Crops Analysis (VIP) -- July 24, 2013

July 24, 2013 09:37 AM
 

Corn

Price action: September corn futures closed 14 1/4 cents lower, while new-crop contracts ended around a nickel lower. That was a low-range close.

Fundamental analysis: Pressure on corn futures today was twofold. September corn futures were largely pressured by heavy spillover from sharp declines in old-crop soybeans. Pressure on new-crop corn futures came from the weather as traders view forecasts calling for below-normal temps and scattered rains into next week as favorable for crop development as the first big wave of corn pollinates.

Global end-user buying has started to perk up on the price break, but much of the business is optional origin. Plus, what traders are waiting for is China to make a big purchase that signals prices have fallen far enough for now. Until that happens, there's more near-term downside risk.

With the "favorable" weather and a lack of demand news, funds were again on the sell side of the market, dumping an estimated 8,000 contracts (40 million bu.) of soybeans today. Since July 12 (the day after USDA's Supply & Demand Report), funds have sold a net 45,000 contracts (225 million bu.) of corn.

Technical analysis: December corn futures dropped through Tuesday's low to extend the price slide. The next level of support is the psychological $4.75 mark, followed by layered support from $4.74 to $4.60.

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: August soybean futures came under heavy pressure and settled the 70-cent limit lower. Tomorrow the contract's limit will be expanded to $1.05. September beans finished low-range and 22 1/4 cents lower for the day. New-crop beans settled 3 1/2 to 6 1/4 cents lower for the day after a mixed day of trade.

Fundamental analysis: Heavy pressure on interior and Gulf soybean basis translated to heavy pressure on soybean futures today. This spilled over to deferred contracts. End-users now appear to have backed off their aggressive bidding amid thoughts supplies will last until new-crop supplies come available. And favorably mild weather in the Corn Belt with some locations receiving precip has eased concerns about realizing a rebound in production this growing season. All of this encouraged funds to sell 7,000 bean contracts (35 million bu.) today.

Recognition the soybean crop is off to a very slow start developmentally and will need a late fall to realize yield potential helped to limit pressure on new-crop beans, however.

Technical analysis: August soybeans took out uptrending support since June and the key $14.00 level today. The next level of major chart support isn't until the psychological $13.00 mark, followed by the April low of $12.82. November beans are again approaching key support at the $12.50 level. A downside breakout would point the contract toward a test of the July low of $12.25. Resistance stands just below the $13.00 level.

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: Wheat futures tried to trade higher today but were unable to withstand spillover pressure from corn and soybeans. SRW wheat futures closed fractionally to 3 cents lower in most contracts; HRW wheat was 1 3/4 to 6 1/2 cents lower and HRS wheat ended fractionally to 4 cents lower. Futures generally closed at their lows of the day.

Fundamental analysis: The limit loss in August soybean futures proved the dominant fundamental factor. Export news tended to be negative as Egypt, the world's biggest importer of wheat, announced it had bought 240,000 MT of Russian, Romanian and Ukrainian wheat for shipment Sept. 1-10 at prices considerably lower than those in the United States. Other export news shows business going to cheaper wheat producers.

In addition, reports from the Wheat Quality Council's HRS tour tend to suggest that crop is in good shape with positive yield prospects but maturity is lagging.

Technical analysis: Chicago September wheat futures traded above Tuesday's high before slumping and closing near where it opened and at it's daily low. However, Tuesday's low did offer support. The move to a new contract low Tuesday sets up $6.07 1/2 as the next level of support, which comes from the weekly continuation chart, followed by psychological support at $6.00. Resistance starts at $6.73 3/4.

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 closed 15 to 41 points higher in very narrow trade.

Fundamental analysis: Traders were reluctant to push prices aggressively higher or lower as they sort through conflicting reports on crop conditions and demand. Crop conditions have improved somewhat on welcome rains in Texas but the extent of the improvements is unclear as drought still remains well-entrenched.

Meanwhile, there is little news on the demand front and traders are waiting to see what happens with Chinese demand. A potential negative for Chinese purchases is the continued slump in its manufacturing sector amid sluggish domestic and export orders.

Technical analysis: December and March cotton futures traded in a narrow range inside of Tuesday's boundaries and posted mid-range closes. The December contract has resistance starting at 86.55 cents and extending to 89.56 cents. Support starts at 84.60 cents and extends down to 81.72 cents.

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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