Crops Analysis (VIP) -- October 21, 2013

October 21, 2013 09:50 AM


Price action: Corn futures were choppy today but buying picked up ahead of noon CT and futures firmed into the close to end with gains of 2 1/2 to 3 cents.

Fundamental outlook: As soybean futures extended gains, traders in the corn pit extended their long coverage. However, buying was limited in the corn pit as traders still fear the bulk of hedge-related pressure is still ahead given the fact corn harvest got off to a slower-than-usual start this year. Gulf corn basis slipped 2 cents for immediate delivery today to reflect the flow of new-crop supplies to the market.

Also helping to support prices was this morning's weekly export inspections data that showed nearly 32.3 million bu. of corn left the U.S. the week ended Oct. 17, which was stronger than traders expected.

Technical outlook: December corn futures posted a high-range close after dipping below support at Friday's low to remain within the boundaries of this month's consolidation range. Support at the bottom of the range lies at $4.32, with resistance at the October high of $4.49 3/4. Closes above the late September high of $4.62 are needed to signal the market is working on a low.

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 posted a high-range close to finish 6 to 12 cents higher, with November leading gains.

Fundamental outlook: Two export announcements from USDA helped to lift soybean futures this morning. First was the announcement of a 235,000-MT soybean sale to unknown destinations for 2013-14 delivery. Second was the weekly exports inspections figure of 59.325 million bu., which was well above expectations. Meanwhile, traders believe this year's harvest is nearly two-thirds completed, which means hedge-related selling pressure will decrease going forward.

Technical outlook: November soybean futures edged above psychological resistance at $13.00 and closed just above that level. This marks the third day futures have closed above the fall downtrend line and the 9-day moving average. However, futures need a close above the October high of $13.05 3/4 to confirm the double bottom. It takes a close above $13.15 to break the 50-day moving average. November futures have support at $12.60.

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: Wheat futures enjoyed gains overnight, but then profit-taking took hold and the market dipped double-digit lower before moving off these levels into the close. SRW wheat ended 2 3/4 to 6 cents lower, while HRW finished 3 1/2 to 7 1/2 cents lower. HRS wheat settled 4 1/2 to 8 1/2 cents lower.

Fundamental outlook: Wheat futures enjoyed gains overnight, but the market softened after a failed test of summer highs spurred a round of profit-taking. Selling pressure mounted in the market after the release of data showing export inspections of 20.582 million bu. for the week ended Oct. 17 fell short of expectations and week ago, raising concerns that U.S. wheat prices are no longer competitive. However, the dollar has since softened.

Beneficial rains on the U.S. Southern Plains over the weekend and thoughts the downside has been overdone in the winter wheat market added to the negative tone.

Technical outlook: December SRW wheat futures traded through resistance at the July high of $7.05 3/4 and up to $7.11 1/4, before reversing course and settling 1/4 cent below the psychological $7.00 mark. These three levels are now tightly layered resistance. Last week's low of $6.78 1/4, which roughly coincides with the August high, is support.

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.



Price action: Cotton futures saw two-sided trade today and little changed for the day, with the December through May contracts 2 to 8 points lower and deferred months mostly 3 to 5 points higher.

Fundamental outlook: The cotton market continues to chop sideways with the December contract consolidating between 82.50 cents and 84.50 cents and deferred months seeing similar action as traders try to determine if more downside risk is ahead. Cotton export sales released Friday afternoon reflected tepid demand at the end of September, but this is largely considered factored into prices. Official customs data indicates China's cotton imports from January through September stand at 3.2 MMT, down 19.9% for the year.

Light pressure on nearbys stemmed from strength in the U.S. dollar index today as well as news the Cotton Association of India raised its production forecast by 7% to 38.1 million bales.

Technical outlook: December cotton futures continue to chop around 83.00 cents, with support layered from last week's low of 82.57 cents to the September low of 82.11 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. The Oct. 8 high of 84.75 cents marks resistance.

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

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