Crops Analysis (VIP) -- March 25, 2013

March 25, 2013 09:43 AM


Price action: Corn futures favored the upside through the day, with buying building ahead of this afternoon. Futures posted a high-range close with gains of 6 to 8 1/4 cents.

Fundamental analysis: After a mixed start to the day, buying in the corn pit began to improve on a better-than-expected weekly export inspections report. Traders also noted strengthening Gulf and country basis levels, which suggests a potential uptick in demand as well as tight supplies. Anytime Gulf basis upticks it starts talk of fresh export demand, although none has been confirmed.

Traders are also beginning to more aggressively even positions ahead of Thursday's key Quarterly Grain Stocks and Prospective Plantings Reports. According to pre-report guesses, traders look for the data to show planted corn acreage in line with year-ago, which gave new-crop futures a boost today.

Technical analysis: December corn futures posted an upside day of trade on the daily chart -- marking the contract's first close above the January lows. Followthrough buying tomorrow would confirm a near-term low has been posted, making the February high of $5.96 1/2 as bulls' next target.

Hedgers: 100% sold on 2012-crop in the cash market. No 2013-crop sales advised yet.

Cash-only marketers: 75% sold on 2012-crop, including 15% for May 2013 delivery. No 2013-crop sales recommended yet.




Price action: Soybean futures saw two sided trade today and ended split with old-crop fractionally to 3 1/4 cents lower, September up 1 1/2 cents and new-crop 5 to 6 cents higher. Soymeal and soyoil futures also staged a mixed finish.

Fundamental analysis: Bull spread unwinding was the dominant action in the soybean market today, with new-crop futures benefiting from news China has stepped up its buying of U.S. soybeans. USDA announced a 234,000 MT new-crop bean sale to China this morning. Meanwhile, soybean basis remains historically high and Gulf basis strength today signals more demand news may lie ahead as Brazil sorts out its shipping issues.

Traders are also readying for USDA's reports Thursday. The market expects USDA to peg soybean plantings at 78.5 million acres, which would be up 1.3 million acres from year-ago. They also expect USDA to peg quarterly soybean stocks as of March 1 at 947 million bu., which compares to 1.374 billion bu. the year prior.

Technical analysis: May soybean futures settled mid-range and were little changed for the day, leaving near-term support and resistance at last week's high and low of $14.51 1/2 and $14.03, respectively.

Hedgers: 100% sold on 2012-crop in the cash market. No futures/options positions at this time. No 2013-crop sales advised yet.

Cash-only marketers: 75% sold on 2012-crop production for harvest delivery. No 2013-crop sales advised yet.




Price action: Wheat futures ended narrowly mixed in Chicago, fractionally to 2 cents lower in Kansas City and steady to 2 cents lower in Minneapolis.

Fundamental analysis: Weather pressured wheat futures today. While temps dipped below freezing in areas of the Central and Southern Plains overnight and a freeze warning is in effect for some locations again tonight, traders focused on the benefit of recent precip as the winter wheat crop greens up. Forecasts call for additional precip in the Plains later this week and into next week. Additional pressure came from strength in the U.S. dollar, as traders fear a stronger greenback will stall the recent pickup in export demand. But selling interest was held in check by support from corn and beans, along with positioning ahead of Thursday's USDA reports.

Technical analysis: May Chicago wheat futures must push above last week's high at $7.36 3/4 and clear old support at the January low of $7.45 1/4 to signal an extended price correction is underway. If this resistance isn't cleared, it would signal the move off the lows from earlier this month was just a modest correction.

Hedgers: 75% sold on 2012-crop in the cash market. No 2013-crop sales advised yet.

Cash-only marketers: 75% of 2012-crop is sold. No 2013-crop sales advised yet.




Price action: Cotton futures settled 20 to 75 points lower, which was mid-range in all but some of the far-deferred contracts that ended high-range.

Fundamental analysis: Cotton futures were pressured by strength in the U.S. dollar today as it's feared a stronger greenback could slow demand for U.S. cotton. Additional pressure came from corrective trade as traders are lightening long positions they added on the strong runup. With Thursday marking the last business day of the quarter and USDA's Prospective Plantings Report also out that day, more corrective trade is possible.

Technical analysis: Despite the sharp pullback from the March 15 high, May cotton futures have suffered no major technical damage. Key near-term support is the 38% retracement of the rally from the November low just above 85.00 cents. Violation of that level would trigger a drop to the February low at 81.39 cents and the uptrend from the November low.

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

Cash-only marketers: 85% sold on old-crop. 25% of expected 2013-crop production is sold via cash forward contract for harvest delivery.


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