Crops Analysis (VIP) -- October 17, 2013

October 17, 2013 09:55 AM
 

Corn

Price action: Corn futures didn't stray too far from unchanged and ended steady to 1/4 cent higher, which was low-range for the day.

Fundamental outlook: Corn traders shrugged off sharp gains in nearby soybean futures, sharp weakness in the U.S. dollar index and reports that corn exports so far this month have been stronger than previously indicated. The fact that futures could only find light support from these factors suggests it's going to take time to shift traders' attitudes toward the market from the current bearish stance. Instead, traders focused on expectations that harvest-related hedge pressure will intensify in the near-term.

There is also disappointment that USDA has canceled its October Crop Production Report, which means traders will have to wait until Nov. 8 for USDA's next report on yield and acreage (see "Evening Report" for more).

Technical outlook: December corn futures briefly traded above yesterday's high to post a weekly high of $4.46 1/2. But the contract posted a low-range close and has a lot of work ahead to signal a low has been posted.

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.

 

Soybeans

Price action: Soybeans futures gained strength during the day's session and closed near the day's highs. Futures finished 6 1/4 to 16 3/4 cents higher paced by the lead November contract.

Fundamental outlook: The sharp selloff in the U.S. dollar index lifted futures from the opening as the weakness in the currency makes U.S. soybeans more attractive to buyers. Futures gained additional strength from a private Reuters survey which shows expectations that soybean exports have totaled nearly 3 MMT during the three weeks ending Oct. 10 -- above levels seen a year earlier. Official government data has not yet been released.

Firming basis levels along with expectations harvest has reached at least 50% complete contributed to ideas hedge-related pressure would soon ease. Additionally, soybeans saw spillover strength from strong gains in soybean meal futures driven by reports of strong export demand.

Technical outlook: November soybean futures posted a strong upside day of trade on the daily chart. The high-range close gives bulls momentum heading into the overnight session. Closes above the psychological $13.00 for the week would be positive for bulls. Today's surge saw futures jumping through the September-October downtrend line and the nine-day moving average.

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.

 

Wheat

Price action: All wheat flavors spent most of the day session in positive territory and settled 2 to 5 cents higher. SRW and HRW wheat finished mid- to high-range, while HRS wheat saw a low-range close.

Fundamental outlook: Wheat futures benefited from spillover support from the soybean market and sharp losses in the U.S. dollar index today. The greenback erased virtually all of the gains this month after lawmakers reached an 11th-hour agreement regarding the debt ceiling and government funding battle to kick the can down the road on these fiscal issues. Traders are hopeful this will result in more export business coming to the U.S. Dryness and the frost concerns in Argentina and unfavorable weather for seeding in Ukraine add to such ideas.

But a number of contracts pulled back into the close as news regarding export demand during the government closure was not immediately forthcoming. See "Evening Report" for more.

Technical outlook: December SRW wheat futures saw a relatively quiet day of trade and a mid-range close. Tough resistance stands at the $7.00 mark, while support is at the October low of $6.72 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: Several cotton contracts posted bullish reversals for the day and the market ended near session highs with gains of 55 to 75 points. Nearbys led gains.

Fundamental outlook: The cotton market recently gave some technical signals it may be consolidating before moving the next leg lower. Cotton futures appeared headed to do just that early in today's session as futures broke through near-term layers of support, but this was met with strong bargain buying that propelled futures into the close. Key will be if traders return as buyers again tomorrow or if this proves to be a technical head fake.

Steep losses in the U.S. dollar index and spillover from the grain and especially the soybean market added to the positive tone.

Technical outlook: December cotton futures narrowly missed posting a bullish reversal for the day as the contract traded through support at yesterday's low but then found strong bargain buying just above 82.50 cents, marking the level as near-term support. Bulls' next target is the 38% retracement of the September to October rally around 84.28 cents, which coincides with the top of the market's recent consolidated trading range.

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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