Crops Analysis (VIP) -- July 10, 2013

July 10, 2013 09:54 AM
 

Corn

Price action: July corn ended 5 3/4 cents higher and September was 2 cents higher amid bull spreading with deferred contracts that were narrowly mixed.

Fundamental analysis: Upside potential for new-crop contracts was limited after funds were aggressive buyers of corn on Monday and Tuesday. This resulted in some light profit-taking at times. Meanwhile, traders remain concerned about forecasts for a developing high pressure ridge over the central U.S. that would bring with it warm and dry conditions as corn begins to pollinate in areas of the eastern and southern Corn Belt. Traders will continue to gauge updated forecasts to get an idea of how long the hot and drier period will last as corn pollination will last into early August this year.

News that China has purchased 120,000 MT of new-crop corn also reminded the market that prices are at levels that are rebuilding demand.

Technical analysis: December corn futures posted a mid-range close. Today's high of $5.27 1/2 is initial resistance. The ability of the market to post back-to-back closes above the May low of $5.12 is encouraging to bulls, although a drop back below that level would be technically bearish.

Hedgers: 100% sold on 2012-crop in the cash market. 25% of expected 2013-crop production is sold via cash forward contract for harvest delivery.

Cash-only marketers: 100% sold on old-crop. 25% of expected 2013-crop production is sold via forward contract for harvest delivery.

 

Soybeans

Price action: Soybean futures trader higher through early trading but bull-spread unwinding pressed old-crop August futures lower. The contract closed down 3 1/2 cents and near the lows of the day. November futures probed higher, closing mid-range and up 8 1/2 cents.

Fundamental analysis: Concerns about a shift in weather forecasts to a hotter, drier outlook lifted new-crop futures. Also supporting futures today was news China reported a record level of soybeans imports in June, up 23% from a year earlier. Traders also started squaring positions ahead of tomorrow's Supply & Demand, which resulted in the unwinding of bull spreads.

Technical analysis: New-crop futures continued to post bullish technical signs today with the November contract trading through Tuesday's high and well into resistance starting at $12.85 and running up to the June high of $13.33. Today's upswing also saw the contract close just above its 200-day moving average, marking the first move above that momentum indicator since June 20. The close at $12.85 makes the band from $12.70 to $12.85 a support zone.

Hedgers: 100% sold on 2012-crop in the cash market. 20% forward priced on expected 2013-crop production for harvest delivery.

Cash-only marketers: 100% sold on old-crop. 20% of expected 2013-crop production is sold via forward contract for harvest delivery.

 

Wheat

Price action: Chicago wheat futures finished 1 to 4 cents higher in all but the July contract, which was 3 1/2 cents lower. Kansas City wheat ended roughly 4 to 5 cents higher. Minneapolis wheat was steady to 2 cents higher in all but the July contract, which closed 1/2 cent lower.

Fundamental analysis: Wheat futures were choppy today as traders focused on evening positions ahead of tomorrow's USDA reports. The slightly firmer bias came amid light pre-report short-covering. But buying interest remains limited to corrective buying at this time.

After a flurry of export demand from China over the past week, traders are now waiting to see if there's any additional purchased -- by China or other foreign buyers. Without more export demand, wheat will struggle to find sustained buying interest. But if there is more value buying, there's room for wheat futures to recover after an extended price fall.

Technical analysis: September Chicago wheat futures have now posted consecutive higher closes above the April low of $6.73 3/4. That could spark added chart-based buying. Bulls' next upside targets are $7.18 and $7.24.

Hedgers: 50% of 2013-crop is sold in the cash market. 100% sold on of 2012-crop.

Cash-only marketers: 25% of 2013-crop sale is sold. 100% sold on 2012-crop.

 

Cotton

Price action: Cotton futures ended at or near session highs with gains of 7 to 67 points, with nearbys the way.

Fundamental analysis: Early gains in the soybean market as well as sharp losses in the U.S. dollar index gave bulls an edge in the cotton market today. Traders also began to more actively even positions for USDA's reports tomorrow. The market expects a slightly bearish report, but traders covered short positions in case of a surprise. Traders expect USDA to raise its cotton production estimate by 240,000 bales from June to 13.74 million bales; they expect USDA to raise its 2013-14 ending stocks estimate by 340,000 bales to 2.95 million bales. A slight uptick in USDA's export projection is also expected.

Also tomorrow, USDA will have another Weekly Export Sales Report to digest. Last week's tally was disappointing.

Technical analysis: December cotton futures advanced the contract's recent uptrend today, with next resistance the May high of 87.25 cents. Uptrending support drawn off the lows since June intersects in the 84.00-cent area tomorrow.

Hedgers: 50% of expected 2013-crop production is hedged in December cotton futures at 83.87 cents. 50% of expected 2013-crop production is also sold via cash forward contract for harvest delivery. 100% sold on old-crop in the cash market.

Cash-only marketers: 85% sold on old-crop. 50% of expected 2013-crop production is sold via cash forward contract for harvest delivery.

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