Crops Analysis (VIP) -- May 1, 2013

May 1, 2013 09:28 AM
 

Corn

Price action: Corn futures settled 1 1/2 to 3 1/4 cents lower in the May and July contracts, respectively. September corn futures ended 7 1/4 cents lower. New-crop contracts were 5 1/2 to 6 1/4 cents lower.

Fundamental analysis: The corn market is still trying to catch its breath following Monday's strong upside push. While bears controlled price action for much of the day, old-crop contracts poked above unchanged at times thanks to supportive weekly ethanol production/stocks data.

New-crop futures were pressured throughout the session by expectations corn planting progress will ramp up next week. First, however, a cold front is bringing snow and rain to the country's midsection. But next week's forecast and the 11- to 15-day weather models now signal drier conditions.

Funds were relatively quiet today, selling an estimated 4,000 contracts (20 million bu.) of corn.

Technical analysis: Key near-term boundaries for July corn futures are $6.69 and $6.76 to the upside and $6.10 to the downside.

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: Old-crop soybeans faced heavy pressure today and ended low-range with losses of 20 1/2 to 30 1/4 cents. New-crop beans closed 12 3/4 to 14 3/4 cents lower.

Fundamental analysis: Funds added short positions to start the month of May, which weighed heavily on the soy complex today. Funds were net sellers of 7,000 contracts (35 million bu.) of soybeans today.

Softening basis levels around the country and at the Gulf this week added to the negative tone; the recent rally spurred an increase in farmer selling. Also, the market was reminded that economic headwinds in China will likely temper the country's soy import needs.

New-crop futures were pressured by growing expectations that 2013 soybean plantings will be above year-ago as persistent cold, wet weather for the Corn Belt will likely cause some producers to switch intended corn acres to beans.

Technical analysis: November soybean futures settled back near last Friday's closing levels after a big downside day of trade. The contract tested but respected psychological support at $12.00. A move through that level would open downside risk to the 2013 low of $11.86 1/2. Yesterday's spike high of $12.40 1/4 is near-term resistance.

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 faced pressure throughout the day and the market ultimately settled mid-range with losses of 8 1/4 to 11 1/4 cents. Kansas City and Minneapolis wheat saw choppy trade at times today, but bears had the advantage most of the day and into the close. Kansas City and Minneapolis ended mostly 3 1/2 to 7 1/2 cents lower.

Fundamental analysis: Risk aversion across the commodity sector and spillover pressure from corn and soybeans weighed on the wheat market today, despite a number of bullish supply factors. The Wheat Quality Council HRW Tour is underway. Day one revealed below-average yield prospects of 43.8 bu. per acre for central and northern Kansas and southern Nebraska. Day two is expected to reflect even worse yield potential as scouts are sampling in areas of the western and southern Kansas that experienced greater drought and freeze stress this season. Freeze warnings are again in effect as far south as the Southern Plains May 2-3.

Meanwhile, pressure on Minneapolis wheat was limited by ongoing planting delays in the Northern Plains. This region is again receiving substantial precip (including snow) today.

Technical analysis: Kansas City July wheat futures saw an inside day of trade, leaving near-term resistance at yesterday's April high of $7.99, closely followed by the January low of $8.03 1/2. Support is layered from the March low of $7.30 1/4 to the April low of $7.11 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 plunged in afternoon trade to finish more than 300 points lower through the July 2014 contract.

Fundamental analysis: Buying interest dried up today following recent corrective gains and futures plunged sharply. Helping fuel the price plunge was another red flag with the Chinese economy as the official purchasing managers' index showed the country's vast manufacturing sector eased last month. Textiles are a key component of the manufacturing sector; thus, there are concerns Chinese demand for cotton could decline. That was enough to spook buyers.

The statement following the two-day Federal Open Market Committee meeting did nothing to encourage traders to take a bullish stance. While the Fed says it will continue its bond-buying program and may increase its stimulus efforts, it also said asset purchases may be reduced.

Technical analysis: May cotton futures posted a bearish reversal today. Followthrough selling Thursday would suggest the contract will make a near-term run at support at the April low of 80.82 cents. Below that, next strong support is at the September 2012 high at 78.90 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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