Crops Analysis (VIP) -- January 14, 2013

January 14, 2013 11:27 PM


Price action: Corn futures settled with gains of 15 1/4 to 16 cents through the July contract. The September contract forward closed mostly 5 3/4 to 8 cents higher.

Fundamental analysis: Old-crop corn futures built on last Friday's gains as traders continued to react to USDA's lower-than-expected Dec. 1 corn stocks and 2012-13 carryover projection. With supplies tighter than expected, traders are refocused on trying to find a price that slows use. But with constant reminders of sluggish demand, it will be a challenge to keep buying interest intact.

Weekly export corn inspections were within the guess range at 9.239 million bu., though the pace continues to slow relative to year-ago. Basis was also softer today, suggesting there isn't fresh demand on the near-term horizon.

Technical analysis: March corn futures closed above the bottom of the old, sideways range at $7.08 3/4 for the first time since dropping below it Dec. 19. Another higher close above this level would signal the downside breakout attempt late last year was a bear trap and would point the contract toward the top of the range in the $7.65 to $7.75 area.

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 staged a strong rally today and strengthened into the close to end with gains of 35 to 44 3/4 cents through the August contract; far-deferred contracts ended with gains in the teens to 20s. Soymeal and soyoil also enjoyed strong gains.

Fundamental analysis: With USDA's reports out of the way with little by way of major surprises, buyers returned to the market, encouraged by signs of strong demand. The recent string of daily soybean sales announcements continued today. USDA announced this morning China bought 120,000 MT of U.S. beans for 2012-13. Also signaling impressive demand, this morning's NOPA soybean crush for December was the highest since January 2010 and the second strongest on record for the month.

Strong demand for a limited supply of beans has resulted in historically high basis for the month of January around the country, with cash prices well above futures at most locations.

Technical analysis: March soybean futures settled well above the psychological $14.00 level today, turning that price into near-term support. Resistance is layered from the October low of $14.57 to the December high of $15.01 1/4.

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 enjoyed an upside day of trade today, though many contracts ended well off their highs. Chicago wheat settled roughly 8 to 12 cents higher; Kansas City wheat ended with gains of mostly 10 to 16 cents and Minneapolis wheat closed 3 3/4 to 7 1/2 cents higher.

Fundamental analysis: Wheat futures benefited from some production concerns as well followthrough buying interest after Friday's friendly USDA reports for the wheat market. Reports from a Russian agency that 25% of the country's wheat crop may have been damaged by winterkill gave wheat a boost as it brings tightening global wheat supplies into focus.

In addition, sub-zero temps in the Central Plains where snowcover is largely nonexistent stirred concerns about the drought-stricken U.S. winter wheat crop. Also concerning is a generally dry five-day and 6-14 day forecast for the Southern Plains.

Technical analysis: March Chicago wheat futures traded above Friday's high of $7.73, but the market was unable to hold above this level. Thus, today's high of $7.77 is near-term resistance, followed by the January high of $7.88. Support is layered from the May high of $7.54 1/2 to Friday's low of $7.36 1/4.

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 settled narrowly mixed and near the middle of today's range.

Fundamental analysis: Cotton traders brushed aside news China started selling state cotton reserves, as this was widely expected and the country will also allow mills that buy government stocks to import additional cotton. Trade sources signal companies will be able to import a metric ton of cotton for each 3 MT they buy from government reserves.

Cotton traders are still searching for the next market-moving news as last Friday's report data also failed to spark price movement.

Technical analysis: March cotton futures continue to hold within the short-term consolidation range from 73.72 cents to 77.10 cents. An upside breakout would have bulls targeting key resistance at the August high of 78.02 cents. A downside breakout from the short-term range would point the contract to a likely test of the November low at 69.79 cents.

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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