Crops Analysis (VIP) -- September 16, 2013

September 16, 2013 09:44 AM
 

Corn

Price action: Corn futures were mildly firmer through the overnight hours and early in the day session, but as soybean futures sharply extended their losses, corn softened. Corn futures finished 2 1/4 to 3 cents lower through the July 2015 contract.

Fundamental outlook: Corn futures succumbed to spillover pressure from the soybean market today. While traders unwound long soybean/short corn spreads, that wasn't enough to offset the spillover pressure.

Corn is fighting seasonal pressure as harvest is gradually getting started across the Corn Belt. Reports of "good" early yields are likely to act as a wet blanket on futures. Plus, basis is expected to weaken as new-crop supplies hit the market.

Technical outlook: Key near-term support for December corn futures lies at the August low at $4.45 3/4. A drop through that level is likely to trigger fresh chart-based selling. Below that, support is layered every 10 to 20 cents starting at $4.40.

Hedgers: 100% sold on 2012-crop in the cash market. 25% of expected 2013-crop production is sold via cash forward contract for harvest delivery.

Cash-only marketers: 100% sold on old-crop. 25% of expected 2013-crop production is sold via forward contract for harvest delivery.

 

 

Soybeans

Price action: Soybean futures gapped lower at the start of the overnight session and remained on the defensive throughout the day. November and January futures closed 33 1/4 and 31 1/2 cents lower, respectively, and near the day's lows.

Fundamental outlook: Weekend rains over portions of the Upper Midwest coupled with forecasts for more precipitation midweek pressured futures today. The more favorable forecast also prompted unwinding of long soybean/short corn spreads.

NOPA reported soybean crush fell to 110.5 million bu. during August, under 116.3 million bu. in July and down from 124.8 million bu. in August of 2012. However, given the extremely tight level of 2012-crop supplies, a small crush total was expected.

Technical outlook: November soybean futures tested support at the $13.35 to $13.40 area, which has served as a support zone since the Aug. 26 upside chart gap. Filling the gap at $13.31 1/4 would be technically bearish. The bottom of today's gap at $13.75 1/4 now serves as initial resistance. There is resistance up to the August high of $14.09 1/2, with contract-high resistance at $14.09 3/4.

Hedgers: 50% of expected 2013-crop production is sold via a forward-price cash contract for harvest delivery. 100% sold on 2012-crop in the cash market.

Cash-only marketers: 50% of expected 2013-crop production is sold via a forward-price cash contract for harvest delivery. 100% sold on 2012-crop in the cash market.

 

 

Wheat

Price action: Wheat futures were choppy in overnight trade and during early daytime trade, but weakened late in the morning on spillover from neighboring pits. SRW wheat ended marginally to 5 cents lower, with HRW and HRS mostly 3 to 4 cents lower.

Fundamental outlook: Weakness in the U.S. dollar index encouraged periods of short-covering overnight in the wheat market, but as corn and soybean futures weakened in daytime trade, buying in wheat futures dried up. Traders then ignored this morning's weekly export inspections report that showed inspections up more than expected compared to last week.

Traders then turned their attention to improved rainfall chances across the Plains. Traders expect producers to increase their planting efforts as many wheat growers across the region are enjoying the best soil moisture conditions in years.

Technical outlook: December SRW wheat futures spent much of daytime hours pivoting around Friday's low of $6.40 and closed just above it. This is just above contract-low support of $6.35 1/2. To signal a near-term low is in the works the contract needs to return above the August high of $6.79 3/4.

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

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

 

 

Cotton

Price action: October through July cotton futures ended 14 to 34 points lower, with deferred contracts ending 39 to 48 points higher.

Fundamental outlook: Nearby cotton futures were on the defensive throughout the day on profit-taking after contracts posted solid gains last week. Pressure was limited by weakness in the U.S. dollar index, but without a late-season weather threat, it will be difficult for cotton futures to gain traction with market bulls.

Technical outlook: December cotton futures posted a downside day of trade on the daily chart but finished mid-range. Today's low of 83.70 cents is initial support, followed by key support at this month's low of 82.11 cents. Resistance begins at last week's high of 85.15 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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