 if prices penetrate this week's lows. The November short-term uptrend line also offers support at $12.80 with the longer-term August-November uptrend offering support at $12.55.

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.




Price action: Wheat futures slumped into the close, ending on or near session lows. SRW futures closed 8 to 9 cents lower, HRW futures ended 4 to 9 cents lower and HRS futures finished 6 to 8 cents lower.

Fundamental analysis: A disappointing weekly export sales figure gave traders a reason to extend yesterday's losses today. USDA reported weekly export wheat sales of just 229,200 MT, which was much lower than anticipated. This renewed concerns about the competitiveness of U.S. wheat. While FOB prices are relatively competitive -- cheaper in some instances -- freight costs continue to be a limiting factor for U.S. wheat.

The market was also still reeling today from the shockingly big Canadian wheat crop estimate from Wednesday. While traders knew the U.S. was going to face stiff export competition from Canada, there's now even more Canadian wheat to compete with.

Traders ignored seemingly bullish factors today. They seem unconcerned with the arctic temps that have invaded much of winter wheat country. Traders also ignored a weaker U.S. dollar.

Technical analysis: March Chicago wheat futures were working on a potential rounded double-bottom on the daily chart, but that's now at risk of being negated. If the contract violates support at the September low of $6.47 3/4, it would open sharp downside risk.

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.




Price action: Cotton futures ended 20 to 49 points lower and low-range for the day following a choppy day of trade.

Fundamental analysis: Weekly export cotton sales were very solid at 248,600 bales for 2013-14 and 18,000 bales for 2014-15. In addition, the U.S. dollar index was lower through the daytime hours. But these seemingly supportive factors failed to spark sustained buying interest, suggesting the upside is limited to mild corrective buying unless there's a strong bullish catalyst. But traders are also unlikely to add new short positions unless a fresh bearish factor surfaces. That suggests near-term price action will remain choppy.

Technical analysis: The extended choppy trade has pushed March cotton futures through downtrending resistance from the October highs. But the contract hasn't been able to pull away from this trendline, limiting the bullish impact from the "breaking" of the downtrend. The November spike high at 80.52 cents stands at key near-term resistance, while support is at the November low of 76.65 cents.

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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