Crops Analysis (VIP) -- May 13, 2013

May 13, 2013 09:31 AM
 

Corn

Price action: Futures closed 9 cents to 30 cents higher with the May contract leading the charge higher. The July closed up 19 1/4 cents while the new-crop months were generally 9 to 10 cents higher.

Fundamental analysis: The looming expiration of the May contract coupled with the lack of deliverable supplies prompted a squeeze on shorts in that contract. With the May expiring at noon CT Tuesday, there could be more fireworks tomorrow.

Some traders cite slow-planting progress and the potential for a halt in planting again next week due to a wetter-than-average forecast for the Midwest as a reason behind today's upmove. But heavy fund-buying activity today was the bigger factor. Funds reportedly bought 15,000 contracts (75 million bu.) of corn today. It will take strong fund participation to eventually break the downward momentum in prices.

Technical analysis: Today's surge saw the July contract filling the gap left May 6 at $6.57 3/4. July corn also closed near its high of the day. The next upside target for the contract is the April 30 high at $6.69 followed by $6.76, which, if reached, would fill the gap left April 1. It would take closes above both of those upside price targets to break out of the six-week consolidation range.

December futures opened above Friday's low, traded higher throughout the day and closed near it's daily high. The initial upside target is $5.52, the top of the gap left May 6. However, it would take a close above the April 30 high of $5.70 to prompt thinking this contract may be shifting from a downward to sideways trend. December corn has support at the April 24 low of $5.17. USDA's bearish Supply & Demand outlook failed to take out that low, suggesting the report's bearishness was already factored into prices.

Hedgers: 100% sold on 2012-crop in the cash market. 10% of expected 2013-crop production is sold via cash forward contract for harvest delivery.

Cash-only marketers: 75% sold on 2012-crop production. 10% of expected 2013-crop production is sold via cash forward contract for harvest delivery.

 

 

Soybeans

Price action: July soybean futures finished 32 3/4 cents higher, while the July, August and September contracts were 20 1/4, 15 and 8 3/4 cents higher, respectively. New-crop soybean futures closed around 4 cents higher.

Fundamental analysis: May soybean futures were supported by short position holders trying to get out of those positions today. With the contract expiring at noon CT Tuesday, there's potential for a greater short squeeze.

The strong rally in the lead-month contract along with tight supplies fueled gains in the other old-crop contracts today. Once the May contract exits the board, it will give bulls an upside target for the remaining old-crop contracts.

New-crop futures were pulled higher by the strength in old-crop contracts and short-covering. A lack of fundamental support for new-crop futures led to a late trimming of gains.

Technical analysis: The price pattern in July soybean futures remains choppy, with the contract moving into the middle portion of the long-established range. For November soybean futures, the downtrend from the February high remains intact. That trendline intersects around $12.20 3/4 Tuesday. Bulls need a close above the trendline and above the last reaction high at $12.40 1/4 to signal a short-term low is in the works.

Hedgers: 100% sold on 2012-crop in the cash market. 50% of expected 2013-crop production is hedged in November soybean futures at $12.19. 10% of expected 2013-crop production is sold via cash forward contract for harvest delivery.

Cash-only marketers: 75% sold on 2012-crop production. 10% of expected 2013-crop production is sold via cash forward contract for harvest delivery.

 

 

Wheat

Price action: Chicago wheat futures closed mostly around 5 cents higher, while Kansas City wheat was mostly 7 to 9 cents higher and Minneapolis wheat was mostly 3 to 4 cents higher. Futures ended near the middle of today's range at all three exchanges.

Fundamental analysis: After trading lower much of the overnight session, wheat futures firmed on spillover from the corn market during the day session. This encouraged short-covering after sharp losses following USDA's reports last Friday.

Hot and dry weather forecast for the Central and Southern Plains this week was also mildly supportive, although traders remain reluctant to "write off" the HRW wheat crop despite its many struggles. It appears traders want hard proof via yield results before they factor in crop losses due to drought and freeze damage.

Technical analysis: July Chicago wheat futures continue to consolidate around the $7.00 mark. Key support is marked by the April low at $6.64 3/4 and the March high at $7.40 1/2.

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 faced pressure for much of today's session, but the market ended high range with losses of 10 to 39 points.

Fundamental analysis: More disappointing economic data out of China weighed on the cotton market for much of the day as traders view this as a sign the country will reduce its cotton imports. USDA on Friday projected world cotton carryover at a record-large 92.74 MMT and it projected Chinese cotton imports for 2013-14 at 12 million bales, which would be down 6.25 million bales from its forecast for the current marketing year.

But the market moved off its lows into the close as traders expect this afternoon's Crop Progress Report to reflect a continued slow planting pace.

Technical analysis: July cotton futures remain within the confines of the recent trading range, the parameters of which are support at 82.84 cents and resistance at 88.40 cents.

Hedgers: 50% of expected 2013-crop production is hedged in December cotton futures at 83.87 cents. 50% of expected 2013-crop production is also sold via cash forward contract for harvest delivery. 100% sold on old-crop in the cash market.

Cash-only marketers: 85% sold on old-crop. 50% of expected 2013-crop production is sold via cash forward contract for harvest delivery.

 

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