Crops Analysis (VIP) -- February 4, 2013

February 4, 2013 08:38 AM


Price action: Corn futures closed 1 1/4 to 1 3/4 cents lower through the July contract. New-crop contracts were mostly 1 to 1 3/4 cents higher.

Fundamental analysis: Corn futures were supported by strong spillover from the soybean market and Argentine weather/crop concerns for the overnight hours and much of the morning. But buying interest dried up mid-morning amid a disappointing weekly export inspections figure and negative outside markets.

Today's choppy price action signals its going to take more than Argentine crop concerns to support the market given demand concerns, especially on days when outside markets aren't helping. While hot, dry conditions in Argentina are likely more detrimental to filling corn than soybeans at this stage, traders are more concerned with impacts to soybean yields.

Technical analysis: March corn futures must push through resistance in the $7.65 to $7.75 range to extend the uptrend from the January low. Key near-term support for the contract is the Jan. 24 low at $7.14 1/4.

Hedgers: 100% sold on 2012-crop in the cash market -- 10% for March 2013 delivery. No 2013-crop sales recommended yet.

Cash-only marketers: 75% sold on 2012-crop --10% for March 2013 delivery; 15% for May 2013 delivery. No 2013-crop sales recommended yet.




Price action: Soybean futures traded as much as 20-plus cents higher this morning, but the market reined in gains ahead of midday and settled mostly 11 to 16 cents higher for the day. Soymeal and soyoil enjoyed strong spillover support.

Fundamental analysis: Soybean futures benefited from both supply concerns and demand news today. Weekend rains in southern Brazil and Argentina were largely disappointing and the forecast for heat and dryness this week is keeping South American production concerns close at hand. A large crop from the region is necessary give the tight U.S. supply situation.

A major contributor to these tight U.S. stocks has been a hearty Chinese appetite for soybeans. USDA announced a 58,000-MT daily sale for both 2012-13 and 2013-14 beans to China this morning. Plus, weekly export inspections topped expectations by a wide margin and advanced the pace of export inspections relative to the year-prior.

Technical analysis: March soybean futures continued on their uptrend since mid-January today and closed above the 100-day Moving Average for the first time since Nov. 1. The contract came within 3 1/4 cents of strong resistance at the December high of $15.01 1/4. The Jan. 24 low of $14.15 is initial support, followed by the psychological $14.00 mark.

Hedgers: 100% sold on 2012-crop in the cash market. No futures/options positions at this time. No 2013-crop sales advised yet.

Cash-only marketers: 75% sold on 2012-crop production for harvest delivery. No 2013-crop sales advised yet.




Price action: Wheat futures were firmer in early trade on spillover from corn and soybeans but weakened ahead of midday and finished slightly lower. Chicago wheat ended mostly 1 to 2 cents lower, with Kansas City and Minneapolis down 3 to 5 cents.

Fundamental analysis: Early support came from weather concerns in South America that lifted corn and soybean futures, as well as weekend news that Egypt purchased 60,000 MT of U.S. SRW wheat. This signals U.S. wheat may again be competitive on the global market, but traders want to see larger purchases and consistent demand before they will be convinced demand for U.S. wheat is on the rise. Today's disappointing export inspections tally didn't fit the bill.

Negative outside markets and midday weather models that improved rainfall chances for the HRW Wheat Belt weighed on wheat futures around midday and into the close. Traders also say expectations for a recovery in global production in the year ahead was also behind late-session weakness.

Technical analysis: March Chicago wheat futures posted a downside day of trade on the daily chart and violated support at the Jan. 24 low of $7.63. Key support lies at the January low of $7.36 1/4 and resistance stands at the January high of $7.99 3/4.

Hedgers: 75% sold on 2012-crop in the cash market. No 2013-crop sales advised yet.

Cash-only marketers: 75% of 2012-crop is sold. No 2013-crop sales advised yet.




Price action: Cotton futures closed mixed, with the nearby contracts under pressure and deferred contracts steady to firmer amid bull spread unwinding.

Fundamental analysis: Sharply negative outside markets weighed on nearby cotton futures, as strength in the dollar index resulted in sharp pressure on crude oil futures. The Continuous Commodity Index posted sharp daily losses and nearby cotton futures followed suit.

Additional pressure came from talk that China is canceling purchases of U.S. cotton, as reflected by last week's USDA Export Sales Report. But so far, no large cancellations have been reported. Still, this has added to thoughts the upside in cotton futures may be peaking despite expectations cotton acres will drop dramatically this spring compared to last season.

Technical analysis: March cotton futures posted a downside day of trade on the daily chart and violated steep uptrending support drawn off January lows. Followthrough pressure tomorrow would confirm a near-term top has been posted, although futures could set back to the August high of 78.02 cents without doing serious technical chart damage.

Hedgers: 50% priced on expected 2012-crop production in the cash market.

Cash-only marketers: 50% priced on expected 2012-crop production in the cash market.


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