Crops Analysis (VIP) -- March 11, 2014

March 11, 2014 09:39 AM
 

Corn

Price action:
Corn futures faced light pressure overnight and early this morning, but the market firmed as the day progressed. Futures ended just off session highs with gains of 2 3/4 to 6 cents. Old-crop futures led to the upside. Funds were net buyers of 9,000 contracts (45 million bu.) of corn today.

Fundamental outlook: Corn futures initially faced some followthrough selling after a bearish reaction to a reminder of ample corn carryover in yesterday's Supply & Demand Report. But as this was already known, traders tagged along when the wheat market resumed its rally. Support also stemmed from news Goldman Sachs raised its near-term corn price outlook, citing strong export demand for the grain as well as unrest in Ukraine.

Traders also responded positively to news the Rosario Grain Exchange pegged the Argentine bean crop at 22.7 MMT. While this is up 700,000 MT from the exchange's previous forecast, it is still below USDA's latest crop peg of 24 MMT.

Technical outlook: May corn futures have posted consecutive lower lows and highs since Friday, but the contract remains a long way from uptrending support drawn off the 2014 lows, which intersects around $4.63 tomorrow. Plus, today's high-range close gives bulls the edge heading into the overnight session. Resistance is in the $5.00 to $5.02 1/2 area.

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: March through July soybean futures closed 3 to 7 3/4 cents lower today. The August contract finished a nickel higher, while new-crop contracts posted gains of 12 to 13 cents on the day.

Fundamental outlook: Traders continued the bull spread unwinding that was seen in Monday's session. The difference today is that spreading activity came with new-crop contracts trading higher. There was some talk the soybean market may be making a late push to buy some acres after the new-crop soybean/corn price ratio tightened from its early winter high.

Funds were modest sellers of 4,000 contracts (20 million bu.) today. That comes on the heels of them selling 12,000 contracts (60 million bu.) Monday. Fund money flow is very much a key near-term "fundamental" as fund buying was one of the factors behind the recent, strong rally.

Technical outlook: May soybean futures have now posted back-to-back days of losses for the first time on the rally from the late-January low. That's a potential sign of a short-term top, but uptrending support from that low remains intact. If the uptrend is violated, it would threaten to extend the corrective pullback. If the uptrend is violated, the September high at $13.49 would be a target for bears as that corresponds closely with a 50% retracement of the rally from the late-January low to the contract high.

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 sharply extended gains around midday, finished off session highs but still posted double-digit gains for the day. SRW wheat ended mostly 17 to 18 cents higher; HRW ended up mostly 17 to 20 cents; and HRS futures were 14 to 18 cents higher, with the exception being the March contract that was up a nickel. Funds were net buyers of 8,000 wheat contracts (40 million bu.) today.

Fundamental outlook: Futures were supported by ideas yesterday's losses were overdone, which attracted value buying to the market in early trade. Wheat extended gains on concerns about dryness in the Southern Plains and discounted forecasts for rains later this week, as they are not expected to be drought-busters.

Focus in the market also turned to political unrest in Ukraine and talk that importers are seeking supplies outside of the Black Sea region. Traders don't like uncertainty, and the Ukraine situation provides plenty of that for the markets.

Technical outlook: May SRW wheat posted a bullish reversal after seeing price weakness in overnight trade. The contract posted a new-for-the-move high of $6.67 1/4, which is initial resistance. Above that, resistance is at the December high of $6.79 1/4, with support at today's low of $6.37.

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 favored a firmer tone in a mixed close. The market ended 38 points lower to 40 points higher.

Fundamental outlook: With little fresh news for the market to digest today, traders focused on evening positions, with pressure limited by positive technicals. Also limiting pressure was the fact traders still have yesterday's USDA reports on their minds, as the agency trimmed U.S. carryover, although that was expected. With improved demand factored into the market, traders say they need a dose of fresh news -- something unexpected -- to keep their bullish interest.

Technical outlook: May cotton futures posted an inside day of trade on the daily chart and finished mid-range. Near-term boundaries are support at the February high of 90.44 cents and resistance at last week's high of 93.35 cents. Above that, bulls' target is the 95.00-cent level.

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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