Crops Analysis (VIP) -- October 2, 2013

October 2, 2013 09:45 AM


Price action: Corn futures were mixed today and didn't stray too far from unchanged throughout the session. Futures ended steady to 1/2 cent higher.

Fundamental analysis: Price action in the corn pit was muted by a lack of fresh news, with pressure limited throughout the day by sharp weakness in the dollar index, as that brought some buying back to the commodity sector. As a result, corn benefited from spillover from the gold and crude oil markets. Corn also benefited from strength in the wheat market.

But buying throughout the day was limited by ongoing harvest activity that is resulting in slipping basis levels across the country.

Technical analysis: December corn futures posted a weekly low of $4.35, which is initial support. Below that support is layered every 10 cents to the contract low of $3.98 1/4.

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 spent the day in positive territory and ended mid-range with gains of 4 1/2 to 6 cents. Soymeal posted solid gains while soyoil posted similar losses amid spreading activity.

Fundamental analysis: Bargain hunting and a technical bounce lifted the bean market today. While harvest is making new supplies available, supplies are still expected to be on the tight side due to strong demand. Gulf basis ticked up this morning and USDA yesterday reported yet another daily sale. While weekly export sales are not expected to be released tomorrow due to the government shutdown, pre-report expectations were for strong sales between 800,000 MT and 1.1 MMT.

Nevertheless, fresh buying interest will remain limited by harvest-related hedge pressure.

Technical analysis: November soybean futures closed but settled below yesterday's downside gap at $12.78 3/4, marking that area as near-term resistance, followed by the psychological $13.00 area. The 62% retracement of the August to September rally at $12.57 is support.

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 moved higher with HRW and HRS leading the move higher. Contracts finished near their daily highs with SRW up 3 1/2 to 6 cents, HRW up 2 to 9 1/2 cents through July 2014 and HRS up 4 1/2 to 10 cents through May 2014 and down fractionally to 4 1/4 cents for later deferred contracts.

Fundamental analysis: Weakness in the U.S. dollar index and a rebound in gold and crude oil futures got traders rethinking about rising export opportunities for U.S. wheat. Continuing problems with winter seeding in Ukraine has traders thinking some export business previously destined to the Black Sea Region may come to our shores instead. Meanwhile, continuing problems for the Argentine crop means Brazil will may have to come to the U.S. for its needs rather than from its neighbor as it does traditionally.

Continuing concerns over depressed protein levels in the Canadian spring wheat crop had traders bidding up U.S. HRS wheat on thoughts export demand could be moving south of the border. The market shrugged off reports crop-watcher Lanworth increased its world wheat production by 2 MMT to 706 MMT today on expected production increases in Canada and Australia.

Technical analysis: HRS and HRW futures turned in a more bullish performance than SRW futures, but futures did move higher. December SRW futures moved higher but failed to take out Monday's high of $6.94 3/4. Support sits under Tuesday's low at $6.72 1/2. December HRW futures continue to post higher highs, surging above this week's highs, filling the June 24 gap and closing just under resistance at $7.60. Support now sits at $7.37 1/2. December HRS surged to new highs for the move with prices probing a long resistance band from $7.40 to $7.50. A close above that would turn it into support. Meanwhile support exists at $7.30.

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

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



Price action: Cotton futures traded slightly higher in a narrow range. October cotton futures finished 27 points higher while other contracts closed 37 to 53 points higher.

Fundamental analysis: Cotton futures followed through on yesterday's closing strength. Weakness in the U.S. dollar supported buying. Futures also benefited from spillover gains in gold, crude oil and grain futures. Meanwhile, traders remain concerned with the condition of the U.S. cotton crop which has been in a general slide for several weeks.

But the other key is exports, which rose on the decline in prices but slipped as prices moved higher. Traders will try to judge the impact of the last week's late surge in prices on export business but will have to do so without the usual USDA data due to the partial shutdown of the government.

Technical analysis: December cotton futures moved higher but posted a narrow inside day versus Wednesday's trading range. Monday's high at 87.50 cents serves as resistance with Tuesday's low at 85.48 cents acting as support. A decline below support would suggest a short-term top has been made, making 81.72 cents the downside target. A close above Monday's high would point the contract toward 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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