Crops Analysis (VIP) -- March 4, 2014

March 4, 2014 08:55 AM
 

Corn

Price action:
Weakness in the overnight session was met with fresh buying during daytime trade and corn futures ended 7 to 13 3/4 cents higher, with nearbys leading gains amid bull spreading.

Fundamental analysis: Traders took some profits out of the market in overnight trade on news that political tensions had eased somewhat in Ukraine. But concerns the situation will linger and impact shipments from the Black Sea region -- a major export hub -- helped to attract money back to the market today.

Futures were also supported by news Informa Economics has lowered its Brazilian corn estimate by 1.1 MMT to 65.45 MMT due to late-season dryness trimming yields. Funds bought an estimated 18,000 contracts (90 million bu.) of corn today.

Technical analysis: The improved technical outlook also encouraged some chart-based buying today. May corn futures rose through resistance at yesterday's high of $4.82 3/4 and posted a daily high of $4.85 to complete a 62% retracement of the decline from the August high. That makes bulls' next objective the 75% retracement level just below the psychological $5.00 level.

Hedgers: 60% sold in the cash market on 2013-crop. 20% of expected 2014-crop production is sold via cash forward contract sale for harvest delivery.

Cash-only marketers: 50% sold in the cash market on 2013-crop. 20% of expected 2014-crop production is sold via cash forward contract sale for harvest delivery.

 

Soybeans

Price action: Soybean futures finished 9 1/2 to 15 cents higher and near the highs of the day, with July futures leading gains. Funds bought 6,000 contracts (30 million bu.) today.

Fundamental analysis: Cuts in Brazilian crop estimates moved traders to the plus side again today. In addition, continuing logistical issues in Brazil have traders looking for export business to keep coming to the U.S. as the most reliable supplier of soybeans until those logistics issues are resolved. A 15-cent jump in Gulf basis for March delivery at midday contributed to the strength in soybeans.

Pro Farmer South American Consultant Dr. Michael Cordonnier lowered his Brazilian crop estimate 1.5 MMT to 87 MMT. This marks the fourth week in a row he has reduced his estimate. Private analytical firm Informa Economics cut its Brazilian crop estimate to 88.8 MMT from 89.7 MMT and it lowered its Argentine soybean crop projection to 54 MMT from 57 MMT.

Technical analysis: May soybean futures closed 13 3/4 cents higher at $14.23, its highest close for the contract. The contract found support just above the psychological $14.00 area. The steep February uptrend offers support at the $13.90 area the remainder of the week. The Feb. 27 contract high at $14.45 1/2 offers resistance.

Hedgers: 100% sold in the cash market on 2013-crop production. 10% of expected 2014-crop production is sold via cash forward contract sale for harvest delivery.

Cash-only marketers: 90% priced on old-crop. 10% of expected 2014-crop production is sold via cash forward contract sale for harvest delivery.

 

Wheat

Price action: Wheat futures closed up with strong gains, with the exception of the March HRS wheat contract, which closed 5 3/4 cents lower. SRW futures finished 10 3/4 to 13 cents higher. HRW futures closed 3 to 9 1/2 cents higher. Deferred HRS futures closed 6 1/2 to 13 cents higher. Funds bought 9,000 contracts (45 million bu.) today.

Fundamental analysis: Wheat futures moved lower in early trading on profit-taking and signs of easing tensions in Ukraine. But traders moved back to the plus side on ideas the situation in that country was not resolved and grain exports from that key grain-growing company could be restricted going forward. Traders are also becoming increasingly concerned about declining crop conditions in the HRW wheat region.

Meanwhile, Informa Economics increased its wheat crop projection for India by 9 MMT, although this was largely ignored by the market today.

Technical analysis: May SRW wheat futures initially traded weaker but firmed through the day session. Futures moved slightly above yesterday's high and closed at its highest level since Dec. 11. The $6.54 area offers price resistance. The gap area below $6.11 1/4 left on yesterday's upside gap open is a downside target. Both volume and open interest have risen on the winter rally, which is a sign of strength. However, some of the rise in open interest is due to contract change over as the March contract nears expiration.

Hedgers: 100% sold on 2013-crop in the cash market. 35% of expected 2014-crop production is sold via cash forward contract for harvest delivery.

Cash-only marketers: 75% sold on old-crop. 35% of expected 2014-crop production is sold via cash forward contract for harvest delivery.

 

Cotton

Price action: Cotton futures saw a lackluster day of trade and ended 54 to 89 points higher through the October contract and 6 to 28 points higher in the far-deferred months.

Fundamental analysis: Cotton saw spillover from strength in the grain markets, as it was able to shrug off weakness in gold and crude oil futures. Given today's narrow price movement, it appears traders' focus was on evening positions. But it's encouraging to market bulls that futures were able to build on yesterday's strong gains.

Futures were also supported by projections from the International Cotton Advisory Committee for a 1.59% decline in global cotton production in 2014-15 from last year to 25.34 MMT. But the group looks for global ending stocks to rise from 19.93 MMT in 2013-14 to 20.84 MMT as production will outpace consumption.

Technical analysis: March cotton futures traded in the upper portion of yesterday's wide trading range. The contract matched yesterday's high of 88.35 cents and closed high-range. Near-term boundaries are resistance at the February high of 89.31 cents and support at the February low of 84.65 cents.

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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