Price action: The corn market was on the defensive throughout today with futures closing roughly 4 to 6 cents lower through the May 2015 contract. Futures closed near their lows for the day. Funds sold 7,000 contracts (35 million bu.) of corn today.
Fundamental outlook: Corn futures were under pressure today from a stronger U.S. dollar index and news corn-producing areas of Brazil had received timely rains. The precipitation news had traders talking of a larger-than-expected final harvest from Brazil. The market also opened weaker on news China had rejected a shipload of dried distillers grains (DDGs). This came as somewhat of a surprise as there was talk last week that the country was relaxing its inspections of DDGs.
Adding further negative news to the market was weekly ethanol production figures for the week ending Jan. 9. The report shows production declined 51,000 barrels per day (bpd) to 868,000 bpd. Ethanol stocks fell 60,000 barrels to 16.08 million barrels.
Technical outlook: March corn futures have retraced some of the large gains posted on Friday. The slippage is normal profit-taking after the surge and lack of followthrough on Monday. Yesterday's and today's action may be a bullish pennant formation that would project to the $4.50 area. However, there is heavy resistance at $4.35 and around $4.40 that bulls must clear to get an extended bounce. If the pennant fails, futures would be set up for a retest of contract lows.
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.
Price action: March through September soybean futures posted gains of 1 1/4 to 11 cents, with the lead-month contract leading the way. New-crop soybean futures ended around a penny lower.
Fundamental outlook: Bull spreading was seen in the soybean market again today as traders continue to factor in bullish old-crop fundamentals against a bearish longer-term outlook. Old-crop futures were supported by strong demand news as NOPA crush came in stronger than expected at a record 165.384 million bu., which was up 3.3% from November and 3.4% greater than year-ago. So, in addition to aggressive Chinese purchases of old-crop U.S. soybeans, domestic demand is also strong.
New-crop futures were pressured by the coming record Brazilian crop and expectations for a sharp increase in U.S. planted soybean acres this year. This overshadowed building dryness in areas of Argentina that have caused some private crop forecasters to lower their Argentine crop estimates and news that China bought 106,000 MT of U.S. soybeans for 2014-15 delivery.
Technical outlook: March soybean futures are nearing the top of the extended, choppy range, but must push above the December high at $13.39 1/4 to trigger active chart-based buying. Clearing that level would open the upside to the September high at $13.77 3/4. Failure to clear the December high would point the contract back toward the lower end of the range.
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.
Price action: Wheat futures got off to a choppy start, but the market softened as the day progressed. SRW and HRW wheat futures posted losses around 11 to 12 cents, while HRS wheat ended 7 to 9 3/4 cents lower.
Fundamental outlook: Wheat futures initially held up well in the face of spillover pressure from the corn market, but eventually strength in the U.S. dollar index encouraged a pickup in selling. The HRS market hit new contract lows today. Fundamentally speaking, pressure stemmed from a lack of concern about U.S. crop conditions as both domestic and global wheat supplies are expected to remain ample. Also, India forecast a record-large wheat crop today.
Concern about increasing dryness in the Central and Southern Plains remains limited, despite the dry forecast, warm temps and high winds this week.
Technical outlook: March SRW wheat futures narrowly missed posting a bearish reversal today, but the low-range close signals a test of last week's contract low at $5.60 1/2 is likely. The contract must move back above the psychologically significant $6.00 level and the Jan. 6 high of $6.12 to signal a recovery is underway.
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.
Price action: Cotton futures enjoyed gains for much of the day and the market ultimately ended 18 to 68 points higher in most contracts, with the front-month contract leading gains. This was a mid- to high-range close.
Fundamental outlook: Nearby cotton futures spent yet another day chopping around the 84.00-cent level as both buying and selling interest remain limited. While U.S. cotton supplies are tight, world cotton supplies are ample. The market is also uncertain about what tomorrow's export sales report will reflect. While export sales in early December were strong, they dropped off notably over the holiday season. Tomorrow's report will be for the first non-holiday week since mid-December.
Strength in nearby soybean contracts added light support to cotton today, but marked dollar strength tempered buying interest.
Technical outlook: March cotton futures continue to chop between the December high of 85.29 cents and the January low of 82.39 cents. The contract will likely remain in this range until some major fundamental news arises.
Hedgers: 50% of 2013-crop is sold in the cash market.
Cash-only marketers: 50% sold on 2013-crop production.