Crops Analysis (VIP) -- November 21, 2013

November 21, 2013 09:12 AM


Price action:
Corn futures moved higher today, posting gains of 4 to 6 cents in most contracts and finishing near the highs of the day.

Fundamentals analysis: Weekly export corn sales came in above already high expectations, which prompted a round of short-covering. The report showed export sales totaling 945,100 MT for 2013-14 and sales of 37,600 MT for 2014-15 for the week ended Nov. 14. Adding to today's rise in futures was modest weakness in the U.S. dollar index.

Funds were reported net buyers of 7,000 contracts (35 million bu.) of corn today. While funds have recently covered some of their net short position, it remains big. Improving demand gives them a fundamental reason to cover more shorts, but the macro-economic environment is not friendly for commodity investment and the long-term fundamental picture for corn is not bullish.

Technical analysis: The technical picture remains negative for December futures despite today's small bounce. Moving-Average and other trend-following technical indicators remain bearish. It takes a close above the November high of $4.38 to hint the fall low may be in. Tuesday's low of $4.10 3/4 is support, with $4.00 the next level of support if penetrated.

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 enjoyed short-covering overnight and the market continued to firm through the day. Futures ended just off session highs with gains of 10 1/2 to 17 3/4 cents through the August contract with farther-deferred months roughly 4 to 8 cents higher.

Fundamentals analysis: Weekly export soybean sales of more than 1.376 MMT gave soybean futures a boost as the tally came in well above expectations. China accounted for 84% of that business. Exports of roughly 2.489 MMT solidified ideas about strong demand. This propelled soybean futures and early gains triggered buy stops. However, the market still has a quite a ways to go to erase last Friday's technical chart damage.

Strong gains in soyoil, strength in the corn market and weakness in the U.S. dollar index also made it easier for soybeans to rally today. Funds were net buyers of an estimated 7,000 contracts (35 million bu.) of soybeans today.

Technical analysis: January soybean futures are back near the top of this week's consolidation range. The contract must first climb above psychological resistance at $13.00 and then the October high of $13.12 3/4 to signal an extended upside move is underway. The $12.50 area marks tough support.

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 favored the upside for much of the day, but the market softened late in the session and futures ended mixed in the SRW market, fractionally to 4 cents lower in the HRW and HRS wheat markets.

Fundamentals analysis: Wheat futures received an early lift from a better-than-expected weekly export sales tally, as well as spillover support from the corn market. In addition, recent export activity on a daily basis has signaled U.S. wheat prices are again competitive.

But with the winter wheat crop in the best condition preceding dormancy it has been in a number of years and favorable precip in the forecast, these gains eventually gave way to profit-taking. In light of favorable U.S. crop conditions and ample global supplies, the wheat market will continue to struggle to find sustained buying interest.

Technical analysis: December SRW wheat futures continue to consolidate around $6.50. The contract must move above the July/August triple-top around $6.79 3/4 to signal it is working on a low. Support is layered from this week's low of $6.42 to the contract low 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.




Price action: December cotton futures closed 84 points lower today while deferred contracts ended 21 to 36 points higher.

Fundamentals analysis: Weekly export cotton sales were strong at 305,100 running bales for the week ended Nov. 14. But this failed to provide much price support as China accounted for only 46,000 bales of the business, which was down sharply from recent weeks. China has yet to announce it will release massive state-owned reserves onto the domestic market, but this is anticipated to eventually happen and has traders concerned about Chinese demand.

Aside from the weekly export sales data, fresh news was limited today, which kept price action relatively quiet. Traders are waiting on fresh market-moving news.

Technical analysis: March cotton futures are trying to stabilize after the recent price drop. A bounce from current price levels would suggest a short-term low is in place. But if the recent lows are violated, it would point the contract the next leg lower.

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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