Crops Analysis (VIP) -- November 19, 2013

November 19, 2013 09:17 AM


Price action:
Corn futures finished 3 to 5 3/4 cents higher through the September 2015 contract today. This was a high-range close.

Fundamentals analysis: Corn futures were supported by corrective short-covering and bargain buying today amid ideas the downside has been overdone. Funds actively contributed to the price strength, buying an estimated 8,000 contracts (40 million bu.) of corn today. To build on today's corrective gains, funds likely need to remain on the buy side.

The sharp drop in corn prices is encouraging improved demand, though that hasn't provided price strength to this point. South Korea tendered to buy up to 210,000 MT of optional origin corn, with results expected overnight. However, traders are still keeping a close watch on China after the country's inspectors rejected a cargo of U.S. corn on Monday due to unapproved GMO content.

Technical analysis: December corn futures posted a new for-the-move low today prior to finishing high-range. The previous correction high at $4.38 is initial resistance, followed by old support at $4.45 3/4. The contract must clear the latter level to give the first real clue that a seasonal low in in the works.

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.




Price action: Soybean futures closed 5 3/4 to 11 1/4 cents lower through the July 2014 contract, with the lead-month January contract leading the decline. Farther-deferred contracts ended 1 to 3 cents lower.

Fundamentals analysis: Soybean traders brushed aside a daily export sale of 240,000 MT of soybeans to China for 2014-15. Instead, unconfirmed talk of Chinese cancelations weighed on the market. Technical-based selling also weighed on the market today, as January soybean futures dropped through the 200-day moving average, which triggered a wave of fund selling. Funds were estimated sellers of 4,000 contracts (20 million bu.) of soybeans on the day.

A favorable start to the South American growing season also weighed on the soybean market today as traders shift more of their attention to growing conditions in Brazil and Argentina. For now, traders are choosing to ignore the helicoverpa (corn earworm) infestation in the top two production states of Mato Grosso and Parana in central Brazil as soybean plantings are up and record production is forecast.

Technical analysis: January soybean futures posted a bearish reversal, but finished well off session lows. A drop through today's low at $12.68 1/4 would point the contract toward a test of the November low at $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.




Price action: Wheat futures enjoyed gains for much of the session and the market strengthened ahead of the close to end high-range with gains of 6 to 8 cents in the SRW market, while HRW wheat was 4 to 5 cents higher and HRS futures finished 1 to 2 cents higher.

Fundamentals analysis: Wheat futures enjoyed corrective short-covering today amid signs the downside has been overdone. Strength in the corn market and a weaker U.S. dollar index added to the positive tone. The same can be said for a recent uptick in overnight sales announcements that hints U.S. wheat may again be competitive. Thursday's export sales report will provide an update on that front.

The market initially responded negatively to news Egypt bought Russian wheat today, but this gave way to more short-covering into the close. Funds bought a net 3,000 wheat contracts (15 million bu.) today.

Technical analysis: December Chicago wheat futures closed just above the psychological $6.50 mark, but the contract must move above the summer triple-top area of $6.79 to signal an extended upswing is in the works. The market continues to consolidate above support at yesterday's low of $6.42.

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.




Price action: Cotton futures faced pressure again today as the market continued in its downtrend of recent weeks. Futures closed 6 to 49 points lower on the day, which was a low-range close.

Fundamentals analysis: The technical posture of the cotton market fully favors market bears. Plus, the market continues to anticipate a slowdown in demand from China if the country releases its state reserve supplies onto the market. However, recent export sales reports have reflected strengthening rather than diminishing demand for the U.S. fiber.

Meanwhile, the pace of U.S. cotton harvest continues to lag the norm at 68% complete versus 75% for the five-year average pace. But this is not a major source of concern for traders.

Technical analysis: December cotton futures appear headed for a test of the November low at 75.27 cents. Bulls would target last week's high of 78.50 cents on a rebound, which marks last week's high.

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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