Crops Analysis (VIP) -- February 5, 2014

February 5, 2014 08:48 AM
 

Corn

Price action:
March corn ended 1 1/2 cents higher, with the rest of the market ending 1/4 to 2 1/4 cents lower after a lackluster day of trade.

Fundamental analysis: Following recent gains, traders reevaluated and evened positions, which resulted in today's narrow price movement. Pressure was limited ahead of tomorrow's weekly sales report, as traders expect another strong showing after several daily announcements were released last week. In addition, this morning USDA announced an unknown buyer purchased 185,928 MT of old-crop corn and 50,800 MT for 2014-15, which signals prices are still stimulating demand.

There are some concerns about ethanol demand, however, as production last week slipped below the previous week again. See "Evening Report" for more.

Technical analysis: While March corn has posted back-to-back days of closes above the December high, new-crop futures have not yet reached that level of resistance. For December corn, that level is still 12 cents above today's close. As a result, December corn still has work ahead to signal a low has been posted to generate chart-based buying interest.

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: While soybean futures faced pressure overnight, the market firmed with the start of day trading and maintained gains through the close. Futures ended in the upper half of today's trading range with gains of 1 1/4 to 3 cents. Meal ended weaker on profit-taking, while soyoil was stronger.

Fundamental analysis: Traders took advantage of recent gains in the soybean market by booking some profits overnight, but this faded as the U.S. dollar index softened and day trading commenced. Traders are encouraged by the fact China has not yet announced any significant order cancellations, though Brazil has started to ship early harvested supplies. Tomorrow's export sales data will provide an update on this front. Also, concerns linger about the impact of heat and dryness in southern production regions of Brazil.

The market also enjoyed some technical buying based on the March contract's ability to sustain prices above $13.00 and for the May contract to hover around that level today. May settled 1/2 cent shy of $13.00.

Technical analysis: March soybean futures hit a new multiweek high and appears headed for a test of resistance at the 2014 high of $13.30 1/2. A move through this level would set the stage for a test of tough resistance around $13.39. This level stymied multiple rallies in December and June.

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: All three flavors of wheat futures closed 2 1/2 to 6 cents higher with the bulk of the contracts finishing 3 to 4 cents higher. Trading was narrow with futures finishing near the upper end of today's range.

Fundamental analysis: Wheat futures spent the overnight trade on the negative side of unchanged as traders looked at the deep snow cover sweeping across previously exposed winter wheat areas. Traders viewed the snow cover as a plus for providing protection to the dormant crop from yet another wave of arctic temperatures and gave them a reason to take profits following yesterday's strong gains.

However, wheat futures moved higher once the early round of profit-taking subsided and failed to attract followthrough selling. Adding further support was a downturn in the U.S. dollar index along with early signs of money flowing into commodities away for equities.

Technical analysis: Charts have a long way to go before technicians will pronounce them as bullish. However, the March HRW contract traded above and closed above resistance at $6.50, posting its highest close since Dec. 20. March SRW wheat futures closed for the second time above resistance at $5.80, posting its highest close since Jan. 8. The $5.80 area is now initial support with the $5.70 area the next area of support if $5.80 does not hold.

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 closed narrowly mixed following a light and choppy day of trade.

Fundamental analysis: With China observing its Lunar New Year, fresh news in the cotton market remains limited. Without any market-moving news and ahead of next Monday's Supply & Demand Report, traders don't appear willing to move the market too far in either direction. But if there's an unexpected strong move, it's likely going to be to the upside as traders are expecting USDA to lower is 2013-14 carryover projection on Monday.

Weekly export sales tomorrow morning will provide fresh demand news. But barring a shocking number -- either big or small -- that data isn't likely to move the market much.

Technical analysis: March cotton futures remain technically bullish as the uptrend from the November low remains intact. There's also a bullish wedge formation on the daily chart. But the contract likely needs to push above the January high at 88.43 cents soon to extend upside momentum or it is at risk of rolling over.

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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