Crops Analysis (VIP) -- February 26, 2014

February 26, 2014 09:00 AM
 

Corn

Price action:
Old-crop corn futures posted fractional losses, while new-crop contracts finished 1 to 2 cents lower.

Fundamental analysis: Corn futures were supported by positive demand news and spillover from soybeans for much of the day. Weekly ethanol production rose, while USDA reported a daily sale of two cargoes of U.S. old-crop corn to unknown destinations and Taiwan bought a cargo of U.S. corn overnight. This positive domestic and export news helped ease concerns futures may have risen to a level that will slow demand. But traders will continue to monitor demand closely as futures are back to levels that attracted "value" buying on the way down.

While demand news was positive, corn couldn't avoid sharp spillover pressure from wheat late in the session. Neither corn nor wheat likely has enough strength to rally on their own, though corn may be better suited to do so if soybeans continue to surge.

Technical analysis: May corn futures remain in the gradual uptrend from the January low. The August low of $4.67 1/2 is a key near-term technical level. Clearing that level would open the door for a further price recovery. But if futures stall at this level, it would signal the upside has at least temporarily been exhausted.

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 firmed with the start of day trading and the market moved back near session highs heading into the close. Nearbys settled 8 1/4 to 9 3/4 cents higher while July and later contracts posted gains around 1 to 3 cents. Funds bought 8,000 soybean contracts (40 million bu.) today.

Fundamental analysis: Soybean futures faced profit-taking pressure overnight and at times throughout the day, encouraged by gains in the U.S. dollar index and the front-month's move above $14.00. But early losses were seen as bargain buying opportunities and bulls eventually took control of the market.

Fundamental support stemmed from crop concerns in South America; after weeks of hot, dry weather, Brazil is now dealing with excessive rain that has spurred quality concern and slowed harvest. As a result of this and recent dryness, crop estimates have come down in Brazil.

Meanwhile, export demand for old-crop soybeans has not yet shown signs of wavering. Traders will watch tomorrow's weekly export sales update closely for signs this is changing.

Technical analysis: March soybean futures surged through $14.00 today, turning that level into support, and ended just off today's contract high of $14.08. Turning to the weekly continuation chart, the next level of major resistance is the August high of $14.49.

May soybeans pushed through the former contract high of $13.95 3/4 today and came within 2 1/4 cents of psychological resistance at $14.00. The high-range close gives bulls the momentum heading into the overnight session.

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 extended losses into the close, with SRW futures closing roughly 10 to 15 cents lower and HRW futures down 9 3/4 to 11 1/2 cents lower. HRS ended 3 3/4 to 8 3/4 cents lower.

Fundamental analysis: Profit-taking weighed on wheat in early trade, but a strengthening dollar index put more attention on the recent slowdown in export sales. Yesterday's news that Egypt cancelled some purchases of U.S. wheat remained on traders' minds today, as Egypt is known as a "value" buyer and traders believe the country is looking for a lower-price supplier.

Additional pressure came on spillover from corn, but that market saw just modest losses. Early price guidance tomorrow will come from the weekly export sales data, as traders' attention is on demand.

Technical analysis: March SRW wheat futures posted a downside day of trade on the daily chart and violated the psychological $6.00 level, before closing steady with that price. The low-range close gives bears the upper hand heading into overnight trade. Next support is at the Feb. 6 high of $5.92 3/4, with resistance at last week's high of $6.20 3/4.

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 ended 58 to 114 points lower, with nearbys leading losses and ending near session lows.

Fundamental analysis: Strength in the U.S. dollar and a lack of fresh news weighed on cotton futures today. Traders say the cotton market needs a dose of fresh demand news to lift futures. As a result, all eyes will be on tomorrow's weekly export sales data to see if China (or a combination of countries) has returned to buy U.S. cotton, or if buying has been slow as traders suspect.

Technical analysis: May cotton futures opened firmer but saw selling increase through the day amid profit-taking and violated support to post a fresh weekly low of 86.25 cents. The contract has also seen consecutive closes below the uptrend established from the November and January lows to signal a near-term high has been posted. Therefore, stay in touch for potential cash sales advice.

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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