Crops Analysis (VIP) -- February 11, 2014

February 11, 2014 08:54 AM
 

Corn

Price action:
Corn futures closed 1 1/2 to 2 1/2 cents lower, which was mid-range. Funds were net sellers of 2,000 contracts (10 million bu.) of corn on the day.

Fundamental outlook: After a negative close in the face of USDA's deeper-than-expected cut to its 2013-14 carryover projection on Monday, corn futures were pressured through the daytime session again today. While USDA raised its export forecast by 150 million bu. yesterday in response to the pickup in foreign buying, there are concerns recent price strength may curb export demand, which triggered some profit-taking today. But spillover support from strength in the soybean and wheat markets limited selling interest.

While USDA's 2013-14 ending stocks forecast is much lower than once feared, corn supplies remain plentiful. Therefore, demand will be the key to how far price rallies extend.

Technical outlook: March corn futures spiked uptrending support drawn off the January lows today, but closed above that trendline. A close below the uptrend and the January high of $4.35 1/2 would signal a short-term top is in place. To extend the uptrend from the January low, the contract must push above the November high of $4.49 1/2 soon. The contract got within 1/2 cent of that resistance Monday before softening.

Hedgers: 60% sold in the cash market on 2013-crop. 20% of expected 2014-crop production is sold via cash forward contract sale for harvest delivery.

Cash-only marketers: 50% sold in the cash market on 2013-crop. 20% of expected 2014-crop production is sold via cash forward contract sale for harvest delivery.

 

Soybeans

Price action: Soybean futures saw a highly choppy day of trade, but favored a firmer tone through daytime hours and strengthened into the close. Soybeans ended 4 1/2 to 9 1/4 cents higher, with nearbys leading gains. Meal and soyoil saw spillover support.

Fundamental outlook: A combination of weather concerns in South America, weakness in the U.S. dollar index and continued strong demand provided support for the soy complex today. While there are rains in the forecast for southern Brazil this week, the country's supply-estimating arm of the government (Conab) has trimmed the country's soybean crop peg to 90.01 MMT.

Traders expect Brazil to soon takeover as the globe's main supply source, but in the meantime, China has not yet announced large sales cancellations for U.S. beans. Also supportive today was news China had purchased 116,000 MT of U.S. soybeans for 2014-15, as it reminds the country will remain a major demand player in the soybean market.

Technical outlook: March soybean futures violated support to post a weekly low, but recovered to return above $13.30 and posted a high-range close. Closes above yesterday's high of $13.40 would make bulls' next target contract-high resistance of $13.77 3/4.

Hedgers: 100% sold in the cash market on 2013-crop production. 10% of expected 2014-crop production is sold via cash forward contract sale for harvest delivery.

Cash-only marketers: 75% sold on 2013-crop production. 20% of expected 2014-crop production is sold via cash forward contract sale for harvest delivery.

 

Wheat

Price action: Wheat futures saw two-sided trade today, but bulls had the advantage most of the day and into the close. SRW wheat ended 2 to 5 1/2 cents higher. HRW and HRS wheat posted gains of 6 to 10 cents, with the exception of the March HRW contract, which closed around 2 3/4 higher. Most contracts settled high-range.

Fundamental outlook: Wheat futures benefited from some concerns about ongoing dryness in the Southern Plains as well as continued frigid temps in northern locations, though much of the region has protective snowcover. In addition, traders still have USDA's larger-than-expected cut to 2013-14 wheat carryover in mind.

Early gains in the HRW and HRS wheat markets triggered buy stops as these markets hit new highs for the year and month, respectively. Losses in the corn market limited gains in SRW wheat.

Technical outlook: March SRW wheat moved through and closed above resistance at $5.90 after a failed test of last week's high of $5.92 3/4. A move through this price would have bulls targeting the psychologically significant $6.00 mark.

Hedgers: 100% sold on 2013-crop in the cash market. 35% of expected 2014-crop production is sold via cash forward contract for harvest delivery.

Cash-only marketers: 75% sold on old-crop. 35% of expected 2014-crop production is sold via cash forward contract for harvest delivery.

 

Cotton

Price action: While cotton futures faced pressure in the early going, the market strengthened as the day progressed and several contracts narrowly missed posting bullish reversals. Futures ended 103 to 130 points higher through the July contract, while deferred months posted gains of 44 to 80 points.

Fundamental outlook: The cotton market faced light pressure yesterday on disappointment USDA did not raise its U.S. cotton export projection in its Supply & Demand Report. But the market covered short positions today on recognition U.S. cotton supplies remain tight and a closer look at some of the global data in the report. USDA trimmed its Chinese and Pakistan cotton crop projections, resulting in a 1.14-MMT reduction in its global cotton carryover projection.

Gains in the soybean and wheat markets and weakness in the U.S. dollar index added support.

Buying in deferred months was limited by a reminder from USDA's Economic Research Service that cotton producers will likely "significantly" increase cotton production in 2014.

Technical outlook: March cotton futures uncovered buying interest on a test of support at the Jan. 30 high of 86.81 cents. This propelled the contract to a test of yesterday's high of 88.84 cents, which the contract matched and settled just shy of, marking this level as tough near-term resistance. Bulls would eye the 89.00-cent area on another push higher, followed by the June high of 89.21 cents. Uptrending support drawn off the lows since November intersects around 85.65 cents tomorrow.

Hedgers: 75% of 2013-crop is sold in the cash market. 25% of expected 2014-crop production is sold via cash forward contract for harvest delivery.

Cash-only marketers: 75% of 2013-crop is sold. 25% of expected 2014-crop production is forward sold for harvest delivery.

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