Crops Analysis (VIP) -- October 9, 2013

October 9, 2013 09:55 AM


Price action: Corn futures traded moderately higher today in a very narrow range and closed midrange. Futures finished 1 1/2 to 2 3/4 cents higher.

Fundamental outlook: Corn futures moved higher on reports a private Chinese firm purchased 420,000 MT of U.S. corn last week. The Chinese official confirming the report says the price it paid for the U.S. corn is around 20% cheaper than domestic prices. But concerns about pending hedge pressure as harvest is still in its early stages limited gains.

Technical outlook: Corn futures edged higher, primarily thanks to short-covering. This week's high near $4.50 offers initial resistance for December corn futures with next resistance at the Sept. 30 high of $4.62. Support sits at last week's low of $4.35.

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 faced pressure for most of the session and the market ended 1 to 6 3/4 cents lower for the day, which was a low- to mid-range close. Soymeal posted slight daily losses while soyoil edged out gains for the day amid spreading.

Fundamental outlook: Bigger crop estimates at home and overseas, harvest pressure and spread unwinding with corn pressured the bean market today. Lanworth raised its U.S. bean crop peg to 3.160 billion bu. from 3.112 billion bu. previously and upped its world bean production estimate by 2 MMT. Brazil's Conab added to the negative tone with its forecast for 2013-14 Brazilian bean production between 87.6 MMT to 89.7 MMT, which would easily shatter this year's record crop.

Traders were also disheartened by the November contract's inability to find buying interest above the psychological $13.00 mark the past two days.

But basis strength at interior locations helped keep selling interest in check, as it points to slow harvest and still-tight supplies.

Technical outlook: November soybeans faced pressure most of the day, but the contract moved well off its lows into the close. Tough support stands at the rough double-bottom October low of $12.63 1/2, while resistance remains at $13.00, followed by yesterday's high of $13.05 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: SRW wheat futures closed 2 to 3 cents lower, while HRW futures ended fractionally to 1 cent lower in most contracts and HRS futures finished narrowly mixed.

Fundamental outlook: Wheat futures faced mild profit-taking pressure today as fresh supportive news was lacking. But selling interest was limited as attitudes have improved over the past month.

Providing light pressure today was a drier forecast for southern winter wheat production areas of Russia, which should allow planting efforts to pick up after delays due to prolonged wetness. But planting delays remain a concern in central Russia and parts of Ukraine.

With planting concerns in the Black Sea region easing somewhat, the wheat market likely needs a shot of fresh demand news to fuel additional buying interest. Algeria bought 500,000 MT of optional origin wheat today, but most of that business is expected to be sourced from France.

Technical outlook: December SRW wheat futures are a critical juncture on the daily price chart. Resistance at Tuesday's high of $6.99 3/4 is closely followed by the psychological $7.00 mark. Above that, the $7.05 area is key resistance as that would mark a 25% retracement of the price plunge from the contract high to the contract low; the July high is also at $7.05 3/4. Just above that, the downtrend from the contract high currently intersects around $7.17. Failure to clear this resistance could stall the corrective rebound and send the contract to a test of the summer lows.

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

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




Price action: Cotton futures closed 17 to 49 points lower through the March contract. Farther-deferred futures ended slightly firmer.

Fundamental outlook: Cotton futures continue to reel after sharp losses Monday as traders are removing some of the weather premium they had recently built into the market. With the threat of damage from Karen gone, traders are lightening long positions.

A lack of USDA data is also making it harder to generate buying interest. Traders will have to go without weekly export sales for a second straight week. And USDA's Crop Production and Supply & Demand Reports originally scheduled for Friday are delayed. The longer the government shutdown lasts, the greater the risk of position liquidation.

Technical outlook: December cotton futures dropped to their lowest level since Sept. 10 today. The contract appears headed for a test of the September low at 82.11 cents. More critical support lies at the June low of 81.72 cents. A close below that mark would signal a downside breakout attempt from the broad, sideways range.

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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