Crops Analysis (VIP) -- January 22, 2014

January 22, 2014 08:45 AM
 

Corn

Price action:
Corn futures traded in narrow trading range and eventually edged higher into the close. Futures finished unchanged to fractionally higher with the exception of the lead March contract which closed 1 1/4 cents higher. Funds bought 2,000 contracts (10 million bu.) today.

Fundamental analysis: Futures saw only narrow trading activity with some traders engaging in light short-covering. Futures received some supportive news early on USDA's announced sale of 105,664 MT of U.S. corn for 2014-15 delivery to Japan. In addition, the head of China's top ag policy-setting office stated he expects China will likely import more corn to meet rising demand. But spillover weakness from soybeans limited gains in corn futures with corn futures moving generally into the plus column on the surge in soybean futures near the end of today's open-outcry session.

Technical analysis: March futures found light support at yesterday's closing price of $4.25 and took out the previous day's highest price for the first time in six trading sessions. While corrective in nature, it hints futures are building a support area in the $4.20 to $4.25 area. Futures need to take out the Jan. 13 high at $4.35 1/2 to make bears cautious and the Dec. 10 high at $4.40 3/4 to suggest a low has been confirmed.

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 turned choppy in late morning trade and firmed into the close to finish 1 to 4 cents higher in all but the front-month March contract, which ended 1 cent lower. Meal ended higher amid spreading with soyoil, which ended lower.

Fundamental analysis: Early pressure came on followthrough from yesterday's sharp losses, as traders continue to point to improved weather in Argentina and the risk that China will soon begin to cancel old-crop U.S. soybean purchases. Gulf basis certainly doesn't suggest cancellations have begun; it firmed 2 cents for immediate delivery today.

Also Chinese trade officials continue to raise their forecast for the country's soybean imports this month and Brazilian supplies are not yet readily available. As a result, traders are interested to see if tomorrow's weekly export sales data keeps with the trend of an impressive sales pace.

Technical analysis: March soybean futures spent the day pivoting around yesterday's low and closed just beneath it. The mid-range close provides little direction for overnight price action. Near-term boundaries are support at the January low of $12.62 1/2 and resistance at the October high of $12.94 1/4.

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 and ended split with SRW wheat 1 to 2 cents lower and HRW and HRS wheat mostly 1 to 3 cents higher.

Fundamental analysis: While the technical posture of the wheat market clearly favors market bears, traders have been encouraged by the market's ability to respect contract-low support so far this week. Recent signs that prices are finally attracting some tentative export demand have been encouraging to that end.

But ample global supplies and a lack of concern about the U.S. winter wheat crop mean active buying interest will remain scarce unless there is a marked pickup in export demand.

Technical analysis: March SRW wheat futures matched yesterday's low of $5.60 3/4, which is 1/4 cent away from the contract low, marking this narrow range as tough support. Next support is layered from the psychological $5.00 to $5.50 levels. Bulls' initial target is the $5.95 1/2 to $6.00 area.

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 finished 11 to 50 points lower today, but that was in the upper end of today's trading range.

Fundamental analysis: Cotton futures faced corrective selling pressure throughout the day as traders took profits following recent gains. But selling interest dried up late in the session, signaling bullish attitudes remain strong. While fresh fundamental news is lacking of late, expectations for a tightening of the domestic carryover forecast is providing support. Traders expect USDA to raise its usage forecasts and lower its carryover projection in the months ahead.

Due to the government holiday on Monday, traders won't get their weekly update on export sales activity until Friday morning. That could leave the market lacking fresh news again tomorrow, which may trigger additional profit-taking.

Technical analysis: March cotton futures posted a modest inside day down on the daily price chart today. The contract is now at a price level where buying interest has stalled in the past. Therefore, we are on watch for topping signals, but the cotton market has also proven that rallies can last longer than expected.

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

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

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