Price action: Following the release of USDA's report data, corn futures surged higher, plunged lower and then eventually moderated to post losses ranging from around 5 to 10 cents for the rest of the session. Futures settled mid-range with losses of 5 1/2 to 11 1/4 cents.
Fundamental analysis: Action in the corn market centered on followthrough selling after USDA cut its corn production estimate 324 million bu. less than expected to 10.727 billion bushels. USDA also raised its carryover pegs for 2011-12 and 2012-13, whereas traders had expected these numbers to decline. This reminded traders demand rationing has occurred.
But losses were limited by firmer Gulf basis levels today that signal supplies are tight and there's still end-user demand. Traders will watch tomorrow's export sales report and daily sales announcements (or lack thereof) to measure the level of demand that remains.
Technical analysis: December corn futures broke through and settled below initial support around $7.71, which opens downside risk to the July spike low of 7.45 1/2. The contract has now completed a 25% retracement of the rally from the June low. A 38% retracement is around $7.17. Initial resistance is in the $7.86 area.
Hedgers: 40% of expected 2012-crop production is covered in Dec. $6.50 put options for 31 1/2 cents. 35% cash forward sold on expected 2012-crop production -- 25% for harvest delivery; 10% for March 2013 delivery.
Cash-only marketers: 35% forward priced on expected 2012-crop production -- 10% for harvest delivery; 10% for March 2013 delivery; and 15% for May 2013 delivery.
Price action: Soybean futures rallied sharply today, ending with gains of 43 3/4 to 45 cents in the September through March contracts. Farther deferred contracts posted slightly lesser gains in the mid-20 to mid-30-cent range.
Fundamental analysis: USDA's report data was mostly neutral this morning as the 2012 crop estimate and the old- and new-crop ending stocks forecasts were in line with the pre-report guesses. But futures rallied sharply shortly after the data was released as USDA failed to produce a bearish surprise. Traders remain focused on tight supplies, the fact historically high prices aren't slowing use and the dryness issues Brazil is facing with the start of soybean planting just around the corner.
Additional support today came from technical-based fund buying. For the day, funds were estimated buyers of 14,000 contracts (70 million bu.) of soybeans.
While the soybean market was sharply higher today, interior basis declined sharply in some locations as harvest is underway. As combines start to more actively roll, the soybean market could face seasonal selling pressure.
Technical analysis: November soybean futures posted a bullish reversal today. If there's followthrough tomorrow, it would point toward a near-term challenge of the contract high at $17.89. Today's low at $16.93 1/2 is initial support, followed by the July high at $16.91 1/2. Violation of that level would open the door to an extended price pullback.
Hedgers: 25% of expected 2012-crop production is covered in Nov. $14.00 put options for 42 3/8 cents. 50% of expected 2012-crop production is sold via cash forward contract for harvest delivery.
Cash-only marketers: 50% sold on expected 2012-crop production for harvest delivery.
Price action: Wheat futures were highly choppy today, but rallied into the close to end slightly to moderately higher at all three exchanges. Minneapolis wheat led gains, finishing 13 to 16 1/2 cents higher.
Fundamental analysis: Early pressure came on spillover from the corn pit, but around midday wheat futures turned higher on help from dollar weakness and spillover from soybean futures. Traders also viewed this morning's USDA data as slightly friendly as USDA trimmed 2012-13 U.S. wheat carryover more than expected to 698 million bu. and global carryover by 460,000 metric tons (MT) to 176.71 million MT -- down nearly 22 million MT from 2011-12.
The U.S. dollar index weakened on news Germany's Constitutional Court has dismissed complaints on the legality of the European Stability Mechanism, as well as expectations the U.S. Federal Reserve will announce another round of quantitative easing tomorrow. This will bring even more focus to outside markets tomorrow.
Technical analysis: September Chicago wheat futures tested support at last week's low of $8.44 before recovering and posting a high-range close. Futures remain within the boundaries of the broad sideways trading range and need closes above the August high of $9.31 3/4 to reopen upside potential to the July high of $9.47 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 ended 116 to 160 points lower, with nearbys leading losses. While this was off session lows, it was still a low-range close.
Fundamental analysis: Despite slightly friendly domestic report data from USDA, cotton futures saw profit-taking pressure today. USDA trimmed the size of the U.S. crop slightly more than expected to 17.11 million bales and lowered 2012-13 carryover more than expected to 5.3 million bales. However, USDA raised its global cotton carryover projection by 1.85 million bales from last month to 76.52 million -- up 9.5% from 2011-12. Expectations for a slowdown in global demand weighed on cotton futures.
Technical analysis: December cotton futures posted a big downside day of trade on the daily chart. Followthrough pressure tomorrow would signal a near-term high is in the works. But it would take a close below the July low of 69.40 cents to reopen downside risk to the contract low of 64.61 cents.
Hedgers: 50% priced on expected 2012-crop production via cash forward contract for harvest delivery.
Cash-only marketers: 50% priced on expected 2012-crop production via forward contract for harvest delivery.