Crops Analysis (VIP) -- May 8, 2013

May 8, 2013 09:54 AM
 

Corn

Price action: May corn futures settled 1 1/2 cents lower while the rest of the market posted losses around 7 cents.

Fundamental analysis: Corn futures were pressured today by the forecast for better (though certainly not ideal) corn planting weather next week. Ahead of that, however, rains are expected to fall in the upper Midwest today through the weekend and the front will be followed by another blast of cold air. But the market continues to view the benefits of recent precip as outweighing any planting delays.

Traders are also beginning to ready for Friday's balance sheet update from USDA. This will give the market USDA's first projection for 2013-14 carryover. The wide range of pre-report guesses reflects uncertainty about the figure. On average, analysts expect USDA to peg new-crop carryover at 1.973 billion bushels. They expect USDA to trim old-crop carryover slightly.

Technical analysis: Lower remains the path of least resistance for December corn futures as the market remains in its long-term downtrend. The next level of key support is the April low of $5.17. The market must close the Monday's downside gap at $5.52 to open upside potential.

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 soybean futures posted gains of 8 1/2 to 15 1/2 cents, with August beans steady. New-crop beans closed marginally lower amid bull spreading.

Fundamental analysis: Old-crop soybeans ignored news that South American soybeans would be loading ships later this month with soybeans for the U.S. to offset tight supplies (see "Evening Report" for more). Traders say they aren't surprised by the news and it just reinforces the tight supply situation.

Pressure on new-crop futures was limited by spreading with corn as well as USDA's announcement of a 115,000-MT soybean sale to China for 2013-14. Despite concerns China's demand for soybeans will be lighter than previously expected for the near-term, the country's overall demand for new-crop soybeans remains strong.

Technical analysis: July soybean futures saw trade above $14.00 but posted a mid-range close and finished just above $13.90. The contract needs closes above last week's high of $14.23 3/4 to generate fresh technical buying. November beans also posted a mid-range close and held within the boundaries of this week's trading range.

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 ended 2 to 3 cents lower in Chicago, mostly 1 to 2 cents higher in Kansas City and mostly 2 to 6 cents higher in Minneapolis. Chicago wheat closed near the middle of today's range, while the other two exchanges ended high-range.

Fundamental analysis: Spillover pressure from corn weighed on Chicago wheat futures today. With corn under pressure, the market void of fresh, supportive news and traders' beginning preparations for Friday's USDA reports, buying interest was limited.

Kansas City and Minneapolis wheat futures fought off earlier price pressure to close mildly higher. While there are concerns with HRW crop conditions and the slow spring wheat planting pace, these aren't factors that will likely providing lasting support -- at least based on recent price action. That suggests the upside is limited to short-covering.

Technical analysis: Chicago July wheat futures remain pinned within the range from the April low at $6.64 3/4 to the March high at $7.40 1/2. The contract must break out of this relatively broad brand to trigger the next tending move.

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 settled 19 to 122 points higher with 2013-crop contracts leading price gains.

Fundamental analysis: Traders covered short positions in the cotton market today as they prepare for Friday's first official look at the 2013-14 balance sheet. USDA is expected to show a tightening supply situation in the new-crop marketing year.

Additional support for new-crop contracts came from the delayed planting pace for cotton and ongoing drought through key production areas of Texas. As a result of these factors, some traders feel this year's crop may come in smaller than USDA's initial projection on Friday.

Technical analysis: December cotton futures pushed through the downtrend from the March high today. This is the first show of strength since this technical weakness began. Followthrough buying Thursday would suggest a possible move back to the March high at 89.20 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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