Crops Analysis (VIP) -- March 5, 2014

March 5, 2014 08:47 AM
 

Corn

Price action:
Corn futures closed low-range with losses of 1 1/2 to 3 3/4 cents. Funds sold 9,000 contracts (45 million bu.) of corn today.

Fundamental analysis: Corn futures edged higher after working slightly weaker in the overnight session on news China may approve Viptera corn (MIR 162) the first half of the year. However, profit-taking took over market action as traders pocketed profits after recent strong gains. Some traders expressed concern that the recent runup in prices may be pricing corn out of the export market. Traders will get an update on export demand in tomorrow's Weekly Export Sales Report.

Light selling pressure appeared as ethanol production the week ended Feb. 28 declined 11,000 barrels per day (bpd) to 894,000 bpd. However, ethanol stocks declined 413,000 barrels to 16.61 million barrels.

Technical analysis: May corn futures fell back slightly today following the 20-cent surge the first two days this week. That surge lifted prices through stiff resistance in the $4.70 to $4.80 area. That same area offered support in today's trading. The $4.94 area -- the mid-September reaction high -- now serves as resistance.

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 closed narrowly mixed today -- 2 1/2 cents lower to 2 1/4 cents higher. Futures generally ended in the upper third of today's range.

Fundamental analysis: The soybean market did a good job absorbing a 245,000-MT old-crop soybean cancellation from China today. That's largely because Chinese cancellations are expected and needed or USDA must raise its export forecast and cut into already tight carryover. Today's roughly 9-million-bu. cancellation was minor. Whether China actively cancels U.S. old-crop soybean purchases depends on the shipping pace out of Brazil.

Funds were neither net buyers nor sellers in the soybean market today, which is largely why futures closed mixed. While traders are closely monitoring export demand and the finish to the South American growing season, fund money flow is still a key, if not the key, price factor.

Technical analysis: November soybean futures are trading just below the top of an old congestion area on the daily chart. A close above the $11.85 area would make the psychological $12.00 mark bulls' next target, followed by August/September double-top at $12.35. Key near-term support is the uptrend from the January low, which intersects around $11.62 Thursday, followed by the November low at $11.40.

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 saw a mixed day of trade. SRW wheat futures posted losses for most of the day and ended around a penny or two lower. But the HRW and HRS markets firmed after a lower start. HRW wheat closed narrowly mixed, while HRS wheat ended 11 1/2 cents higher in the March contract and 1 to 3 cents higher in deferreds.

Fundamental analysis: As was the case in soybeans and corn, traders took advantage of recent strong gains by booking some profits today. The market has recently benefited from conflict in Ukraine that spurred speculation the country's grain exports may slow. These tensions have eased somewhat, but they remain on traders' minds.

Adding light pressure is precip for the Southern Plains this week. While snow and freezing rain are less than ideal in some areas, traders are more focused on the benefit this brings to very dry soils.

There was also some unease among traders regarding the possibility recent price gains may have slowed export demand. The Weekly Export Sales Report will provide insight as to this.

Technical analysis: While May SRW wheat futures posted losses for the day, the contract spent the day in the upper third of this week's trading range. Bulls' next target is the psychological $6.50 area, which roughly coincides with the September low.

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 settled split with nearbys 27 to 61 points lower and far deferred months mildly higher. The front-month ended high-range, while May and July futures posted low-range closes.

Fundamental analysis: Cotton futures saw some mild bull spreading activity today as traders evened positions after gains to start the week. Losses for much of the day in the grain and soybean markets added incentive for some mild profit-taking. The market paid little attention to a reminder China plans to end its cotton stockpiling program this year. The uncertainty this has created about the nation's demand for U.S. exports is largely considered factored into prices.

Traders also reduced their risk exposure ahead of USDA's Weekly Export Sales Report. Last week's tally was highly disappointing.

Technical analysis: May cotton futures moved above psychological resistance at 89.00 cents and then 89.50 cents, but the contract was unable to sustain buying at these levels and settled back below them. The contract continues to consolidate around uptrending support drawn off the November and December lows and settled steady with that price today.

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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