Crops Analysis (VIP) -- January 30, 2014

January 30, 2014 09:03 AM
 

Corn

Price action:
Corn futures enjoyed gains throughout the session and ended with gains of 2 3/4 to 6 cents, with nearbys as the upside leader. This was good for a mid- to high-range close.

Fundamental analysis: Gains in the corn market were impressive considering marked dollar strength today. Buying interest was spurred by demand news. For one, weekly corn export sales surged to 1.838 MMT for 2013-14 delivery and 105,700 MT for 2014-15 delivery, topping expectations by a very wide margin. USDA also noted a 127,000 MT daily corn sale to unknown destinations for 2013-14. In addition, Gulf basis strength for spring and summer delivery at midday could indicate more demand news is ahead.

Futures appear poised for a test of the 2014 highs if the market sees followthrough buying tomorrow.

Technical analysis: March corn futures came within a few cents of near-term resistance that is layered from the $4.36 area to the December high of $4.40 3/4 today. After that, resistance stands in the $4.50 area. Last week's low of $4.21 marks initial support.

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 posted midrange closes after trading on both sides of yesterday's trading range. Futures closed fractionally to 5 3/4 cents higher through the September contract and a 1/2 cent weaker to 1 3/4 cents higher in the November and later contracts.

Fundamental analysis: Soybean futures opened on the defensive on concerns about potential cancellations of previously booked U.S. soybean orders by China. A stronger U.S. dollar also added to the early jitters, as did the Weekly Export Sales Report from USDA that showed 610,300 MT of beans had been canceled by unknown destinations, which traders immediately translated as China.

However, spillover buying from the corn and wheat markets brought buying interest into soybean futures. In addition, traders today's export sales report also head some positive news. Sales of 494,800 MT for 2013-14 and 371,000 MT for 2014-15 matched expectations. And weekly exports surged 39% from week-ago to 2.115 MMT. But the stronger U.S. dollar index trimmed gains as traders took profits on today's gains.

Technical analysis: March soybean futures probed support at the Jan. 2 low of $12.62.1/2 and bounced higher as the test of support failed to trigger followthrough selling. The rebound pushed futures through yesterday's highs, but the contract later set back as that failed to trigger followthrough buying. The market is comfortable with the current sideways trend with today's low as support and the $12.90 area as resistance.

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 midrange in very narrow trading. SRW futures finished fractionally higher with the exception of the March contract which closed 2 cents higher. HRW futures close 1 to 2 cents higher. HRS futures finished fractionally to 6 1/4 cents lower in the far deferred March 2015 contract.

Fundamental analysis: Wheat futures moved higher in short-covering following yesterday's steep decline and in reaction to a positive weekly exports sales report. The report showed weekly export sales of 794,900 MT for 2013-14 and 2,000 MT for 2014-15, which was well above expectations. The strong weekly figure triggered ideas U.S. wheat prices are competitive on the global market. But futures saw limited buying as the International Grains Council increased its projection of 2013-14 total coarse grain supply forecast, which reminds traders of currently burdensome supplies.

SRW and HRW futures saw light support versus HRS due to forecasts the more arctic temperatures and snow to sweep across the dormant wheat crop. In addition, strength in the U.S. dollar index was seen as negative for U.S. wheat prices.

Technical analysis: March SRW wheat futures bounced mildly after moving to a fresh 3 1/2-year low Wednesday. Yesterday's low at $5.50 1/2 acted as support. But the slight bounce is not seen as a strong technical indicator of a bottom. It takes a close above $5.80 to get traders to temper their bearishness. The $5.25 level remains a downside target.

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: Nearby cotton futures enjoyed followthrough buying today and ended 6 to 55 points higher through the October contract. This was well off session highs, however. Deferred months posted slight losses amid some mild bull spreading.

Fundamental analysis: Cotton futures received a boost from a second consecutive week of strong weekly export sales. China appears to have been stocking up ahead of its Lunar New Year celebration that begins Friday, though purchases by other countries were also strong. USDA reported sales of 479,700 RB for 2013-14 and 51,900 RB for 2014-15. This helped alleviate concerns about any slowdown in demand from China due to its decision to scrap its cotton stockpiling program and switch to direct farmer subsidies.

The ability of the market to rally today is impressive considering marked strength in the U.S. dollar index. This did lead to some light profit-taking at times today, however.

Technical analysis: March cotton futures ended mid-range and just above the 86.00-cent area. The psychological levels of 85.00 cents and 87.00 cents mark near-term support and resistance, respectively. More significant support lies at Monday's low of $83.66 cents while tough resistance is at the 2014 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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