Crops Analysis (VIP) -- February 18, 2014

February 18, 2014 08:46 AM
 

Corn

Price action:
Corn futures finished 4 to 5 cents higher and posted high-range closes across the board.

Fundamental outlook: Corn benefited from spillover from double-digit gains in nearby soybean and wheat futures, as well as weakness in the U.S. dollar index. Mid-morning strength came on stronger-than-expected weekly export inspections data as it reminded the market of the recent pickup in export sales.

This morning, Gulf corn basis firmed 2 cents for immediate delivery and was up another 2 cents a midday to stand 80 cents over March futures. The surge in Gulf basis signals exporters have fresh demand news to report.

Technical outlook: March corn futures matched the psychological $4.50 level and closed 1/2-cent below it. The high-range close gives bulls the advantage heading into overnight trade. The last time the contract closed above $4.50 was Oct. 25, marking this as a pivotal level. December corn closed above last week's high of $4.63 1/4 , making bulls' next objective the December high of $4.69.

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: Old-crop soybean futures posted a high-range close with gains of 22 3/4 to 23 1/2 cents through the July contract, with August up 18 1/4 cents. New-crop futures ended mostly around 7 cents higher. Funds bought 11,000 soybean contracts (55 million bu.) today.

Fundamental outlook: Soybean futures were supported by tight old-crop supplies, concerns about weather in Brazil for filling soybeans and positive outside markets. These factors combined to propel old-crop futures 20-plus cents higher. Stronger-than-expected weekly export inspections added to mid-morning price strength. While there are some rains in the near-term forecast for Brazil, traders believe the crop won't be as large as earlier thought -- although still a record.

Meanwhile, NOPA reports soybean crush in January fell short of traders' expectations and was around 8.4 million bu. below the previous month. Traders largely ignored the report that also showed soyoil stocks rose from the previous month.

Technical outlook: March soybean futures posted a bullish reversal and closed above $13.60, making bulls' next target the September high of $13.77 3/4. Support lies at the December high of $13.39 1/4. November soybeans posted a new-for-the-move high close today, but needs to move above $11.50 to spur additional chart-based buying.

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: 90% priced on old-crop. 10% of expected 2014-crop production is sold via cash forward contract sale for harvest delivery.

Wheat

Price action: Wheat futures enjoyed strong gains throughout the day and most contracts ended just off session highs. SRW wheat closed 9 3/4 to 13 1/2 cents higher, while HRW finished around a dime higher in most contracts. HRS settled mostly 8 to 9 cents higher, with the front-month contract up 12 3/4 cents.

Fundamental outlook: Wheat and most of the commodities benefited from a risk-on attitude to start the week. A softer U.S. dollar index added support as this makes U.S. exports more attractive. Strong gains in soybeans added spillover support and helped wheat futures extend their well defined uptrend.

Fundamentally speaking, above-normal temps and a generally dry forecast for the Southern Plains kept drought worries close at hand. There is also some concern about the fact that much of the HRW wheat crop is now void of snowcover. Traders paid little attention to a disappointing export inspections report today.

Technical outlook: March SRW wheat futures traded and closed above the psychological $6.00 mark, turning it into near-term support. The contract traded through but settled 3/4 cent below the Jan. 6 high of $6.12 3/4. A move through that price would have bulls eying the September low of $6.47 3/4, which acted as support for much of the fall.

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: Cotton futures saw two-sided trade today, but most contracts ended high-range with gains of 36 to 44 points.

Fundamental outlook: Cotton futures benefited from a forecast for China's cotton planting area to decline 10.7% in 2014 due to decreases in projected profits from the crop as well as uncertainty regarding the government's new cotton policy, according to a report from the Cotton Research Institute of Chinese Academy of Agricultural Sciences. Tempering this, however, are expectations for U.S. cotton production to rebound in 2014.

A weaker U.S. dollar index and strong gains in the soybean market added support. In addition, the uptrending stance of the market clearly favors market bulls.

Technical outlook: Resistance for March cotton futures is layered from 89.00 cents to the 2014 high of 89.31 cents. Uptrending support drawn off the lows since November intersects around 86.33 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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