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Crops Analysis (VIP) -- October 22, 2012

14:36PM Oct 22, 2012


Price action: Corn futures traded in a narrowly mixed range today but market bears wrestled control from the bulls ahead of the close. Futures ended fractionally to 1 3/4 cents lower.

Fundamental analysis: Corn futures chopped sideways today as traders are uncertain whether to place more emphasis on tight supplies or lackluster demand. With harvest winding down and farmer selling slowing, cash corn basis is historically high. Plus, soggy conditions in Argentina continue to delay corn planting and up the odds acres will be switched to beans.

But on the other side of the balance sheet, end-users remain reluctant to pay lofty prices for U.S corn and have sought out cheaper alternatives. Emphasizing this, today's weekly corn export inspections tally of 9.605 million bu. fell well short of expectations and last week's figure.

Technical analysis: December corn futures saw an inside day of trade and strayed little from unchanged throughout the session. Near-term support remains at the October low of $7.32 1/4, followed by the September low of $7.05. The October high of $7.76 is resistance.

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 closed roughly 8 to 12 cents higher in the November through July contracts, which was mostly mid-range. Far-deferred contracts closed mixed.

Fundamental analysis: Soybean futures were supported by short-covering today as traders continue to transition from the "better-than-expected" yield results to demand. With harvest quickly winding down and limited farmer selling, basis is strengthening, triggering value buying interest in soybean futures.

Additional support came from a very strong weekly export inspections figure of 61.422 million bu., which easily topped expectations. China was the primary destination for shipments, signaling the country is not only actively buying U.S. soybeans, but also taking shipment.

Technical analysis: November soybean futures must push above the Oct. 9 high at $15.74 to trigger chart-based buying. The Oct. 15 low at $14.85 3/4 is key near-term support.

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 ended mostly 5 to 8 cents higher across the board at all three exchanges, which was good for a mid- to high-range close.

Fundamental analysis: Wheat was supported by spillover from the soybean market, as well as tightening supplies in the Black Sea region. As reported last week, starting Nov. 15, Ukraine will stop exporting wheat and traders suspect Russia's exportable supplies will soon dry up as well. On top of that, the newly planted winter wheat crop in the region needs moisture for establishment.

While the tightening global supply situation is supportive, traders want to see another strong weekly export sales report before they are convinced demand for U.S. wheat has improved.

Technical analysis: December Chicago wheat futures posted an inside day of trade on the daily chart and finished mid-range. Futures need to climb above the Oct. 11 high of $8.94 to signal a near-term low is in the works and to reopen upside potential to the September high of $9.31. Support lies at last week's low of $8.40 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 saw a choppy day of trade and ended 5 to 20 points higher in all but the March contract, which finished 5 points lower.

Fundamental analysis: There was little fresh news for cotton traders to digest today and given choppy action in the U.S. dollar index, cotton futures experienced two-sided, low-volume trade. Helping to limit pressure is the recent pickup in Chinese cotton buying. For the first nine months of the year, China imported 4.03 MMT of cotton, more than double the amount for the same period last year.

Technical analysis: December cotton futures briefly penetrated support at Friday's low of 76.52 cents but finished mid-range. Futures continue to consolidate around the August high of 77.49 cents, but were only able to pull off two closes above that level last week. Last week's high of 79.10 cents is initial resistance.

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.