Crops Analysis (VIP) -- February 12, 2013

February 12, 2013 08:34 AM


Price action: Corn futures finished 5 to 6 cents lower through the July contract. The September contract forward was mostly 4 cents higher. Funds sold 10,000 contracts of corn today.

Fundamental analysis: Old-crop futures continued the recent price slide today, while new-crop futures posted a modest bounce amid ideas the downside is overdone. While talk of expectations for a big crop this year "curing" the supply situation continues to gain a lot of attention, today's bull spread unwinding signals it's the poor demand pace that's really worrying traders. Therefore, it's likely going to take a surge in basis and/or some fresh demand news to signal prices have gotten "cheap enough."

Reports Barclays is exiting ag trading with its hedge funds also weighed on the market as this sparked concerns about potential heavy long liquidation. The firm says, however, its index funds will continue to trade ag commodities.

Technical analysis: March corn futures closed below the psychological $7.00 mark for the first time since Jan. 10. Bear's next target is the January low at $6.78, which is key support.

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 split with old-crop futures 2 1/2 to 10 3/4 cents lower, September down a penny, and deferred months roughly 1 to 7 cents higher. Soymeal ended split with nearbys lower and deferred months higher. Soyoil posted slight losses.

Fundamental analysis: Traders are unwilling to add long positions in old-crop soybean futures considering importers, including China, will likely soon switch to booking South American bean supplies. The region is still anticipated to produce a record-large bean crop. The only remaining question is how soon such supplies will hit the market.

Meanwhile, U.S. bean supplies are tight, as emphasized by very strong basis levels across the U.S. and USDA's most recent Supply & Demand Report. This will make traders unwilling to actively add short positions in new-crop beans until more is known about the 2013 crop.

Technical analysis: Early pressure on March soybean futures brought the contract within 2 cents of near-term support at the Jan. 24 low of $14.15. A move through that level would open downside risk to the November low of $13.56. Last week's high of $14.98 is strong near-term resistance.

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: Wheat futures faced stepped up price pressure through the day and closed mostly 8 to 11 cents lower in the nearby contracts at all three exchanges. Deferred futures posted slightly lighter losses.

Fundamental analysis: Early pressure came on spillover from corn, but even as corn moved off its session lows, wheat extended losses on a more active weather pattern for the U.S. Southern Plains and a slightly higher Australian wheat crop estimate from ABARES. But the heart of the HRW Wheat Belt missed out on the best of the rains and there's little additional precip in the near-term forecast. Still, with little fresh demand news for the market to digest, traders didn't have the encouragement they needed today to rebuild long positions.

Technical analysis: March Chicago wheat futures violated and closed below support at the January low of $7.36 1/4. Followthrough pressure tomorrow would confirm a downside breakout has occurred and make bears' next target the June low of $6.69 1/4, followed by the May low of $6.52. To confirm a near-term low has been posted, the contract needs to return above the January high of $7.99 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.




Price action: Cotton futures faced profit-taking pressure today, with nearbys leading losses. Futures ended 44 to 135 points lower.

Fundamental analysis: Futures were vulnerable to profit-taking today, though selling was limited by weakness in the U.S. dollar index. But traders expect Chinese demand for U.S. goods to be very limited this week as it celebrates its new year. Traders are also concerned that Chinese demand for U.S. cotton could decline after the holiday celebrations are over as it may have increased purchases ahead of the holiday to assure an adequate supply.

But pressure should remain limited as traders anticipate a sharp reduction in U.S. planted cotton acres this year at the expense of corn, soybeans and other crops.

Technical analysis: March cotton futures posted a big downside day of trade on the daily chart but remained within the boundaries of the recent choppy consolidation range. Near-term boundaries are support at last week's low of 80.60 cents and resistance at the January high of 84.00 cents.

Hedgers: 50% priced on expected 2012-crop production in the cash market.

Cash-only marketers: 50% priced on expected 2012-crop production in the cash market.

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