Crops Analysis (VIP) -- January 28, 2014

January 28, 2014 08:47 AM
 

Corn

Price action:
Traders in the corn market engaged in some mild bull spreading today. As a result, corn futures ended steady to fractionally higher in the March and May contracts while deferred months ended fractionally to 2 cents lower for the day.

Fundamental analysis: Once again futures saw limited price action, although nearbys favored a firmer tone on light demand news. This morning USDA announced Spain bought 110,000 MT of old-crop U.S. corn. The country has increased its purchases of U.S. corn in recent years, but the country remains a small importer of U.S. corn overall. This explains the steady to 1-cent firmer tone in Gulf basis this morning.

Otherwise, there was little fresh news for the market to digest today. Outside markets were choppy as investors evened positions ahead of tomorrow's policy statement from the Federal Reserve. The dollar was higher today, with gold slightly lower and crude oil higher.

Technical analysis: March corn futures posted a slight upside day of trade on the daily chart and spent the day above the $4.30 level. Futures are closing in on resistance at the January high of $4.35 1/2. Closes above this level would make bulls' next target the November high of $4.49 1/2. Support lies at last week's low of $4.21.

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 saw a choppy day of trade and ended split with March down 2 1/4 cents and deferred months steady to 3 1/2 cents higher. This was a high-range close for most contracts. Soyoil posted gains for the day while soymeal mildly favored the downside. Funds sold 2,000 soybean contracts (10 million bu.) for the day.

Fundamental analysis: Traders in the soybean market spent much of the day unwinding bull spreads that they had put on in recent sessions. With crop concerns in Argentina moderating for the time being and concerns about possible Chinese order cancellations heightening, buying interest in old-crop futures remains slim. Brazil is expected to start shipping some of its record-large crop next month.

Meanwhile, news Hong Kong suspended live poultry imports from mainland China for 21 days due to the finding of H7N9 bird flu keeps the possibility of reduced feed demand in mind.

Technical analysis: March soybean futures saw a relatively quiet day of trade and traders showed little urgency to test either support at the 2014 low of $12.62 1/2 or resistance at the key $13.00 level.

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 closed mixed with SRW futures fractionally to 2 1/2 cents higher, with the March contract leading gains. HRW futures finished fractionally lower in the front four contracts and fractionally higher in the deferreds. HRS futures closed 1 1/4 to 2 3/4 cents lower. Most contracts closed near their daily lows.

Fundamental analysis: Wheat futures opened generally higher in thin trading on emerging concerns about winterkill as the arctic cold continued its onslaught across the Plains and Midwest. While generally supportive, traders have difficulty quantifying potential losses as the first update on crop conditions won't come from USDA until April. Texas is the exception, however; its weekly crop condition reports reflect a continuing downgrade in ratings.

The market also got light support on the news Egypt bought 60,000 MT of U.S. SRW wheat today. The country also purchased 180,000 MT of Russian wheat. Egypt is a well-known value buyer so its purchase signals U.S. wheat prices are becoming competitive in the global market.

However, the slightly stronger U.S. dollar index and prospects for continuing burdensome world stocks pressed futures lower in late trading.

Technical analysis: March SRW futures posted an inside day in very narrow trading. The contract is compressed into a tight trading range and testing support at contract lows at $5.60 1/2. Resistance starts at $5.80.

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 slightly higher but near their daily lows. The March contract closed up 5 points with deferred contracts closing 7 to 24 points higher.

Fundamental analysis: Cotton futures traded higher in early trading on short-covering following yesterday's steep decline. Some traders initiated new long positions as futures bounced off critical support. The market also found support from a stabilizing stock market, which had fallen on new concerns over emerging markets. But later, futures gave away gains as traders remain concerned about potential Chinese demand as the nation deals with slowing manufacturing. There is also concern about how China will handle its large inventory of government-held stocks.

Technical analysis: March futures posted an inside day following Monday's sharp selloff, The 84.00 to 82.39-cent area offers a broad band of support. The 86.00-cent area offers resistance which runs up to the Jan. 21 high of 88.43 cents.

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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