Crops Analysis (VIP) -- January 21, 2014

January 21, 2014 08:59 AM
 

Corn

Price action:
Corn futures recovered from a weaker start to end mixed, with nearbys steady to 1 cent higher and deferreds mostly around 2 cents lower.

Fundamental analysis: Early pressure came on spillover from soybeans and rains returning to Argentina's key crop regions. However, realization that rains have arrived too late to do more than stabilize a portion of the crop limited pressure on corn futures. Corn eventually found spillover support from wheat, which was positive for much of the day (although it closed steady to weaker).

This morning's weekly export inspections report was also supportive for the market, as it showed inspections above expectations and up strong from last week. But Gulf corn basis was steady today, which doesn't indicate any large corn purchase announcements are pending.

Technical analysis: March corn futures violated support at last week's low before recovering and finishing back above the $4.20 level. The contract needs to return above the January high of $4.35 1/2 to make bulls' next target the November high of $4.49 1/2. Meanwhile, contract-low support lies at $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: Soybean futures faced pressure throughout the day and the market ended near session lows with losses of 26 1/2 to 36 3/4 cents through the September contract, while deferred months posted losses in the teens.

Fundamental analysis: Cooler temps and precip in Argentina, as well as beneficial rains in Brazil, weighed heavily on the soybean market today. An increasing number of H7N9 bird flu cases in China also keeps the possibility of slowed feed demand in focus. Early pressure triggered sell stops as nearby contracts fell through the psychologically significant $13.00 level.

Pressure also stemmed from ideas Brazilian supplies will soon hit the export market, possibly leading to Chinese order cancellations of U.S. beans. This morning's weekly export inspections report reflected still-strong demand, however.

Technical analysis: March soybean futures fell through support in the $13.00 area today, turning that level into near-term resistance. Bears' next target is the 2014 low of $12.62 1/2.

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 saw a choppy day of trade, but bears took a slight advantage heading into the close. As a result, SRW wheat settled around a penny lower while HRW wheat posted losses of 2 to 3 cents. HRS wheat ended steady to 4 cents lower on the day.

Fundamental analysis: Wheat futures initially held up well in the face of spillover pressure from corn and especially the soybean market. But bears took the reins heading into the close. Support stemmed from efforts to correct the technically oversold condition of the market.

In addition, the market last week received some signs prices may finally have reached "value" levels. But a constant source of demand news is needed for a rebound in wheat, and such news was lacking today. In fact, weekly wheat export inspections fell short of last week's tally and expectations.

Technical analysis: March SRW wheat futures came within 1/4 cent of the contract low of $5.60 1/2 today, leaving that level as key near-term support. A downside breakout leaves little by way of chart support until the May 2010 high of $5.04 1/4 on the weekly continuation chart. Psychological support levels lie at $5.50 and $5.00. Resistance extends from $6.00 to the January high of $6.12 3/4.

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 posted a strong upside day of trade on the daily chart and finished 133 to 155 points higher through the July contract, with deferred futures ending 4 to 54 points higher.

Fundamental analysis: Cotton futures saw a mixed start to the day as traders responded to confirmation that China would end its stockpiling program to ensure mills have a steady supply of cotton. Instead, China's focus will be on encouraging producers to expand cotton production. As this move was expected, traders reacted by buying the fact.

As the dollar index reversed course and weakened, cotton futures extended gains. Today's high-range close gives bulls momentum heading into tomorrow's open. Therefore, it will be key if cotton can extend gains tomorrow or if the air begins to come out of the market.

Technical analysis: March cotton futures hit buy stops on the move through resistance at the October high of 87.62 cents, with the contract also rising above tough resistance at the March 2013 high of 88.00 cents. Consecutive closes above 88.00 cents would make bulls' next target the August 2013 high of 90.61 cents.

Hedgers: 50% of 2013-crop is sold in the cash market.

Cash-only marketers: 50% sold on 2013-crop production.

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