Crops Analysis (VIP) -- October 1, 2013

October 1, 2013 09:31 AM


Price action: Corn futures closed 1 to 2 3/4 cents lower through the July 2015 contract, which was mid-range for the day.

Fundamental analysis: Corn futures were pressured by followthrough selling today as traders continued to react to USDA's higher-than-expected Sept. 1 stocks figure on Monday. Heavy spillover pressure from the soybean market and seasonal pressure also weighed on corn today.

Funds were still net sellers of 3,000 contracts (15 million bu.) of corn today, but the fund selling wasn't nearly as pronounced as it was in the soybean market. Helping limit selling pressure on corn today was the fact funds are already heavily loaded up on the short side of the corn market. Still, without a bullish catalyst, there's no incentive for funds to cover short positions.

Technical analysis: After the drop below the August low yesterday, support for December corn futures now extends from today's low of $4.35 1/4 to $4.28. Below that, psychological support is at $4.25 and $4.00, and then contract-low support lies at $3.98 1/4. A quick recovery above the August low at $4.45 3/4 would signal the drop below that level was a bear trap. But even then, the upside would be limited to corrective buying.

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: Soybean futures gapped lower on the open and most contracts posted double-digit losses throughout the day. November through August futures ended 10 to 15 cents lower for a low-range close.

Fundamental analysis: Monday's Quarterly Grain Stocks Report that showed Sept. 1 stocks of 141 million bu., 15 million bu. above the average pre-report trade guess, continues to weigh on the bean market. In addition, USDA reports harvest was 11% complete as of Sunday and warm, dry Corn Belt conditions to start the week are expected to help the pace pick up this week. The condition of the crop also improved over the past week, adding selling incentive.

Technical selling pressure mounted and funds sold 4,000 bean contracts (20 million bu.) today.

The market brushed off news of a daily sale to China for 2013-14 delivery today as strong demand is seen as already factored into prices.

Technical analysis: November soybean futures traded through support at yesterday's low, which roughly aligns with the March highs, turning the $12.81 area into resistance. Bears' next target is the November 2012 low of $12.55 1/4, followed by the August low of $11.62 1/2.

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 futures traded on both sides of unchanged then surged in the final minutes to finish higher in the front three contracts. December through May 2014 contracts finished 2 1/4 to 2 3/4 cents higher. July and September 2014 SRW futures closed fractionally weaker. HRW futures finished fractionally to 5 1/2 cents higher. HRS closed up 2 to 8 cents with December leading gains.

Fundamental analysis: The general selloff in commodities as traders moved away from risk due to the partial government shutdown pressured wheat futures through much of the day, with the exception of HRS wheat. But recent demand improvements coupled with the weaker U.S. dollar index lifted futures at the end of pit trading.

Futures were also supported by news the Ukraine Ag Minister indicated heavy rains have slowed winter grain sowing in the Black Sea region and may reduce the area seeded for the 2014 wheat crop by 20%. That has prompted that country to increase its ending stocks due to the anticipated smaller 2014 crop. That pulls some wheat off the market that otherwise would have moved into the global wheat trade. Meanwhile, the weakness in the U.S. dollar today continues to make U.S. wheat more competitive in global trade.

Technical analysis: December SRW futures rebounded after testing support under Monday's low. It finished above $6.80 for the second time in three trading days and since July 16. That leaves futures sitting on top of a former resistance area. Futures need to return above the $7.00 level to confirm a bottom.

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

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




Price action: October cotton futures finished unchanged today, while deferred contracts were 26 to 61 points lower. Cotton futures finished well off session lows.

Fundamental analysis: Cotton futures faced corrective selling today. With government offices on shutdown, traders opted to lighten their long exposure and take some profits following recent gains. But the late move off session lows signals traders aren't willing to press the market sharply lower at this stage.

There's some concern with the cotton crop as condition ratings have been in a general slide for the past seven weeks. As a result, traders will continue to watch late-season weather closely for potential impacts to crop size and quality.

Technical analysis: December cotton futures found intra-day buying interest at last Friday's low of 85.48 cents, marking that level as key near-term support. A drop below it would signal a short-term top is in place and could point the contract toward a test of key support at 81.72 cents. Monday's high at 87.50 cents is key near-term resistance. A close above that level would point the contract toward a test of resistance above 89.20 cents and 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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