Crops Analysis (VIP) -- May 15, 2013

May 15, 2013 09:50 AM
 

Corn

Price action: Corn futures faced light pressure for most of the session and ended fractionally to 6 1/4 cents lower for the day, which was low-range.

Fundamental analysis: Favorable weather thus far this week has planters rolling around the clock in the Corn Belt ahead of a return to rainy weather late this week and into next week. This has eased traders' concerns about a record-slow start to the 2013 growing season, though planting uncertainty is also somewhat limiting selling interest.

Gulf basis levels slid this morning and at midday for near-term delivery. This, along with news Taiwan and Japan recently bought more than 200,000 MT of South African corn (an unusual purchase) to meet near-term needs reminds the market of demand destruction for U.S. corn. Plus, South American corn is set to be imported into the U.S. Southeast.

While export demand and domestic feed use is easing, ethanol production increased 14,000 barrels per day (bpd) last week to 857,000 bpd. Meanwhile, ethanol stocks declined 418,000 barrels to 16.43 million barrels.

Technical analysis: December corn futures continue to struggle to find buying interest above the $5.40 level. The contract needs a close above this level and the top of the May 6 downside gap at $5.52 to signal a reversal in the trend may be in the works. Support is layered from the May low of $5.22 3/4 to the April low of $5.17.

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 2 cents lower, while most other contracts were 4 to 5 cents lower. The July through November contracts ended mid-range, while farther deferred contracts finished in the lower end of today's range.

Fundamental analysis: Soybean futures got caught up in the general weak tone across the grain and soy complex today. With wheat leading the move lower, soybeans followed amid a lack of fresh, supportive news.

Adding to the negative tone today was NOPA crush data, which came in well below expectations at 120.113 million bu. for April. That was 12.4% lower than March, 8.8% under year-ago and the smallest monthly crush number since last September. The combination of tight supplies and some plants being down for maintenance produced the disappointing crush figure.

Technical analysis: July soybean futures remain in the modest uptrend from the April low, trading near the middle of the extended, broad range. Meanwhile, November soybean futures continue to hold in the downtrend from the February high, though sideways trade will soon be enough to "break" the downtrend. As a result, the more important near-term resistance is the last reaction high at $12.40 1/4.

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: Losses in the wheat market built through the day, resulting in a low-range close at all three exchanges. Chicago wheat was mostly 15 to 17 cents lower, Kansas City wheat mostly 15 to 16 cents lower and Minneapolis wheat mostly 7 to 9 cents lower.

Fundamental analysis: A stronger U.S. dollar, a lack of fresh supportive news and generally bearish attitudes combined to weigh on wheat futures today. Technical-based selling also contributed to the losses as sell stops were triggered on the drop through support. With the low-range close, futures are vulnerable to followthrough selling.

Traders continue to ignore HRW crop woes, suggesting they continue to hold out hope for a recovery. But forecasts continue to signal any hope for a significant crop recovery is just that -- hope -- as above-normal temps and below-normal precip are in the outlook for the heaviest production areas of the Southern Plains through next week.

Technical analysis: July Chicago wheat futures dropped through the modest uptrend from the April low and also closed below the psychological $7.00 mark. If the April 24 low at $6.87 3/4 is taken out, the contract would be headed for a test of the April low at $6.64 3/4. Contract-low support stands at $6.47 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: Bears had control in the cotton market throughout the day, though the market moved well off its lows into the close. Futures settled mid- to high-range with losses of 43 to 74 points.

Fundamental analysis: Strength in the U.S. dollar index weighed on the cotton complex throughout the day, though the market saw some light short-covering late in the session ahead of tomorrow's export sales report. The market is concerned that a strengthening greenback will limit demand from Chinese mills, especially as recent data from the country points to slowed economic growth. Textile mills are thus thought to be reining in production and are exercising more caution when it comes to extending coverage.

Technical analysis: July cotton futures saw an inside day of trade as the contract continues to consolidate between the May high of 88.40 cents and the April low of 82.84 cents. A move through either of these levels would open significant upside or downside potential.

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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