Crops Analysis (VIP) -- October 15, 2013

October 15, 2013 09:35 AM


Price action: Corn futures rallied into the close to finish mostly around 6 cents higher through the September 2014 contract, with farther-deferred futures up mostly 3 to 5 cents. Funds bought 8,000 contracts (40 million bu.) of corn today.

Fundamental outlook: Futures were supported by short-covering, but gains extended on rumors of Chinese purchases. Confirmation of such purchases are unlikely until the government reopens, as importers are usually close-lipped about making purchases.

Light showers were moving across areas of the Corn Belt today, which slowed harvest progress. But harvest is expected to pick up as drier weather is expected to extend well into next week, say forecasters.

Technical outlook: December corn futures posted an upside day of trade on the daily chart. The high-range close gives bulls momentum heading into overnight trade. But the contract has a lot of work ahead in order to signal a seasonal low has been posted. A close above $4.50 would improve technical momentum, although it would take a return above $4.75 to confirm a low has been struck.

Hedgers: 25% of expected 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: Soybeans settled fractionally to 6 cents lower through the August 2014 contract, with the November contract pacing losses. Far-deferred months posted marginal gains.

Fundamental outlook: Soybean futures saw a split day of trade amid some bull spread unwinding as well as some spreading activity with the corn market. With harvest thought to be around 45% complete, harvest-related hedge pressure remains a weight on the market and bulls will continue to face stiff headwinds, despite signs of improving demand.

Weekly soybean export inspections of 47.381 million bu. for the week ended Oct. 10 topped already high expectations and rose nearly 17 million bu. from the week prior. This compares to average weekly inspections of roughly 9.1 million bu. for the month of September.

Technical outlook: November soybean futures saw an inside day of trade, leaving support at yesterday's low of $12.61 3/4, followed by the July low of $12.25. The contract must move back above $13.00 and the October high of $13.05 3/4 to signal a low may be in the works.

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

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




Price action: SRW wheat futures closed 5 to 6 cents lower today, HRW wheat ended mostly 4 to 5 cents lower and HRS futures finished 3 to 6 cents lower. That was a low-range close for all three flavors.

Fundamental outlook: After actively adding long wheat/short corn positions the past several weeks, traders unwound those spreads today. Fundamental backing for the spread unwinding came from favorable weather in the Plains as rains are boosting soil moisture and winter wheat crop development in the region. A lack of fresh demand news and a firmer dollar also contributed to the corrective selling in the wheat market today.

While winter wheat seeding is behind normal in Ukraine and Russia, some of those seeding efforts have restarted after prolonged delays due to excessive wetness. Therefore, production concerns in the Black Sea region have temporarily eased somewhat. But crop concerns are building in China as the country's top two wheat production provinces are experiencing dryness/drought.

Technical outlook: December SRW wheat futures continue to consolidate following the correction from the September low. The eventual breakout from the short-term consolidation range from $6.72 1/2 to $6.99 3/4 will determine if the contract rolls over to challenge the September and August lows or extends the price recovery.

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

Cash-only marketers: 25% of 2013-crop is sold.




Price action: Cotton futures closed 9 to 27 points higher, which was mid-range in all but some of the far-deferred contracts that closed low-range.

Fundamental outlook: Cotton futures were boosted by mild short-covering for much of the day, though buying interest was limited by strength in the U.S. dollar index. As the government shutdown drags on and with the debt ceiling looming, traders remain hesitant to actively add positions on either side of the market.

With government data absent, traders are turning to private crop reports for guidance on the crop. Early yield reports are relatively strong, which is likely to limit near-term buying interest unless there's bullish demand news.

Technical outlook: Key near-term support for December cotton futures lies at Oct. 9 low at 83.10 cents, the September low at 82.11 cents and the June low at 81.72 cents. To the upside, there isn't much strong resistance until the Oct. 3 high at 87.78 cents and then the June high at 89.56 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.

Cash-only marketers: 50% of expected 2013-crop production is sold via cash forward contract for harvest delivery.


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