Crops Analysis (VIP) -- March 5, 2013

March 5, 2013 08:54 AM
 

Corn

Price action: Corn futures settled 4 1/4 to 9 cents higher through the July contract. September corn finished 1 cent lower, while new-crop contracts were just over a penny higher.

Fundamental analysis: Corn futures were supported today by strength in the cash market. While there was no fresh news on the demand front, rising basis gives traders the impression some demand may be on the horizon. Additional support came on spillover from soybeans, which are being supported by strong demand.

Buying interest in new-crop corn futures remains limited to mild short-covering as recent heavy precip across the Corn Belt will help recharge soil moisture. But on a flip side, the heavy snowcover makes the start of planting season seem a ways off.

Technical analysis: May corn futures must turn resistance from $7.06 3/4 to $7.11 into solid support to trigger an extended price recovery. If that happens, it would open the upside to the February high at $7.47 1/2.

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.

 

 

Soybeans

Price action: Soybean futures favored a firmer tone throughout the day. Old-crop futures trimmed gains late while many new-crop contracts firmed into the close to end 4 1/4 to 6 1/4 cents higher across all contracts.

Fundamental analysis: Bull spreading was seen through the morning as importers are still seeking U.S. soybeans to fill needs due to shipping delays at Brazilian ports. But a slight unwinding of bull spreads was seen into the close. USDA announced an old-crop soybean sale of 330,000 MT to an unknown destination, but new-crop bookings have also picked up recently as USDA announced China purchased 345,000 MT of soybeans for 2013-14.

Traders are also beginning to even positions ahead of Friday's USDA Supply & Demand Report, which is expected to show a slight tightening of carryover from last month to a tight 122 million bushels. Traders also expect USDA to raise the size of the Brazilian crop by around 1 MMT from last month but to trim the Argentine soybean by 2 MMT to tighten projected global carryover slightly.

Technical analysis: May soybean futures traded above the $14.80 level before setting back into the close. Resistance stands at the February high of $14.97 and support is at the February low of $14.20 1/2. November soybean futures posted an upside day of trade on the daily chart and a high-range close -- coming within a half-cent of $12.80.

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.

 

 

Wheat

Price action: Wheat futures favored a firmer tone throughout the day on spillover from strength in the corn and soybean markets, but gains were limited by the lack of fresh demand news. Chicago wheat ended mostly 3 to 6 cents higher, with Kansas City wheat mostly 7 to 8 cents higher. Minneapolis wheat closed mostly 2 to 4 cents higher.

Fundamental analysis: May Chicago wheat futures ended the day at a 3-cent discount to May corn futures amid indications of a pickup in corn demand. History suggests this discount structure to the corn market will be short-lived, but wheat is clearly in a follower's role as the market searches for a price that stimulates demand.

Buying in wheat futures was limited by recent soil moisture improvements across the Plains, which are helping to stabilize the HRW wheat crop. Above-normal temps across the Southern Plains are melting snow and forecasters say there is rain in the forecast later in the week.

Traders are also beginning to more actively even positions ahead of Friday morning's USDA Supply & Demand Report. According to the average pre-report trade guess, traders look for USDA to raise carryover by around 22 million bu. from last month to 713 million bushels.

Technical analysis: May Chicago wheat futures tested, but respected support at yesterday's low of $6.97 1/2. Below that, support lies at the June low of $6.79 and extends to the contract low posted last May at $6.65. Futures need to return above the January low of $7.45 1/4 to signal a near-term low has been posted.

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.

 

 

Cotton

Price action: Cotton futures closed 70 to 119 points higher through the October contract. December cotton futures finished 32 points higher, while far-deferred contracts were mixed.

Fundamental analysis: Cotton futures added to recent price gains amid expectations of increased demand. While the price rally has slowed Chinese purchases of raw cotton, the country is able to import yarn duty-free. That is causing others to buy U.S. cotton in hopes of exporting cotton yarn to China. Given strong demand, there's hope USDA will reduce its cotton carryover projection in Friday's Supply & Demand Report.

Additionally, new-crop futures are being supported by expectations U.S. cotton acres will be down sharply this year. This anticipation could keep new-crop cotton futures on an upward trajectory ahead of USDA's Prospective Plantings Report at the end of the month.

Technical analysis: May cotton futures reached the highest level today since May 7 of last year. The contract has now completed a 50% retracement of the price plunge from the contract high posted in June 2011 to the contract low posted in June 2012. Next resistance is 90.70 cents, followed by a 62% retracement of the price plunge at 91.27 cents.

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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