Crops Analysis (VIP) -- March 18, 2014

March 18, 2014 10:11 AM
 

Corn

Price action:
Corn futures enjoyed mild short-covering overnight and the market extended these gains throughout today's session. The market ended 4 1/2 to 7 1/4 cents higher, with nearbys leading gains.

Fundamental outlook: Nearby corn futures led gains today thanks to renewed bull spreading activity. Political tensions in Ukraine is giving traders incentive to build some premium back into prices. Traders are optimistic this could turn some export business to the U.S., though grain shipments have thus far been uninterrupted by the conflict.

The market also benefited from reminders of already strong demand for U.S. corn. South Korea purchased U.S. corn overnight and late in today's trading session the market learned that Taiwan Sugar Corp. purchased 20,000 MT of U.S. corn.

Strong gains in the soybean and wheat markets added spillover support.

Technical outlook: May corn futures spent the day within yesterday's trading range, which means resistance still stretches from $5.00 to the 2014 high of $5.02 1/2. Last week's low of $4.73 1/4 is initial support.

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 enjoyed strong gains today and ended 20-plus cents higher in the May and July contracts, around 12 cents higher in August and September futures and mostly 9 cents higher in new-crop contracts. Nearby soymeal contracts surged today, pulling soyoil higher as well.

Fundamental outlook: Soybean futures benefited from generally bullish attitudes stemming from concern about unrest in Ukraine and what impact that might have on grain trade. Bull spreading also contributed to price strength for nearby contracts. In addition, the market has received multiple reminders of strong demand for U.S. soybeans so far this week.

China raised its soybean import forecast for March by more than 50% today, and the much-anticipated big U.S. order cancellations by the nation have not yet materialized. Traders responded more favorably to yesterday's NOPA crush data today; it came in stronger than expected, reflecting solid domestic demand in February. Late support also stemmed from news Taiwan Sugar Corp. tendered for 15,000 MT of U.S. soybeans, signaling U.S. prices are still competitive.

Meanwhile, South American soybean production estimates continue to come down due to heat and dryness during the growing season, followed by excessive rain for some areas.

Technical outlook: May soybean futures surged through resistance at $14.00 today and closed the March 12 downside gap at $14.10 3/4, turning these levels back into support. Resistance is layered from the February high of $14.45 1/2 to the contract high of $14.60.

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 strengthened as the day progressed and the market ended just off session highs. HRW wheat led the charge and ended 18 1/2 to 21 cents higher, while SRW and HRS wheat posted gains around 15 to 18 cents.

Fundamental outlook: Unrest in Ukraine garnered more attention from the wheat market today as traders still believe this will eventually turn some export business to the United States. Plus, depreciation of the nation's currency and tightening credit in the country is expected to reduce spring sowings in 2014. The market also responded positively to news Egypt included the U.S. in its wheat buy today, as this signals U.S. prices are competitive globally.

The wheat market also benefited from state reports that reflected ongoing deterioration in the condition of the winter wheat crop the week ended March 16.

Technical outlook: May SRW wheat futures nearly matched yesterday's trading range, maintaining the market's recent consolidated trading range. The boundaries of this range are resistance at $6.96 1/2 and support at $6.69 3/4.

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: May and July cotton futures posted gains of 90 to 95 points today, while the rest of the market finished 20 to 60 points higher.

Fundamental outlook: Cotton futures benefited from a risk-on day of trade across the grain and oilseeds markets. This helped nearby contracts break through near-term levels of resistance, setting the stage for a test of multi-year highs. Fundamental support for nearby futures stems from concern about relatively tight carryover supplies; deferred months, on the other hand, have benefited from some efforts to buy back some acres for the 2014 growing season.

China's stockpiling purchases have slowed as its domestic supply dwindled due to these efforts. This has kept the nation's import appetite strong. Uncertainty lingers about how the end of the nation's stockpiling program this year will impact China's appetite for cotton imports going forward.

Technical outlook: May cotton futures posted solid gains for the day and settled high-range, pointing the contract toward a test of the March high at 93.75 cents. Last week's low of 90.44 cents is 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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