Price action: Corn futures were stronger overnight and ahead of the start of open-outcry trade, but then posted choppy trade the remainder of the day and settled narrowly mixed. Sharp losses in the soybean pit limited buying in corn futures.
Fundamental analysis: Early strength came on followthrough from Friday's limit-higher performance, as well as positive outside markets. But as soybean futures turned sharply lower, corn had a difficult time generating buying interest. The inability of the corn market to build on Friday's gains signals the tighter-than-expected stocks situation -- as revealed by the Grain Stocks Report -- is factored into prices.
Traders also shrugged off news that Mexico purchased 100,000 metric tons (MT) of optional-origin corn, with 33,333 MT for 2012-13 and 66,667 MT for 2013-14. News that Brazil's corn exports in September set a record for the second straight month are helping to offset the tight U.S. stocks situation.
Technical analysis: December corn spent the day pivoting around Friday's high of $7.56 1/4. The contract saw trade above the 25% retracement level of the decline from the June low to the August high, but closed beneath it. Closes above this level are needed to signal a near-term low has been posted.
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 settled just off their daily lows with losses of 27 1/2 to 40 3/4 cents in the November through July contracts, with nearby contracts leading to the downside. Far-deferred months saw lighter losses. Soymeal and soyoil faced heavy pressure, as well.
Fundamental analysis: On Friday, soybean futures benefited from a spillover of bullish enthusiasm from the corn market. Today, USDA's higher-than-expected Sept. 1 stocks figure for soybeans garnered more attention and encouraged some profit-taking. This accelerated as sell stops were triggered and funds actively lightened long positions. They sold an estimated 10,000 contracts (50 million bu.) today.
Harvest-related hedge pressure also remains a source of pressure on soybeans. Traders expect USDA to peg harvest at 38% complete this afternoon.
Traders ignored a surge in weekly export inspections to 41.699 million bu., which topped expectations by a wide margin and signals more rationing is needed.
Technical analysis: November soybean futures tested and respected support at Thursday's low of $15.57 1/2. A breakout below this level would open downside risk to the 50% retracement level of the June to August rally around $15.17. Resistance stands at the Sept. 20 high of $16.86.
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 closed 7 to 18 1/4 cents lower in Chicago and mostly 14 to 24 cents lower in Kansas City and Minneapolis. Futures at all three exchanges finished in the lower portion of today's trading range, but off session lows.
Fundamental analysis: Wheat futures faced active profit-taking pressure today following last Friday's strong gains. Additional pressure came from improved soil moisture conditions for the planting and emergence of the winter wheat crop following recent rains through the Central and Southern Plains and the lower Midwest.
The fact wheat traders ignored supportive outside markets is concerning and signals the market may struggle to find buyers near-term without a shot of fresh bullish news. Any support would likely have to come from export demand. While global supplies are tightening, U.S. wheat is still priced above supplies from other exporters, suggesting a big purchase of U.S. wheat is not anticipated near-term.
Technical analysis: December Chicago wheat futures posted an inside day down following Friday's big move up. Key near-term support lies at last Thursday's low of $8.49 1/4. A drop below that level would open downside risk to $8.15. Resistance starts at last Friday's high of $9.07 is and layered heavily to the July high at $9.53 1/4.
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 settled 15 to 56 points higher following a choppy day of trade. Most contracts ended near session highs.
Fundamental analysis: Supportive outside markets triggered corrective buying in the cotton market today. But given the lack of bullish fundamentals, buying interest was limited to mild short-covering. That suggests that if outside market support wanes, cotton futures are vulnerable to fresh near-term price pressure.
Given the recent break in futures, traders will want to see proof that prices have fallen far enough to trigger fresh export demand. Until that happens, they will remain hesitant to actively pump money into the long side of the market.
Technical analysis: Old support at 71.59 cents and 72.75 cents is near-term resistance for December cotton. A close above the latter level is needed to signal a short-term low is in place. To the downside, support extends from July low at 69.40 cents to the contract low at 64.61 cents.
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.