Crops Analysis (VIP) -- March 24, 2014

March 24, 2014 09:40 AM


Price action:
Corn futures closed 9 1/2 to 11 cents higher through the September contract. New-crop futures posted gains of 6 1/4 to 8 cents. Funds were net buyers of an estimated 10,000 contracts (50 million bu.) of corn today.

Fundamental analysis: Much of today's price support came courtesy of the wheat market. Strong gains in wheat futures encouraged traders to buy corn. But fundamental support came from weekly export inspections, which easily topped trade expectations. That signals export demand remains strong despite the price rally.

Uncertainty over the situation in Ukraine also remains price-supportive for corn. While there is no proof of slowed exports out of Ukraine at this point, traders anticipate that will eventually happen, which would open the door to more export demand for U.S. corn. As a result, traders are keeping some risk premium in the market.

Technical analysis: May corn futures continue to chop in the short-term consolidation range from roughly $4.75 to $4.90. Key near-term resistance stands at the March 7 spike high at $5.02 1/2. A close above that level would produce the highest close since late August. To the downside, uptrending support from the winter low intersects around $4.74 1/4 Tuesday.

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 saw a highly volatile day of trade, with early losses attracting buying into the close. May through August futures ended 12 3/4 to 16 3/4 cents higher, with new-crop contracts up 5 1/2 to 9 1/2 cents. Meal ended higher amid spreading with soyoil, which was mixed. Funds bought an estimated 7,000 contracts (35 million bu.) of soybeans today.

Fundamental analysis: Early pressure was tied to disappointing Chinese economic data that suggests its economy has cooled. This, combined with weakening crush margins in China and bird flu concerns raises concerns about near-term Chinese soybean demand.

But futures firmed as traders reacted to weekly export inspections data that shows soybeans continue to leave U.S. ports at a stronger-than-usual pace for this time of year. This was a reminder the U.S. export window is open longer than normal.

Technical analysis: May soybean futures started the overnight session lower and violated the $14.00 level before buyers returned to push futures to a session high of $14.32 3/4. Bulls' next upside target is the March high of $14.60. November soybean futures saw trade at the lower end of the month-long consolidation range before returning to the upper half of the range. Resistance is at last week's high of $11.98.

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 finished with gains in the upper teens to 20-plus cents. Nearby HRW contracts led gains. Funds bought a net 9,000 contracts (45 million bu.) of SRW wheat today.

Fundamental analysis: Traders came out of the weekend adding premium into the market. With the HRW crop breaking dormancy as temps warm in the Southern Plains, traders are paying closer attention to weather. Ongoing drought in the region increases the need for timely spring rains. With the near-term forecast calling for limited rainfall chances in the driest areas, traders built weather premium into the market.

Heightened tensions in Ukraine also encouraged traders to add some risk premium today. While Black Sea exports have not been slowed yet, traders anticipate this will eventually be the case and expect the U.S. to get some additional business.

Fundamentally, spring weather and the Ukraine situation will remain at the top of traders' watch list in the wheat market. The March 31 Prospective Plantings and Quarterly Grain Stocks Reports are likely to trigger some position squaring later this week, though those reports should be more of a tone-setter in the corn and soybean markets.

Technical analysis: July SRW wheat futures posted an outside day up on the daily chart today. That may be enough to push the contract above last week's high of $7.25 1/4. If bulls can turn the October high at $7.10 3/4 into solid support, it would open the upside to the $7.60 to $7.75 area. Uptrending support from the winter low currently intersects around the $6.70 area, with flat support around $6.50.

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 and July cotton futures settled 215 and 268 points lower, respectively, while the rest of the market finished 34 to 115 points lower, with far deferred months seeing the lightest losses.

Fundamental analysis: News out of China pressured the cotton market today. The country will reduce the minimum price at which domestic mills can purchase the fiber auctioned from state-owned reserves in an effort to diminish the nation's massive stockpiles. This will take effect April 1. Also, preliminary data shows China's manufacturing sector slowed to an eight-month low this month. Poor economic data from the country of late has raised concerns about its export demand going forward.

Cotton futures dipped below support at last week's low and the 90-cent area for May and July futures, but this triggered some bargain buying and nearby contracts settled just above these levels. Bull spread unwinding added pressure to nearby contracts.

Technical analysis: May cotton futures dipped below support at the March 12 low of 90.44 cents and 90.00 cents, but this triggered some bargain buying that resulted in a finish above both these prices. However, the contract settled just below steep uptrending support, meaning action tomorrow will be key. To move back into the steep uptrending channel, the contract must move back to the 91.00 cents area. Bears' next target is uptrending support drawn off the November and February low, which intersects around 88.66 cents tomorrow.

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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