Crops Analysis (VIP) -- February 27, 2014

February 27, 2014 09:10 AM
 

 

Corn

Price action:
Corn futures chopped around unchanged for much of the day, but selling picked up ahead of the close and futures ended low-range with losses of 5 to 7 1/2 cents. Nearbys led to the downside. Funds sold 13,000 corn contracts (65 million bu.) today.

Fundamental analysis: Corn futures faced light profit-taking for much of the day as traders looked to take advantage of recent price gains. But the late selloff in beans increased pressure on corn late in the session. March corn settled 2 cents below the pivotal $4.50 mark.

Selling was limited today by confirmation that export demand remains strong. Weekly corn export sales of 840,800 MT for 2013-14 and 1,500 MT for 2014-15 topped expectations. Plus, USDA announced a 284,480-MT daily sale to Mexico for 2013-14. But strong demand is known, limiting bullish reaction to this data.

Technical analysis: May corn futures stopped just short of the uptrend drawn off the January and February lows. This uptrending support line intersects around $4.54 tomorrow, with psychological support just below that at $4.50. Yesterday's high of $4.65 is initial resistance.

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 volatile day of trade with March beans posting nearly a 60-cent trading range for the day. After surging on the open, soybeans pulled back to post double-digit gains for much of the day. But late profit-taking resulted in futures finishing 6 1/2 to 18 cents lower on the day.

Fundamental analysis: Old-crop soybean futures surged sharply higher on the open, but buying enthusiasm faded throughout the day. After midday, profit-taking picked up in earnest and futures ended with solid losses for the day, with the front-month narrowly escaping a bearish reversal. Nevertheless, the low-range close gives bears the near-term advantage.

Early gains were spurred by reminders of still-strong Chinese demand. Today's Weekly Export Sales Report featured China as the lead buyer of old- and new-crop beans and the recipient of more than 1 MMT of weekly bean exports. Also, USDA announced a daily sale of optional origin beans to China for 2013-14 delivery.

But traders shifted gears to focus on profit-taking and correcting the oversold condition late in the session. A pickup in farmer selling also pressured beans in late trade.

Technical analysis: May soybean futures surged through the $14.00 mark and traded all the way up to $14.45 1/2 before reversing course to close back below $14.00, leaving it as near-term resistance. While the low-range close gives bears the advantage heading into the overnight session, the contract has not broken the uptrend drawn off the lows since late January, which intersects around $13.69 tomorrow.

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 faced pressure for much of the day and the market extended losses heading into the close. All three flavors ended double-digit lower, with SRW leading the decline with losses of 14 to 17 3/4 cents.

Fundamental analysis: A few contracts gapped lower on the open and early pressure triggered some additional sales as the market appears to have rolled over following a month-long rally. Pressure stemmed from ongoing concerns about export demand for U.S. wheat.

While weekly export sales topped expectations, the tally was not overly impressive. In addition, Egypt purchased wheat from Romania and Russia today, reminding traders of the value-buyer's recent cancellation of a U.S. SRW wheat purchase and raising concerns about the competitiveness of U.S. prices. The wheat market remains highly sensitive to export demand due to plentiful global supplies.

Technical analysis: March SRW wheat futures opened steady with yesterday's low and the psychologically significant $6.00 and then quickly dipped through the former level of support, turning it back into resistance. Downside risk extends to the contract low around $5.50.

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: The cotton market followed yesterday's big downside day with an even stronger upside day of trade. In fact, the front-month posted a bullish reversal. Futures ended 101 to 154 points higher on the day with nearbys leading gains.

Fundamental analysis: Bargain buying was a dominant feature in the cotton market today as traders are not convinced the market's uptrend is complete. A weaker U.S. dollar index and strength in the soybean market for much of the day were also supportive to this end.

Traders largely brushed off a disappointing export sales report for the week ended Feb. 20. Sales of 27,100 RB for 2013-14 were a marketing year low and sales of 28,000 RB for 2014-15 were also light. Exports of 277,600 RB were down 15% from the previous week, but up 16% from the four-week average.

Technical analysis: May cotton futures hit a new weekly low of 86.12 cents this morning, which is new support. But this spurred short-covering and the contract ended near yesterday's high. The high-range close gives bulls the advantage; their initial target is the January high of 88.62 cents.

 

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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