Crops Analysis (VIP) -- July 25, 2013

July 25, 2013 10:27 AM


Price action: The collapse in prices continued today with hefty spillover selling pressure from soybeans adding to the decline. The September contract closed 12 1/4 cents lower, at price levels last seen in October 2010. New-crop contracts ended mid-range, down at 1 1/4 to 1 1/2 cents.

Fundamental analysis: Spillover selling pressure from soybean futures coupled with weak export demand and improving weather conditions drove futures lower. Funds were light sellers, selling a net 4,000 contracts (20 million bu.) of corn today.

Weekly export sales proved to be a disappointment as USDA reported net sales reductions of 27,900 MT for 2012-13 and sales of 515,900 MT for 2013-14. The combined tally fell short of expectations and week-ago. Traders are also disappointed that the recent plunge in prices has failed (so far) to trigger purchases from global end-users, especially China.

Meanwhile, updated weather forecasts continue to show rain chances and cooler temperatures in the mix for this weekend and into next week, which is viewed as positive for pollination and crop development.

Technical analysis: With September futures making new contract lows, the next level of support is the psychological $4.75 area. Resistance sits at $5.25. December futures also have psychological support at $4.75 with resistance starting at $4.90.

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.




Price action: The heavy liquidation in August soybean futures continued today with that contract posting its low of the day early and finishing 37 1/4 cents lower. New-crop contracts finished 27 to 32 3/4 cents lower.

Fundamental analysis: Sharp losses in interior basis continued to drag the August futures lower. Traders ignored the stronger-than-expected weekly soybean export sales of 128,300 MT for 2012-13 and 665,200 MT for 2013-14, even with China as the lead buyer. The favorable weather forecasts calling for precipitation and cool temperatures into next week eased trader concerns over the late-developing soybean crop.

Funds were noted sellers, dumping a net 11,000 contracts (55 million bu.) of soybeans today.

Technical analysis: More severe chart damage was done to August soybean futures. The contract found light support just under $13.50 but the main level of support is at the psychological $13.00 mark and the April low at $12.82. Resistance starts at old support at $14.01. November futures broke support at $12.50 1/4, which triggered sell stops. It also broke support at the July 8 low of $12.25. The wide congestion area from $12.20 to $11.86 1/2 is next support . Resistance now starts at $12.25.

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.




Price action: Wheat futures faced light pressure for most of the day and ended low-range with losses of 1 to 4 cents for SRW wheat, while HRW and HRS wheat ended roughly 4 to 5 cents lower.

Fundamental analysis: Wheat futures held up relatively well in the face of heavy spillover pressure from soybeans and losses in the corn market again today. Helping to limit selling interest was a reminder of solid export demand for U.S. wheat. Weekly wheat export sales of 661,400 MT topped expectations with China as the lead buyer.

But ample global wheat supplies means the wheat market lacks the fundamentals to rally on its own, so the market will likely continue to follow corn lower until it shows signs of bottoming. Adding pressure for the HRS market is the favorable condition of the crop and the forecast for needed rain.

Technical analysis: September SRW wheat extended the recent slide and hit yet another contract low today. Former support at $6.50 is now resistance. Looking to the weekly continuation chart, the next level of support stands at the June 2012 low of $6.07 1/2.

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.




Price action: Cotton futures ended high-range with slight gains of 3 to 16 points in all but the March contract, which ended 5 cents lower. This was generally a high-range close.

Fundamental analysis: Both buying and selling interest were limited in the cotton market today, though weakness in the U.S. dollar index gave bulls a slight advantage heading into the close. Weekly cotton export sales of 33,900 RB were light and down 33% from week ago, but paired with net sales of 96,200 RB for 2013-14, the overall tally was not all that grim (though neither was it "good"). China was the lead buyer, closely followed by Turkey.

Spillover from heavy selling in the soybean market also limited buying interest.

Technical analysis: December cotton futures are making their way back toward the upper half of the market's wide choppy range that has bound action since March. The July high of 87.11 cents is initial resistance, followed by much tougher resistance at the June high of 89.56 cents. Support is layered from the July low of 83.58 cents to the June low of 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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