Crops Analysis (VIP) -- May 2, 2013

May 2, 2013 09:50 AM
 

Corn

Price action: Corn futures enjoyed gains for most of the day and buying interest mounted heading into the close. Old-corn ended around 15 cents higher; September closed 10 3/4 cents higher; and new-crop corn posted gains of 7 1/2 to 8 3/4 cents.

Fundamental analysis: A very late blast of winter weather for parts of the upper Midwest kept planting delays in focus today. Today's major precip event will keep farmers out of the field for some time and will likely encourage some, especially in the northwest Corn Belt, to switch acres to other crops. In response, basis levels in the western Corn Belt rose today as end-users sought coverage amid supply concerns. Funds also bought 12,000 corn contracts (60 million bu.) today.

Adding to supply concerns were strong weekly export sales tallies of 329,300 MT for 2012-13 and 656,000 MT for 2013-14, which came in near the top of lofty expectations.

Corn's strong close was especially impressive considering sharp gains in the dollar today.

Technical analysis: July corn futures posted a strong upside day of trade. But the contract needs closes above Tuesday's high of $6.69 and the top of the April 1 downside gap at $6.76 to signal a low is in place.

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: Soybean futures saw two-sided trade today, with the front-month May contract favoring a firmer tone throughout the day and ending 3 1/2 cents higher. July through September futures closed 3/4 to 2 1/2 cents lower, with new-crop futures mostly around 5 cents lower.

Fundamental analysis: Bull spreading was seen in the soybean market today as traders returned their focus to the tight old-crop stocks situation. Pressure on new-crop futures came from expectations the late start to corn planting would result in some producers switching acres to soybeans.

Interestingly, the demand situation was more favorable for new-crop futures today. The weekly export sales data showed net sales reductions of 109,800 MT for 2012-13, but sales in excess of 1.3 MMT were reported for 2013-14. Additionally, USDA announced a 290,000-MT new-crop daily sale to China.

Sharp strength in the U.S. dollar index added to weakness in the bean pit, although crude oil and gold futures were sharply higher today.

Technical analysis: November soybean futures traded in the lower half of yesterday's trading range and respected support at yesterday's low of $12.00 3/4. Key support is at the April low of $11.86 1/2, with resistance at this week's high of $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: Wheat futures at all three exchanges extended gains into the close to finish mostly 7 to 10 cents higher.

Fundamental analysis: Minneapolis wheat futures were generally the upside price leader today as traders recognize planting delays are serious in the Northern Plains -- especially since a blanket of snow once again covers the region.

Kansas City futures were supported by confirmation of crop concerns in the HRW Wheat Belt. The Wheat Quality Council's tour of the region reveals yield potential below year-ago. Although this was expected, it sheds more light on the situation. Additionally, another freeze warning is in effect for the region tonight.

Adding to today's positive tone was the weekly export sales data, which showed sales of 219,200 MT for 2012-13 and sales of 497,300 MT for 2013-14. The stronger-than-expected sales data helped to offset strength in the dollar index today.

Technical analysis: July Chicago wheat futures posted an inside day up on the daily chart. The high-range close gives bulls more momentum heading into overnight trade. Resistance is layered between this week's high of $7.36 3/4 and the March high of $7.40 1/2. Support is at the April 24 low of $6.87 3/4.

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 traded in a wide range today and ended mid-range with strong gains of 72 to 181 points, with nearbys leading to the upside.

Fundamental analysis: Cotton futures received a boost from another week of strong cotton export sales. Sales of 314,400 RB for 2012-13 were up 32% from the week prior and 69% from the previous four-week average. And sales of 87,500 RB for 2013-14 helped push the combined total past 400,000 RB. This signals that the recent selloff on fear of slower demand has yet to be backed by a slowdown in export sales data.

But another dose of disappointing data from China's manufacturing sector today along with sharp gains in the U.S. dollar index kept such concerns in mind and caused cotton to settle well off its daily highs.

Technical analysis: December cotton futures traded in a very wide range today, but the market still posted an inside day of trade and ended near the midpoint of its recent consolidation trading range. The parameters of this range are this week's low and high of 82.92 cents and 86.48 cents, respectively

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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