Crops Analysis (VIP) -- October 30,2012

October 30, 2012 10:03 AM


Price action: Corn futures were firmer throughout the day and ended mostly around 5 cents higher through the July contract, with far-deferred contracts around a penny higher.

Fundamental analysis: Futures were supported by weakness in the U.S. dollar index today, although buying was limited due to a lack of fresh news and the disruptive storm event on the East Coast. Also providing some support was news private Ukrainian consulting firm UkrAgroConsult trimmed its corn production estimate by 200,000 MT to 18.8 MMT.

Planting delays due to too much rain in southern Brazil and Argentina are also supportive as it raises the risk some acres will shift to soybeans (see "Evening Report" for more). But softer basis levels remind traders of demand destruction that is ongoing due to historically high prices.

Focus tomorrow will be on month-end positioning and how the stock market reacts after being closed for two days due to Superstorm Sandy.

Technical analysis: December corn futures posted an inside day up on the daily chart. Today's high-range close gives bulls momentum heading into overnight trade, but futures remain within the boundaries of the month-long consolidation range.

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 5 to 6 3/4 cents higher through the September contract. That was in the lower portion of today's range.

Fundamental analysis: Soybean futures were supported by short-covering today amid ideas Monday's sharp losses were overdone. Additionally, talk of Chinese demand sifted through the market on a light news day. Firmer basis is supportive of potential fresh Chinese demand, although basis has been generally firmer of late amid tight supplies and strong demand.

November soybean futures start the delivery process Wednesday, with traders expecting deliveries of 0 to 500 contracts. Most traders are on the low end of that guess range given tight supplies and strong demand, but those expecting heavier deliveries point to high freight rates as the reason.

Technical analysis: January soybean futures posted a modest inside day up today. Monday's low at $15.26 1/4 is initial support, followed by the Oct. 3 spike low at $15.06 1/4. Below that, the Oct. 15 low at $14.84 is stronger support. To the upside, last week's high at $15.77 is key near-term resistance.

Hedgers: 100% sold on 2012-crop in the cash market. No futures/options positions at this time. No 2013-crop sales advised yet.

Cash-only marketers: 75% sold on 2012-crop production for harvest delivery.




Price action: Wheat futures wrapped up a choppy day of trade with a mid-range and mixed finish. Nearby contracts settled marginally lower in Chicago and Kansas City with deferred months firmer. Minneapolis wheat futures posted slight gains in most contracts.

Fundamental analysis: Wheat futures initially benefited from light short-covering thanks to a weaker dollar and spillover support from corn and beans today, but this gave way to bouts of profit-taking as export demand for U.S. wheat remains sluggish, despite tightening global wheat stocks. Until this changes, wheat will continue to chop steady to lower.

Buying and selling interest was also limited by ongoing trade disruptions as a result of Superstorm Sandy. A return to more normal conditions is expected tomorrow. See "Evening Report" for more details.

Technical analysis: December Chicago wheat futures remain within a gradually downtrending channel, with near-term support standing at the Oct. 15 low of $8.60 1/4 and resistance at last week's high of $8.95. The contract is also flirting with support at the 100-day moving average and settled just 3/4 cent above it.

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 two-sided trade today, but most contracts ended at or near session lows with losses ranging from 112 to 180 points.

Fundamental analysis: Early profit-taking in cotton futures after gains yesterday escalated as the market failed to find buying interest above its 100-day moving average and broke through its week-long consolidation trading range, encouraging technical selling. But the market remains between the October low and high that has bound action since late September.

Global cotton supplies are plentiful and certified (deliverable) cotton stocks are no longer worrisome, limiting upside potential for the market. But downside risk is also limited as the coming growing season will likely see producers switch acres from cotton to soybeans.

Technical analysis: December cotton futures are headed for a test of the bottom of the consolidation range at the October low of 70.22 cents. A breakout from that level would layer support from the July low of 69.40 cents to the contract low of 64.61 cents. Resistance remains at the October high of 79.19 cents.

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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