Crops Analysis (VIP) -- March 17, 2014

March 17, 2014 10:00 AM


Price action:
Corn futures ended 5 to 7 cents lower, which was in the lower end of today's range, but slightly off session lows.

Fundamental outlook: Traders had a sell-the-fact reaction to the Crimean referendum to break away from Ukraine and join Russia, as this was widely anticipated. News that grain shipments continue to flow normally out of Ukraine also contributed to the negative price tone today. As a result, traders took profits after recent gains. But this situation is likely far from over as tensions in the region remain high and there are likely to be some grain shipment disruptions at some point in the future.

Funds were moderately active on the short side of the market today, selling an estimated net 8,000 contracts (40 million bu.) of corn. Funds are still moderately long corn, and speculative money flow will continue to be a key near-term market fundamental.

Technical outlook: May corn futures did no technical damage despite today's losses. Initial support lies at last week's low of $4.73 1/4. If that support is violated, it would likely trigger a test of the uptrend from the January low, which intersects around $4.67 1/2 tomorrow and rises about a penny every day thereafter. Violation of the uptrend would signal upward momentum has officially stalled. Tough near-term resistance is at the March 7 spike high at $5.02 1/2.

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.



Price action: Soybean futures faced pressure overnight, but the market firmed with the start of daytime trade. Futures ended high-range with gains around 1 to 3 cents. Soymeal posted moderate gains while soyoil closed with losses amid some spreading activity.

Fundamental outlook: Soybean futures benefited from reminders of strong domestic and overseas demand for U.S. soybeans/products today. Kicking things off was an announcement by USDA that an unknown destination purchased 110,000 MT of soybean meal. Next came the Weekly Export Inspections Report, which reflected inspections near top of pre-report expectations and China as the lead destination for shipments. Finally, members of the National Oilseed Processors Association reported soybean crush at a solid 141.612 million bu. in February. This was above pre-report expectations and up nearly 4% from the year prior.

On the other hand, concerns about the possibility of slowed demand from China limited gains. There were also some rumblings that some Brazilian soybean shipments may be diverted to the U.S. Southeast.

Technical outlook: Bargain buying picked up on the May soybean contract's dip though $13.80 today, confirming that price as a key support level. However, traders are hesitant to test resistance at $14.00, signaling more choppy price action may lie ahead.

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.



Price action: Wheat futures faced pressure throughout the day and ended near session lows. SRW wheat was the downside leader with losses of 10 3/4 to 12 3/4 cents, while HRW wheat posted losses around 8 cents and HRS wheat finished roughly 9 cents lower on the day.

Fundamental outlook: As expected, Crimea voted to secede from Ukraine and join Russia over the weekend, triggering sanctions from the U.S. and the European Union. But so far, grain trade has been largely unaffected by the conflict. As a result, the wheat market saw a sell-the-fact reaction to the referendum vote. But if tension escalate, the situation could change regarding wheat exports. And already there is talk that spring grain seedings will be down this year due to devaluation of Ukraine's currency and tightening credit lines (see "Evening Report").

Despite today's double-digit losses in the SRW market, the uptrend remains untested, signaling the path of least resistance remains to the upside. Concern about the U.S. winter wheat crop that is coming out of dormancy with very dry soils will also keep a floor of support under the wheat market.

Technical outlook: May SRW wheat futures have consolidated in recent sessions between last week's high of $6.96 1/2 and Friday's low of $6.69 3/4. Outside of this range, tough resistance stands at $7.00, while steep uptrending support drawn off the January and March lows intersects around $6.39 tomorrow.

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.



Price action: May cotton futures ended 16 points lower today, while other contracts posted slight gains following a lightly traded session.

Fundamental outlook: It was rather impressive cotton futures were able to manage slight gains in all but the lead-month contract today. News out of China was far from bullish as February Chinese cotton imports were down 15.9% from January and 35% lower than year-ago. Also, China's leading ag banker called on the Chinese government to more actively sell state cotton reserves and limit imports. Traders were able to take this news in stride, however, as little action is expected on this front anytime soon.

Today's price action signals attitudes remain bullish in the cotton market. With traders clinging to bullish attitudes, futures have remained very resilient.

Technical outlook: Uptrending support remains firmly intact for May cotton futures. That trendline drawn off the November and January lows intersects around 90.07 cents Tuesday. If violated, old flat resistance at 89.04 cents is key near-term support. Last week's high at 93.75 cents is near-term resistance.

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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