Crops Analysis (VIP) -- October 29, 2013

October 29, 2013 09:58 AM


Price action: Corn futures did not stray far from unchanged today, and after a choppy day of trade the market ended fractionally to a 1 1/4 cents higher through the July contract with deferreds steady to 3 1/4 cents lower.

Fundamental analysis: Position squaring was seen in the corn market today as traders weighed expectations for a record-large crop against signs of rebuilding demand. USDA yesterday reported that harvest advanced to 59% complete, signaling related hedge pressure should be easing and that rain/snow delays this week are not a major concern.

On the demand front, recent daily sales along with news China plans to import 5 MMT of corn from all sources in 2013, according to China National Grain and Oils information Center, signals end-users see current prices as a value. Thursday's export sales update for the weeks ended Oct. 10, 17 and 24 will provide more insight as to the pace of rebuilding demand.

Technical analysis: December corn futures dipped to $4.28 1/4 today -- the lowest level since August 2010. This is initial support, with tough support layered from the $4.00 level to the contract low of $3.98 1/4. Resistance starts at the October high of $4.49 3/4.

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 favored a firmer tone in choppy trade today. Buying picked up in late trade to produce a high-range close with most contracts posting gains of 4 to 7 3/4 cents. Meal ended mixed, with soyoil higher amid spreading.

Fundamental analysis: After a choppy overnight session, buying picked up during daytime trade on news a top ADM official doesn't expect the porcine epidemic diarrhea virus (PEDV) in hogs to have a major impact on soymeal demand. Futures were also supported by harvest moving into its final leg, as USDA reports 77% of the crop was out as of Sunday.

However, there is some concern that demand has slowed, as Gulf basis softened by 10 cents this morning for immediate delivery and was 1 to 4 cents lower for deferred delivery. But given the overall tightness of supplies, any pickup in demand should be viewed as price supportive.

Technical analysis: January soybean futures violated support at yesterday's low, but held above the October low of $12.61 1/4. Violation of that support could trigger sell stops to the $12.50 level, which is psychological support. Resistance remains at the $13.00 level and extends to the October high of $13.12 3/4.

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: All three wheat flavors finished narrowly mixed. SRW and HRW futures closed mid-range, while HRS futures ended low-range.

Fundamental analysis: Choppy, two-sided trade was seen in the wheat market today as there wasn't a lot of fresh news to guide the market. Pressure from a firmer dollar limited buying interest. The upside was also limited by forecasts calling for rains in the Plains. With the HRW crop already off to a favorable start, the rains will further boost early crop development. Meanwhile, there are also decreased concerns with the Russian and Ukrainian winter wheat crops as conditions have turned warmer and drier after excessive rains slowed planting earlier this fall.

The downside was limited by short-covering and mild bargain buying. Ideas recent losses have been overdone attracted some mild buying interest.

Technical analysis: December SRW wheat futures dropped below support at the August high of $6.76 1/2 and slipped to the lowest level since Oct. 1 intraday, but rebounded to close mid-range. Today's low at $6.76 1/4 is key near-term support. A close below that level would open risk to the $6.40 area. Last week's high at $7.11 1/4 is solid near-term resistance.

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 settled 15 to 31 points lower through the October 2014 contract, which was low-range in a relatively narrow daily trading range.

Fundamental analysis: Cotton futures stood up well to strength in the U.S. dollar index, though that influenced the low-range close. Selling interest was limited by ideas the downside was overdone with last week's sharp price pressure. But given the dollar strength today, the market couldn't muster up strong or sustained short-covering interest.

While cotton harvest is running behind year-ago and the five-year average, traders are not concerned. In fact, harvest-related pressure is weighing on prices as new-crop supplies move to market. With roughly two-thirds of the U.S. crop left to harvest, seasonal pressure is likely to persist near-term.

Technical analysis: December cotton futures dropped to the lowest level since Jan. 11 today. The next level of solid daily chart support extends from 75.41 cents to the November 2012 low at 74.35 cents. To the upside, old support at the September 2012 high at 81.30 cents must be cleared to signal a short-term low is in the works.

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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