Crops Analysis (VIP) -- February 3, 2014

February 3, 2014 09:02 AM
 

Corn

Price action:
Corn futures spent the day in positive territory and ended 1 to 3 cents higher, which was good for a mid-range close. Funds were net buyers of 3,000 corn contracts (15 million bu.) today.

Fundamental analysis: Corn futures enjoyed some technical-based buying to start the month as a number of contracts tested or hit new highs for the year. Traders have displayed a friendlier attitude toward corn since USDA reported impressive weekly export sales of 1.838 MMT last Thursday. Also, while weekly corn export inspections fell short of expectations today, the tally did advance the overall pace of inspections to 84.1% ahead of year-ago, versus 80.8% ahead last week and USDA's forecast for 2013-14 exports to surpass the year prior by 98.4%.

A weaker U.S. dollar index and gains in the soybean market added to the positive tone.

Technical analysis: March corn futures traded through but settled in line with the $4.35 resistance area. Bulls' next target is the December high of $4.40 3/4, followed by former support at the mid-October low of $4.45. The contract must push through these resistance levels to signal an extended move higher is underway. Tough support remains at the contract low of $4.06 1/4.

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 trading mixed in overnight trade, soybean futures opened the day session higher amid ongoing strong demand. March through September futures closed 6 1/2 to 10 cents higher, with deferreds mostly around 3 to 4 cents higher. Meal was higher, with soyoil weaker amid spreading. Funds bought an estimated 5,000 contracts (25 million bu.) of soybeans today.

Fundamental analysis: There wasn't much fresh news for the market to digest, but it's encouraging to market bulls that funds returned as buyers to start the month. Some light support came from news that an unknown buyer purchased 40,000 MT of U.S. soyoil. More than anything, traders are becoming somewhat more encouraged that China has not cancelled large U.S. soybean purchases even though Brazilian beans are moving to exportable position.

A drier weather pattern for the Brazilian states of Parana and Rio Grando do Sul also lent some support to the soybean market today, as much of the crop could benefit from pod-filling rains. Traders will be watching the forecast as the week progresses.

Technical analysis: November soybean futures posted an upside day of trade on the daily chart. While the contract came off the session high, it still closed in the upper third of today's price range. Futures, however, need to climb back above the January high of $11.29 to stimulate fresh chart-based buying. Support is at last week's low of $10.88 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: 75% sold on 2013-crop production. 20% of expected 2014-crop production is sold via cash forward contract sale for harvest delivery.

 

 

Wheat

Price action: Wheat futures enjoyed gains for most of the day and ended just off session highs. SRW and HRW closed roughly 6 to 8 cents higher and HRS wheat ended with 3- to 6-cent gains. Funds bought 3,000 contracts (15 million bu.) today.

Fundamental analysis: Wheat futures benefited from weakness in the U.S. dollar index, along with spillover support from the corn and soybean market. Traders also returned to the wheat market with the idea the downside has been overdone in recent weeks, especially after multiple blasts of cold weather for winter wheat country since the start of the year. This week's winter storm event is expected to come with beneficial snow, however.

Buying interest was tempered by a poor showing for wheat in this morning's weekly export inspections report. Inspections of 11.653 million bu. for the week ended Jan. 30 fell short of expectations and week-ago. But a 5-cent jump in Gulf HRW basis this morning for immediate delivery has spurred optimism some value buying may be underway.

Technical analysis: March SRW wheat futures posted an upside day of trade, but the contract has a long ways to go to break the downtrending pattern. Tough resistance stands at $6.00, which roughly coincides wtih the downtrend drawn off the highs since October. Before that, resistance is in the $5.80 area. Support stands at the double-bottom contract low are of $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: Cotton futures faced pressure for most of the day and ended 41 to 82 points lower on the day through the October contract. Deferred months ended high-range and narrowly mixed.

Fundamental analysis: Trading interest in the cotton market was limited today as the market recognizes that the next few weeks could be short on the news front. China kicked off its Lunar New Year celebration Friday and Chinese markets are closed this week. Little business is expected to be conducted during this extended holiday celebration.

Adding pressure was heavy selling in the stock market to start the week and the month. Some commodities were the beneficiaries of money shifting from equities to "bargain-priced" commodities, but cotton was not one of them.

Technical analysis: March cotton futures traded through but settled just above support at 85.00 cents. Another downside move would have bears eyeing the 83.63- to 83.66-cent area that has acted as both support and resistance in recent months. Tough resistance is at the 2014 high of 88.43 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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