Crops Analysis (VIP) -- May 30, 2013

May 30, 2013 10:08 AM
 

Corn

Price action: Corn futures faced pressure for most of the session with the front-month leading losses. The July contract ended 10 3/4 cents lower, while the rest of the market settled 2 to 4 3/4 cents lower amid bull-spread unwinding.

Fundamental analysis: Traders took advantage of recent price strength today by booking some profits as they sort out the impact of recent and expected heavy rains in the heart of the Corn Belt. While rains have helped ease or remove drought from the region, substantial acreage remains to be planted and saturated soils signal farmers will not be able to move forward any time soon. Thus, expectations are building that acres will be switched to other crops or claimed as prevent plant. Some replanting will also be necessary. As a result, expectations for a record-large crop are being reined in. This limited pressure on new-crop futures to profit-taking and helped the market end well off its lows.

Technical analysis: December corn futures saw an inside day of trade, leaving near-term resistance at yesterday's high of $5.68, closely followed by the April spike high of $5.70. Support stands at the April 15 high of $5.51.

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 opened slightly weaker, traded lower amid light profit-taking and then firmed in late trading to close mixed and near the highs for the day.

Fundamental analysis: Traders are looking at the impact of the heavy rains that have swamped the western Corn Belt coupled with forecasts for more rainfall today and tomorrow. The rains point to very little planting progress being made this week and continued slow emergence. But the delays also could mean a switch of some corn acres to soybeans.

The trade found some support from news China bought 120,000 MT of U.S. soybeans for 2013-14 delivery.

Technical analysis: November soybean futures failed to mark a higher high after five days of doing such. But traders failed to find selling under yesterday's low and moved higher into the close, finishing near the day's high. Resistance starts at yesterday's high at $12.95 and is layered to the late-February high of $13.07. Today's action suggests the $12.80 area, which twice stopped rallies in March, is now providing some support with the $12.50 area the next layer of daily chart support.

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: 90% sold on 2012-crop. 10% of expected 2013-crop production is sold via forward contract for harvest delivery.

 

Wheat

Price action: Wheat futures moved well off their lows to end high-range with losses of 3 1/4 to 4 cents in Chicago and 1/4 to 1 3/4 cents lower in Kansas City. Minneapolis wheat poked into positive territory late today and ended steady to 2 cents higher, with the exception of the July contract, which closed marginally lower.

Fundamental analysis: Wheat futures came under pressure today amid fallout after the finding of unapproved GMO wheat in Oregon. Japan canceled an offer to buy U.S. western white wheat in its weekly tender and said it will halt such wheat buys until the U.S. provides a testing kit for shipments. The European Union also said it will test U.S. wheat shipments for GMO content. But the market moved off its lows into the close as GMO wheat poses no food risks.

Plus, the National Drought Monitor reminded of ongoing severe drought in winter wheat country. Minneapolis wheat, on the other hand, benefited from the forecast for more heavy rains for the Northern Plains, which will further delay spring wheat planting.

Technical analysis: July Chicago wheat futures have been in a downtrend throughout the month of May. To break this trend, the contract must move above the downtrending resistance drawn off the daily highs, which intersects around $7.03 tomorrow. To confirm a reversal is in the works, the market needs closes above the May high of $7.35. Support remains at $6.74.

Hedgers: 100% sold on 2012-crop in the cash market. No 2013-crop sales advised yet.

Cash-only marketers: 100% sold on 2012-crop. No 2013-crop sales advised yet.

 

Cotton

Price action: Cotton futures saw two-sided trade today, but the market settled in the lower half of its daily trading range with losses of 35 to 83 points. Deferred contracts led losses.

Fundamental analysis: Cotton futures initially benefited from concerns about the slow pace of planting and ideas tomorrow's weekly export sales report could show improved demand after the recent price break. But this optimism faded as the session progressed as some expect mills may wait for new-crop supplies to come online before actively booking needs. Recent strength in the U.S. dollar index and last week's lighter export sales tally add to such ideas.

Also, while the overall pace of cotton planting lags the norm, substantial progress was made in the region last week. The market also saw some technical selling pressure as a number of contracts moved to three- to four-month lows today.

Technical analysis: July cotton futures posted a bearish reversal today and hit their lowest level since January. Followthrough selling tomorrow would suggest the contract is headed for a test of the 2013 low of 75.58 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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