Crops Analysis (VIP) -- March 6, 2014

March 6, 2014 08:50 AM
 

Corn

Price action:
Corn futures traded mixed in the overnight session but moved higher, gaining strength through the day session and finished at or near their daily highs. Futures closed 3 1/2 to 10 1/2 cents higher with the expiring March contract leading gains. Funds bought 14,000 contracts (70 million bu.) today. Funds have bought 68,000 contracts (340 million bu.) since Feb. 27.

Fundamental analysis: Corn futures moved higher at the start of the day session on confirmation of strong export sales from USDA. This morning's Weekly Export Sales Report showed corn sales totaling 1.518 MMT for 2013-14 and 164,500 MT for 2014-15, which were well above expectations and 35% above the prior four-week average. The figures eased concerns U.S. prices had risen high enough to curb demand. Adding to the buying enthusiasm was a weaker dollar today.

Technical analysis: May corn futures burst through Wednesday's high and closed at new highs for 2014 and at their highest level since Sept. 11. Today's trading action saw futures move lower initially and then surge above and closing above yesterday's high, which is a powerful bullish sign. Technical traders are also pointing to corn's move above the 200-day moving average for the first time in more than a year. The $4.80 area now appears to be support. There is resistance virtually over nickel higher.

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 were stronger throughout the day session and ended near session highs with gains of 12 1/4 to 17 1/2 cents through the August contract. Deferred futures ended mostly around 6 cents higher.

Fundamental analysis: This morning's weekly export sales data fed market bulls positive news. The report showed sales of 772,700 MT for 2013-14 and 256,700 MT for 2014-15, which topped expectations. With old-crop sales remaining strong, it reminded the market the U.S. export window is open longer than usual due to shipping issues in Brazil. (However, exports are picking up according to local trade ministry numbers.) Additionally, soybean exports of nearly 1.2 MMT were impressive, with China the lead destination. Check "Evening Report" for more details on the export pace.

Soybean futures were also supported by weakness in the U.S. dollar index, as it provided a friendly atmosphere for commodity-wide buying today. The S&P Goldman Sachs Commodity Index posted strong daily gains.

Technical analysis: May soybean futures posted a strong upside day of trade on the daily chart, but were turned back at the $14.40 level. Today's high-range close gives bulls momentum heading into overnight trade and their near-term objective is last week's contract high of $14.45 1/2. The steep uptrend intersects near $13.97 tomorrow.

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: SRW wheat futures settled high-range with gains of 3 to 4 1/4 cents and HRW wheat was roughly 2 to 3 cents higher. March HRS wheat closed 39 3/4 cents higher while the rest of the market saw gains ranging from 1/2 to 6 1/2 cents.

Fundamental analysis: Wheat futures saw trade on both sides of unchanged today, but bulls had the advantage heading into the close. The uptrending pattern of the wheat market favored market bulls as did weakness in the U.S. dollar index and spillover from corn and wheat. A number of contracts closed at new highs for the year. Of note, the March HRS contract's surge was likely due to someone being caught short and needing to get out ahead of the contract's expiration next week.

The wheat market also benefited from ongoing unease about grain exports out of Ukraine due to political tensions. Also, a strong showing in today's weekly export sales report alleviated concerns about higher prices slowing demand.

Technical analysis: May SRW wheat futures stopped just shy of the $6.50 level, marking it as near-term resistance. Just above this psychological level is the $6.54 to $6.55 area that acted as support from August until early December. The February high of $6.20 is now support.

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: March through July cotton futures surged into the close and ended 210 to 300 points higher for the day. Deferred months saw lighter gains ranging from 5 to 105 points.

Fundamental analysis: A number of factors propelled the cotton market today. To start things off, this morning's Weekly Export Sales Report was much improved from recent lackluster tallies. Sales of 159,500 RB for 2013-14 were 60% above the prior four-week average and 48,200 RB were noted for 2014-15. Also, exports of 363,800 RB were a marketing year high, with China as the primary destination.

A dollar that softened as the day progressed corresponded with building strength in the grain and soybean markets today. Cotton also took part in the rally. The move through February highs triggered buy stops for nearby contracts.

Technical analysis: May cotton futures surged through the February high of 90.44 and psychological support at 91.00 cents today, turning these levels into support. The contract ultimately hit a high of 91.73 cents today -- its highest level since early 2012. Today's high of 9 is initial resistance, followed by the 92.00-cents mark.

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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