Crops Analysis (VIP) -- March 4, 2013

March 4, 2013 08:49 AM


Price action: Bull spreading dominated price action in the corn pit throughout the day, but nearby futures softened from earlier levels to close 1 1/4 to 5 14 cents lower. New-crop corn ended mostly around 6 cents lower.

Fundamental analysis: Old-crop corn futures were initially supported by demand news, as USDA announced a 100,000-MT old-crop corn sale to an unknown destination. Gulf corn basis was sharply higher this morning, but flattened by midday, which took focus off the recent pickup in demand.

New-crop corn futures remained under pressure through open-outcry hours as traders reacted to recent moisture improvements across the Corn Belt. A more active weather pattern is dumping another round of snow across the Upper Midwest today and tomorrow.

Technical analysis: May corn futures saw trade above last week's high, with today's high of $7.12 3/4 now initial resistance. Futures saw trade below Friday's low but ended mid-range. Support lies at the February low of $6.80 3/4. Meanwhile, December corn futures spiked support at the February low of $5.47 but closed back above this level.

Hedgers: 100% sold on 2012-crop in the cash market -- 10% for March 2013 delivery. No 2013-crop sales recommended yet.

Cash-only marketers: 75% sold on 2012-crop --10% for March 2013 delivery; 15% for May 2013 delivery. No 2013-crop sales recommended yet.




Price action: Following a very choppy day of trade, soybeans finished moderately to sharply higher and near session highs. Soybean futures closed 14 1/4 to 25 3/4 cents higher though the August contract. New-crop contracts were mostly 8 to 10 cents higher.

Fundamental analysis: March soybean futures, which are in delivery, led today's strong gains amid tight old-crop stocks and an attempt by market participants to try to get their hands on supplies. Expectations Brazilian port delays will push more near-term export business to the U.S. was also supportive, though there wasn't any fresh demand news today.

New-crop futures were pressured at times today by heavy spillover from wheat and corn, along with improved Corn Belt weather, but eventually were pulled higher by old-crop beans. Still, it will be hard for new-crop beans to find sustained buying interest if moisture continues to flow into the Corn Belt.

Technical analysis: The November high of $14.99 1/4 is tough resistance for May soybean futures as that level has turned back multiple rally attempts.

While the technical focus for old-crop futures is on the upside, November soybeans are trying to find traction around the November low at $12.55 1/4. The contract posted a bullish reversal today, but must show strong followthrough to suggest a short-term low is in the works.

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 were lower throughout the day and finished 17 to 18 cents lower in Chicago, 17 to 19 cents lower in Kansas City and 10 to 16 cents lower in Minneapolis.

Fundamental analysis: Improved moisture through the Plains pressured wheat futures today. While the forecast for the Central and Southern Plains is mostly dry until late in the week when rains are possible, melting snow from last week's storms is expected to boost soil moisture. As a result, traders' concerns with HRW crop conditions have eased for now. Until USDA's weekly crop condition ratings start back up one month from now, it will be hard to generate buying interest from HRW crop concerns.

Therefore, any support must come from the demand side of the market. While wheat export demand has improved, it isn't consistently strong enough to support buying interest in wheat futures, especially with crop concerns easing. The drop in nearby wheat futures below old-crop corn prices may attract some increased feed wheat demand, but that's hard for traders to track and therefore not a strong source of support.

Technical analysis: July Chicago wheat futures poked below support at last week's low, but closed above that level. Key near-term support lies at the psychological $7.00 mark. A close below that level would make the June low at $6.85 3/4 bears' target, followed by the May low at $6.70.

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 strengthened into the close to finish 28 to 123 points higher. Old-crop contracts led price gains.

Fundamental analysis: Futures were supported by improved demand for U.S. cotton, with China being the lead buyer. Due to a string of stronger-than-expected weekly export sales reports, traders believe USDA will raise its export projection in Friday's Supply & Demand Report, which would tighten carryover from last month.

New-crop cotton futures continue to be supported by expectations of a sharp reduction in planted acreage this spring, which will tighten the longer-term supply situation.

Technical analysis: May cotton futures posted an upside day of trade on the daily chart and posted its first close above the early May gap area of 85.54 cents. Bulls' next target is the April high of 90.70 cents. Support lies at last week's low of 81.39 cents. Futures have entered overbought territory according to the 9-day Relative Strength Index, which could calm near-term buying interest.

Hedgers: 50% priced on expected 2012-crop production in the cash market.

Cash-only marketers: 50% priced on expected 2012-crop production in the cash market.


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