Crops Analysis (VIP) -- November 18, 2013

November 18, 2013 08:37 AM
 

Corn

Price action:
Corn futures fell 7 to 10 cents to new 2013 lows with December leading declines. Most contracts closed near their lows for the day

Fundamentals analysis: Corn futures shrugged off mostly positive export news and fell to three-year lows in reaction to EPA's proposal to reduce the corn-for-ethanol mandate for 2014. Today's export inspections report came in at a strong 30.87 million bu., 13.6 million bu. higher than the previous week and above expectations. But news China had rejected a cargo of corn because it contained a GMO variety not approved for import added to bearish attitudes (see "Evening Report" for more).

Technical analysis: December futures penetrated support at $4.15 1/2 and slumped to a new low for 2013. There is psychological support at $4.00 and at the contract low of $3.98 1/4, posted in June 2010. December futures has several layers of heavy resistance resting above the market starting at $4.20 followed by $4.30 and each 10 cents higher.

Hedgers: 25% of 2013-crop production is sold via cash forward contract for harvest delivery.

Cash-only marketers: 25% of expected 2013-crop production is sold via forward contract for harvest delivery.

Soybeans

Price action: Soybean futures spent most of the day in positive territory and nearby contracts ended high range with gains of 6 to 10 cents. Soymeal posted strong gains, while soyoil faced pressure amid spreading activity.

Fundamentals analysis: Soybean futures initially benefited from some corrective short-covering and spreading activity with corn. A weaker U.S. dollar index added to the positive tone. USDA's weekly export inspections update added to the positive tone as inspections of 87.809 million bu. topped lofty expectations and last week's tally. This reminds that exporters see current prices as a value.

But with harvest in the U.S. easing the tight supply situation and South American production expected to be record-large, nearby soybean contracts could struggle to find to find buying interest above $13.00.

Technical analysis: January soybean futures briefly moved below support at Friday's low of $12.78 today, but the contract bounced off this level and settled high-range. The $13.00 level is tough resistance while support is layered from the Oct. 1 low of $12.65 1/2 to the November low of $12.47.

Hedgers: Get to 100% sold in the cash market on 2013-crop production. We'll manage risk on the board the remainder of the marketing year.

Cash-only marketers: Get to 75% sold on 2013-crop production.

 

Wheat

Price action: Wheat futures started the day firmer but gave way to spillover from weakness in the corn market and ended 2 to 4 cents lower in the SRW and HRW markets, with HRS down 1 to 2 cents. Futures ended low-range for the day.

Fundamentals analysis: Early support came on spillover from soybeans and weakness in the U.S. dollar index, but as corn futures sharply extended early losses, wheat futures weakened. Also, traders look for this afternoon's crop condition data to show the winter wheat crop improved again. Traders remain concerned about the competitiveness of U.S. wheat on the global market and note the wider-than-usual spread between nearby corn and nearby wheat contracts, which suggests wheat is a less attractive feed alternative.

However, this morning's weekly export inspections report showed wheat inspections of 18.113 million bu., which came in above traders' expectations. In fact, cumulative inspections are running 43.4% ahead of year-ago, which is well ahead of the pace needed to reach USDA's export forecast.

Technical analysis: December SRW wheat posted a bearish reversal. The low-range close gives bears the near-term technical advantage. Their next downside target is the contract low posted in August of $6.35 1/2.

Hedgers: 75% sold on 2013-crop in the cash market. No 2014-crop sales are advised.

Cash-only marketers: 50% sold on 2013-crop. No 2014-crop sales are advised at this time.

 

Cotton

Price action: Cotton futures closed 45 to 75 points lower, which was a low-range close.

Fundamentals analysis: Futures were pressured by news that Chinese stockpiling has slowed. Last week, China bought 269,450 MT of domestic cotton from its state reserves, less than half the previous week's 555,920 MT. Traders aren't sure why the volume dropped off, but speculate it's to raise prices for reserve sales that may take place this week. U.S. cotton futures were pressured by this news as they suspect Chinese demand for U.S. cotton will soon wane if the country reduces its stockpiles as expected.

Technical analysis: December cotton futures posted a downside day of trade on the daily chart, but respected support 76.27 cents. Followthrough pressure tomorrow would violate this support and make bears' next target the November low of 75.27 cents. That support is followed by the November 2012 low of 74.35 cents.

Hedgers: 50% of expected 2013-crop is sold in the cash market.

Cash-only marketers: 50% sold on 2013-crop production.

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