Crops Analysis (VIP) -- February 25, 2014

February 25, 2014 08:44 AM
 

Corn

Price action:
Corn futures saw two-sided trade today, but bulls had the advantage the latter half of the day and futures ended high-range with gains around 2 to 4 cents.

Fundamental analysis: Corn futures faced some profit-taking pressure overnight and this morning as traders looked to take advantage of recent gains. Early losses in soybeans and wheat added spillover pressure. But the price dip below $4.50 for the front-month triggered bargain buying and the March contract ended back above that level.

Firmer Gulf basis this morning and at midday for near-term delivery added to the positive tone as it signals ongoing demand strength. Adding to such ideas were a flurry of sales tenders this morning, though it is not yet clear whether the U.S. will garner any of the business.

Technical analysis: March corn futures matched last week's high close after a test of tough resistance at $4.56 1/2. This price has stymied buying three times in the past week. Just above that level is resistance at $4.60, which was a pivotal level August through October. The $4.50 area remains tough support.

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: After a weaker start, soybean futures gained upward momentum and closed 5 3/4 to 12 1/2 cents higher, with nearbys leading gains. Meal ended higher amid spreading with soyoil, which was weaker.

Fundamental analysis: Traders viewed early losses as a buying opportunity due to concerns about backlogs at Brazilian ports and China remaining a buyer of old-crop U.S. soybeans. USDA announced this morning that China had purchased 568,000 MT of U.S. soybeans for 2013-14. Traders had expected China to have cancelled large U.S. bean purchases by now, but instead the country continues to prefer U.S. supplies.

Technical analysis: March soybean futures were the only contract to post a fresh contract high. It did so at $14.00 and closed a penny below that level. The contract has moved into overbought territory according to the Relative Strength Index, which signals a time or price correction is due. But attitudes are clearly bullish in this market.

November beans rallied to a new-for-the-move high of $11.70 and posted a high-range close. Bulls' next target is the December high of $11.74, followed by the November high of $11.79 1/4.

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

 

Wheat

Price action: SRW wheat futures closed 1 to 3 cents higher except for the lead-month March contract, which finished 2 3/4 cents lower. HRW futures closed mostly 7 to 9 cents higher, while HRS futures were mostly 4 to 6 cents higher.

Fundamental analysis: Wheat futures faced pressure overnight and through early trade this morning. Egypt canceled 110,000 MT of U.S. SRW wheat, prompting concerns about the competitiveness of U.S. wheat. But spillover support from soybeans, corn and the oat market resulted in a high-range close.

HRW wheat futures were supported today by ongoing crop concerns through the Plains. While the coldest temps from the latest polar vortex are expected to remain north of the major production states, some of the HRW crop is likely to be nipped -- again. And drought remains a concern in the Oklahoma panhandle and in Texas.

Technical analysis: March SRW wheat futures avoided a bearish reversal today to hold in the short-term consolidation range. With the contract moving into delivery on Friday, our technical focus is shifting to deferred contracts. July SRW wheat futures extended its price recovery from the winter low today. Having completed a 38% retracement of the price drop from the October high, bulls' next upside target is a 50% retracement at $6.34. A 38% retracement of the entire price plunge from the contract high would be at $6.72.

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 finished 156 to 195 points lower through the July contract, while new-crop contracts were 74 to 115 points lower.

Fundamental analysis: Speculative long liquidation weighed heavily on the cotton market today. While there wasn't any bearish fundamental news that caused the selloff, a lack of fresh bullish news contributed to the price pressure. The market has been supported on the runup by expectations USDA will ultimately trim its old-crop ending stocks forecast, but today's action would suggest some traders have grown tired of waiting. Followthrough selling Wednesday would increase concerns about a market top being in place.

Technical analysis: March cotton futures closed below the uptrend from the November low for only the second time today. The first time it did so last Thursday failed to trigger followthrough selling and was followed by price strength yesterday. A close below today's low tomorrow would be the first sign the rally is running out of steam.

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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