Crops Analysis (VIP) -- September 24, 2012

September 24, 2012 10:27 AM


Price action: Corn futures closed mostly 1 to 3 cents lower, but worked off session lows to end mid-range for the day.

Fundamental analysis: Corn futures were pressured by harvest activity as combines continue to roll at a record clip across the Corn Belt. Given the poor quality of much of this year's crop, much of the early harvested corn is moving to market. But steady to firmer basis signals some end-user buying is showing up under the market, which should help limit near-term pressure.

Additional pressure today came from outside markets. The U.S. dollar was stronger amid negative economic data out of the euro-zone, which triggered a general risk-off attitude.

Technical analysis: December corn futures are consolidation around the July 24 spike low at $7.45 1/2. A bounce from this level would signal a short-term low is in place, but clear violation of this support would suggest the market is ready to move the next leg lower.

Hedgers: 60% sold on 2012-crop in the cash market -- 50% for harvest delivery; 10% for March 2013 delivery. Also, 40% of expected 2012-crop production is covered in Dec. $6.50 put options for 31 1/2 cents.

Cash-only marketers: 60% sold on 2012-crop production -- 35% for harvest delivery; 10% for March 2013 delivery; and 15% for May 2013 delivery.



Price action: Soybean futures were pressured throughout the day, but trimmed losses in late trade to finish mid-range, with losses of 5 3/4 to 11 3/4 cents in the November through August contracts. Far-deferred futures posted lighter losses. Meal and soyoil saw spillover pressure, but also ended off session lows.

Fundamental analysis: Strength in the U.S. dollar index triggered widespread selling in the commodity world. Investors shredded risk amid renewed concerns about the global economy due to disappointing economic data out of Germany. The Continuous Commodity Index posted sharp daily losses to strongly suggest a high was posted in mid-September.

Additional pressure came from stepped up harvest-related hedge pressure, as favorable weather has resulted in fresh new-crop supplies moving to the market. There are also reports of better-than-expected yields, although these are not widespread across the Corn Belt.

Technical analysis: November beans narrowly avoided posting a downside day of trade on the chart but finishing just above Friday's low of $16.07 1/2. Today's low of $15.90 1/4 is initial support, followed by the July 25 low of $15.36. Resistance on an upside correction stands at the July high of $16.91 1/2.

Hedgers: 100% sold on 2012-crop in the cash market for harvest delivery. The Nov. $14.00 put options purchased for 42 3/8 cents on 25% of 2012-crop should be held as a crop insurance hedge.

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




Price action: Wheat futures faced pressure for much of the day, but the market did move off its lows into the close. Chicago wheat ended with losses of 1 1/4 to 9 3/4 cents. Kansas City closed with double-digit losses. Minneapolis wheat settled mostly 4 to 7 cents lower.

Fundamental analysis: The wheat market was unable to shake spillover pressure from corn and beans until late in the session when the U.S. dollar index moved off its highs. And even then, buying interest was limited as the market lacked fundamentally supportive news today.

Also encouraging selling was news the Institute for Agricultural Market Studies (IKAR) raised its grain production and export estimates for Russia, though the market remains confident exports from this region will slow sometime this fall. Also providing light pressure was news a South Korean feedmaker purchased 65,000 metric tons (MT) of optional corn. This emphasizes that corn is again preferable to wheat for feed.

Technical analysis: December Chicago wheat futures are in a short-term uptrend toward the psychological $9.00 resistance level. More broadly, the contract remains within the bounds of an extended consolidation trading range, the parameters of which are the August high and low of $9.53 1/4 and $8.57 1/4, respectively.

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 settled at or near session lows with losses of 68 to 99 points.

Fundamental analysis: Disappointing economic data out of Germany stirred global economic concerns today, which strengthened the U.S. dollar index and encouraged selling across the commodity sector today. This adds to concerns about slowed cotton imports by China as the country has said it will not issue any more import quotas for 2012 and its government is more concerned about curbing inflation than stimulating economic growth.

And stocks are still not seen as worrisome, which means there is little support from the supply side of the equation. Plus, harvest is underway, and with that comes hedge pressure.

Technical analysis: December cotton futures broke through and settled below near-term support at the Sept. 12 low of 72.75 cents today. Downside risk now extends from the Aug. 13 low of 71.59 cents to the Aug. 2 low of 70.21 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.


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