Crops Analysis (VIP) -- March 10, 2014

March 10, 2014 09:58 AM
 

Corn

Price action:
Corn futures finished 8 1/4 to 10 3/4 cents lower through the September contract, while new-crop contracts were roughly 5 to 6 cents lower.

Fundamental outlook: Corn futures were lightly pressured by profit-taking ahead of USDA's Supply & Demand Report and selling pressure intensified after the data was released despite USDA unexpectedly lowering its 2013-14 domestic ending stocks projection. USDA did mildly raise its global corn ending stocks forecast, but not enough to trigger the type of bearish reaction that was seen. The negative price reaction despite a slightly bullish surprise suggests the upside may be exhausted, especially since futures rallied sharply ahead of the report. The key, as it was on the price rally, will likely be fund money flow. Funds sold 14,000 contracts (70 million bu.) of corn today.

The recent pickup in farmer selling is weighing on basis, which was also mildly negative for nearby corn futures today. With plenty of corn still in storage, there's risk of more near-term basis pressure, especially if today's losses spurs more farmer selling.

Technical outlook: Technically, May corn futures did no major damage despite today's losses. The uptrend from the winter low remains firmly intact and intersects around $4.62 Tuesday. But a short-term top appears to be in place as the contract posted a potential exhaustion tail Friday and followed that up with today's losses. A setback that stops prior to or right at uptrending support would suggest the contract has another run to the upside coming. If the uptrend is violated, it would signal the pullback is more than a modest correction.

Hedgers: 70% sold on old-crop. 30% of expected 2014-crop is sold via forward contract for harvest delivery.

Cash-only marketers: 60% sold on old-crop. 30% of expected 2014-crop is sold via forward contract for harvest delivery.

 

Soybeans

Price action: Soybean futures saw stepped-up profit-taking after the release of this morning's USDA reports, with old-crop contracts ending 20 to 39 cents lower and new-crop futures ending mostly 10 3/4 cents lower. Funds sold an estimated 12,000 contracts (60 million bu.) of soybeans today.

Fundamental outlook: Early selling was triggered by concerns about Chinese economic data, as the country unexpectedly posted a trade deficit in February when traders were expecting a trade surplus. That, combined with strength in the U.S. dollar had futures on the defensive heading into USDA's report.

USDA didn't trim its 2013-14 carryover projection as much as expected, but the forecast was still lowered by 5 million bu. from last month to a tight 145 million bushels. There was also disappointment that USDA left its Argentine soybean crop estimates unchanged and only lowered its Brazilian estimate by 1.5 MMT.

Then around midday, USDA downwardly revised its previously released weekly export inspections figure. While it still came in above expectations, the revision added to the selling pressure. Check "Evening Report" for more.

Technical outlook: May soybean futures posted a downside day of trade on the daily chart and a low-range close. But the contract respected steep uptrending support. Followthrough pressure tomorrow, however, would threaten the uptrend. November beans finished mid-range and also remained within the boundaries of the uptrend. Today's low of $11.67 is initial support.

Hedgers: 25% of expected 2014-crop is sold via forward contract for harvest delivery. 100% sold in the cash market on 2013-crop production.

Cash-only marketers: 25% of expected 2014-crop is sold via forward contract for harvest delivery. 90% priced on old-crop.

 

Wheat

Price action: Wheat futures finished near their lows of the day. SRW futures closed 11 to 13 1/4 cents lower, with the exception of the lead March contract that closed 1 1/2 cents lower. HRW wheat closed 7 1/2 to 10 1/2 lower and HRS finished 10 3/4 to 12 1/4 cents lower in the May and later contracts. Funds sold 6,000 contracts (30 million bu.) of SRW wheat today.

Fundamental outlook: Wheat futures moved lower on profit-taking, a stronger dollar and spillover from the corn and soybean markets. Traders evened positions early ahead of the release of USDA's Supply & Demand Report and pocketed profits from the recent price runup. Traders reacted negatively to today's export inspections report, which came in at 429,081 MT. This was down 180,786 MT from the previous week and below expectations.

Today's Supply & Demand Report provided mixed news as USDA left its 2013-14 carryover projection unchanged at 558 million bushels. The trade expected USDA to increase carryover by 10 million bushels. However, USDA raised its 2013-14 world wheat ending stocks to 183.81 MMT, up slightly from 183.73 MMT in February and above the average pre-report trade estimate of 183.65 MMT.

Technical outlook: May SRW futures dropped 13 1/4 cents today. The setback left futures testing support at the $6.36 to $6.40 area. An upside gap running from $5.90 to $6.11 1/4 left on March 3 serves as a downside target if near-term support falters. The winter uptrend provides support at about $6.01 tomorrow. The early December high around $6.64 to $6.80 offers upside resistance.

Hedgers: 50% of expected 2014-crop is sold via forward contract for harvest delivery. 100% sold on 2013-crop.

Cash-only marketers: 90% sold on old-crop. 50% of expected 2014-crop is sold via forward contract for harvest delivery.

 

Cotton

Price action: Cotton futures ended 9 to 46 points higher today, which was generally mid-range in old-crop contracts and mostly a high-range finish in new-crop contracts.

Fundamental outlook: USDA trimmed its 2013-14 domestic cotton carryover forecast amid a bigger export projection, which was seen as price-positive. But much of that support was negated by a rise in global cotton carryover, which is projected to be record-large. The fact cotton futures were able to brush aside another increase in projected global stocks and ignore selling pressure in the grain and soy complex signals attitudes remain strong. But a fresh bullish catalyst is needed or there's risk of profit-taking.

Technical outlook: Technically, last Friday's high at 93.35 cents is key near-term resistance. Failure to clear that level soon could trigger a corrective pullback. Key near-term support comes initially at the uptrend from the November and January low, which intersects around 89.13 cents Tuesday. If that uptrend is violated, the Feb. 27 low at 86.12 cents is key support.

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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