Price action: Corn futures favored a firmer tone throughout the day on short-covering following yesterday's losses, but buying interest eroded into the close and futures ended 1 cent higher to 3 cents lower, with nearbys leading gains.
Fundamental analysis: Weakness in the U.S. dollar index also helped to support short-covering in early trade, but given a lack of fresh positive news, buying interest was lackluster and eventually gave way to profit-taking. Further indications of demand erosion were apparent today as Japan bought corn from Ukraine. Also, the China National Grain and Oils Information Center increased its estimate of the country's corn crop to a record 201 MMT, leading to thoughts it will not be an aggressive buyer on the global market this year.
Technical analysis: December corn posted an inside day of trade on the daily chart, respecting support at last week's low of $7.32 1/4. Violation of that support would have bears targeting the September low of $7.05. Resistance stands at last week's high of $7.76.
Hedgers: 100% sold on 2012-crop in the cash market -- 90% for harvest delivery; 10% for March 2013 delivery. Also, Dec. $6.50 put options, which were purchased on 40% of 2012-crop for 31 1/2 cents, are held as a crop insurance hedge.
Cash-only marketers: 75% sold on 2012-crop -- 50% for harvest delivery; 10% for March 2013 delivery; and 15% for May 2013 delivery.
Price action: Soybean futures traded as much as 20-plus cents higher this morning, but this encouraged profit-taking that ultimately resulted in a disappointing finish. Futures ended with gains of just 1 to 4 1/2 cents.
Fundamental analysis: Soybean futures initially benefited from corrective short-covering encouraged by ideas the downside has been overdone and a weaker U.S. dollar index. Adding to the positive tone was USDA's announcement of a 110,150 MT soybean sale to unknown destinations for 2012-13. This added to a list of signs that current prices are seen as a "value" and are therefore not achieving the needed supply rationing. News China National Grain and Oils Information Center trimmed its production estimate by 200,000 MT to 12.8 MMT signals China will remain a major buyer of U.S. beans.
But the paring of gains also signals traders aren't convinced the market has fallen far enough. Signs of strong, sustained end-user buying and a technical bottom are needed to convince traders a short-term low is in place.
Technical analysis: November soybean futures were unable to close above the psychologically significant $15.00 mark, keeping it as near-term resistance. With the low-range close, bears maintain the near-term advantage. Their initial target is yesterday's low of $14.85 3/4, followed by the bottom of the July 5 gap at $14.78.
Hedgers: 100% sold on 2012-crop in the cash market for harvest delivery. The Nov. $14.00 put options purchased for 42 3/8 cents on 25% of 2012-crop should be held as a crop insurance hedge.
Cash-only marketers: 75% sold on 2012-crop production for harvest delivery.
Price action: Wheat futures were unable to hold onto early corrective gains and could only muster a narrowly mixed close at all three exchanges.
Fundamental analysis: Wheat futures were supported by corrective short-covering overnight and through mid-morning amid ideas Monday's losses were overdone and by weakness in the U.S. dollar index. But given a lack of bullish fundamental news, the buying interest faded.
While global wheat supplies are tightening, the U.S. is struggling to garner much export business. The latest news that China purchased at least 295,000 MT of Canadian spring wheat is additional proof U.S. wheat is not competitively priced on the global market.
Technical analysis: After yesterday's potential downside breakout from the extended, sideways range, December Chicago wheat futures posted an inside day of trade today. Key near-term support lies at Monday's low of $8.40 1/4. A close below that level would open downside risk to the $8.16 to $8.15 area.
Hedgers: 75% cash sold on 2012-crop in the cash market.
Cash-only marketers: 75% of 2012-crop production is sold.
Price action: Cotton futures closed 161 to 252 points higher, which was near session highs.
Fundamental analysis: Cotton futures were supported by unconfirmed talk of recent, large Chinese purchases. Traders also covered short positions amid concerns with tight deliverable supplies. Certified (deliverable) cotton stocks dipped to their lowest level since October 1995 at just 7,802 bales. With harvest running behind normal and low quality on some of the early harvested supplies, there are concerns with a short-term supply squeeze. Additional support for cotton futures came from weakness in the U.S. dollar index.
With U.S. and global cotton carryover projected to rise sharply from 2011-12, however, supply concerns are a short-term issue and will likely limit sustained buying interest.
Technical analysis: December cotton futures have strung together three days of gains, suggesting a short-term low is in place. Tough resistance stands around the 77.00 cent area.
Hedgers: 50% priced on expected 2012-crop production via cash forward contract for harvest delivery.
Cash-only marketers: 50% priced on expected 2012-crop production via forward contract for harvest delivery.