Crops Analysis (VIP) -- May 7, 2013

May 7, 2013 09:44 AM
 

Corn

Price action: May corn futures settled 2 1/4 cents lower, while the other contracts were 1 to 3 1/2 cents higher. July corn finished mid-range, while new-crop futures closed in the upper end of today's range, though off session highs.

Fundamental analysis: The delayed planting and emergence pace provided light support at times today, but buying interest was limited by forecasts calling for improved weather conditions after the next rain event passes later this week. The lack of buying interest today signals traders feel the bulk of intended corn acres will get seeded, especially through the central Corn Belt and that recent heavy precip will be long-term beneficial for the crop.

Tight old-crop supplies and strong basis remain an underlying source of support for July corn futures. But it's still hard to find sustained buying interest if there's no fresh bullish news.

Technical analysis: Key near-term support for December corn futures lies at the April low of $5.17. Below that is the June 2012 low at $5.11. To the upside, Monday's gap from $5.42 3/4 to $5.52 is initial resistance, with tougher resistance at the April high of $5.70.

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 closed higher with old-crop months posting the strongest gains. The May contract posted the most gain, 19 cents, while the July contract was 13 cents higher. New-crop contracts were generally around 7 cents higher.

Fundamental analysis: Tuesday "correction day" dominated action as traders covered short positions following Monday's slide. Traders also balanced the potential halt to corn planting later this week due to forecasts for precipitation starting Wednesday evening and lingering into Friday versus the National Weather Service's 6-to-10-day planting-friendly forecast calling for warmer temperatures and lighter precipitation next week. Generally, traders aren't expecting a big shift in acres from corn to soybeans.

Tight old-crop supplies continue to support prices. Meanwhile, the market is already starting to look ahead to USDA's release of the Supply & Demand projections for both the 2012-13 and 2013-14 marketing years Friday. This will be USDA's first official look at the new-crop balance sheet.

Technical analysis: The July contract is in a sideways pattern with the April low of $13.36 1/2 providing support and the April 30 high at $14.23 3/4 serving as resistance. The new-crop November contract is trading sideways bracketed by the April low at $11.86 1/2 and the April 30 high of $12.40 1/4. However, the dominant feature remains the downtrend that's governed price action since it was established in early February. That line provides resistance at about $12.28 1/2 tomorrow. That resistance declines at the rate of about 2 cents each day.

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 ended near session highs with gains of 6 to 8 cents, while Kansas City wheat finished off session highs with gains of mostly 1 to 3 cents. Minneapolis futures closed mostly 2 to 6 cents higher.

Fundamental analysis: Wheat futures were choppy today, but strengthened into the close on late help from the corn market. Additional support came from concerns about the HRW wheat crop, as yesterday's condition ratings reflected further deterioration. But rains in the near-term forecast for areas of the Central and Southern Plains limited buying and contributed to periods of price pressure. Minneapolis wheat futures were supported by concerns about the late start to spring wheat planting, as just 23% of the crop is in the ground compared to the five-year average of 50%.

But wheat traders have proven time and again they need constant demand news in order to remain as buyers. While demand hasn't been poor, there is plenty of global competition and that limits upside potential -- at least for now.

Technical analysis: July Chicago wheat futures dipped below the psychological $7.00 level, but returned above this mark to post a high-range close. To signal a near-term low has been posted, the contract needs to push above last week's high of $7.36 3/4 and the April high of $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 ended 70 points higher in the front-month and narrowly mixed in deferred contracts, which was good for a high-range close.

Fundamental analysis: Cotton futures faced some light profit-taking today on news USDA's Foreign Ag Services now expects India, the world's second largest cotton producer, to produce 26.5 million bales of cotton for 2012-13, which is up 3.9% from its previous estimate.

But the market also had USDA's crop progress data to digest today, which encouraged some light buying interest as well. Plantings are just 17% complete, which is well behind 27% complete for the five-year average and 35% complete last year. Spillover from the grain and soy markets today and weakness in the U.S. dollar index were also supportive.

Technical analysis: July cotton futures tested but respected resistance at the top of the market's recent consolidation area at 87.62 cents. A move through this level would signal a test of the 2013 high of 94.20 cents is possible. Support stands at the April low of 82.84 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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