Crops Analysis (VIP) -- October 25, 2012

October 25, 2012 09:58 AM


Price action: Corn futures faced pressure most of the day and the market extended losses into the close. December through September futures settled 9 to 12 1/2 cents lower while deferred months saw slightly lighter losses of 4 3/4 cents.

Fundamental analysis: Disappointing weekly export sales put the attention back on demand, or rather, the lack thereof. Weekly corn export sales of 142,300 MT for 2012-13 fell short of expectations and the cummulative export pace slipped to 48% behind last year's pace. USDA projects exports for 2012-13 will lag last year's pace by 25.5%.

But pressure was limited by news the International Grains Council trimmed its global carryover estimate, reminding the market that supplies are tight.

Technical analysis: December corn futures remain within their recent choppy range, the boundaries of which are the October high and low of $7.76 and $7.32 1/4, respectively. The low-range close gives bears the advantage heading into overnight trade.

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 saw two-sided trade early today, though bears had the advantage most of the day. A late rally helped beans to settle mid- to high-range with November and January futures roughly 6 cents lower and deferred months narrowly mixed. Soymeal also staged a choppy finish, while soyoil posted moderate losses for the day.

Fundamental analysis: Soybean futures faced profit-taking pressure after yesterday's strong gains. A firmer dollar and news the International Grains Council raised its 2012-13 global soybean carryover forecast by 5 MMT to 27 MMT were encouraging of this.

But the market also received supportive supply and demand news today. While weekly soybean export sales fell short of expectations, commutative sales still gained on last year's pace and are much more advanced than needed to meet USDA's export forecast. USDA announced a 120,000 MT daily soybean sale to unknown destinations for 2012-13. Also today, Gulf basis levels firmed notably, signaling more demand news may lie ahead.

Technical analysis: November soybean futures saw an inside day of trade, leaving near-term resistance at yesterday's high of $15.74 3/4, followed by the psychological $16.00 mark. Support is layered from the Oct. 2 low of $15.04 to the October low of $14.85 3/4.

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 saw choppy trade today and ended with deferred months favoring the upside and nearby contracts down mostly 8 to 11 cents in Chicago, around 6 cents lower in Kansas City and roughly 7 to 8 cents lower in Minneapolis.

Fundamental analysis: Wheat futures enjoyed light gains early today, but this quickly gave way to profit-taking amid dollar strength and spillover pressure from corn and soybeans. Though wheat's fundamentals have improved, it still struggles to rally on its own.

But selling pressure in the wheat market was limited by ideas U.S. wheat may be starting to benefit from tightening global wheat stocks. Today's Weekly Export Sales Report showed stronger-than-anticipated wheat sales of 572,000 MT for 2012-13. This was a 40% improvement over the week prior and a 61% increase from the four-week average.

Technical analysis: December Chicago wheat futures saw an inside day of trade, leaving near-term support at last week's low of $8.40 1/4 and resistance at the October high of $9.04 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 closed 28 to 56 points higher today, which was mid-range.

Fundamental analysis: After consecutive days of sharp price pressure, cotton futures were supported by mild short-covering today. Unfortunately for bulls, there wasn't any bullish fundamental news to build off of, which limited buying interest.

Weekly export cotton sales were a disappointment at 34,400 running bales for 2012-13 and 13,200 bales for 2013-14. China was the lead buyer, but Bangladesh canceled purchases totaling 74,700 bales.

Technical analysis: Key near-term support and resistance for December cotton futures lies at the Oct. 1 low at 70.22 cents and last week's spike high at 79.19 cents, respectively.

Hedgers: 50% priced on expected 2012-crop production via cash forward contract for harvest delivery. A breakout from that range is needed to spark a trending move.

Cash-only marketers: 50% priced on expected 2012-crop production via forward contract for harvest delivery.


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