Price action: Corn futures enjoyed gains early today, but the market softened ahead of USDA's Quarterly Grain Stocks Report release and extended losses thereafter. Futures ended near session lows with losses of 10 3/4 to 12 1/2 cents. Contracts across the board posted bearish reversals for the day.
Fundamental analysis: USDA again "surprised" the market with a bearish Sept. 1 grain stocks tally of 824 million bu., which was 136 million bu. more than the average pre-report trade guess and 59 million bu. above the top of the pre-report guess range. This figure is still 16.7% below year-ago. Nevertheless, the resulting pressure pushed contracts through tough support, triggering sell stops and resulting in the lowest close since September 2010 for the December contract and new contract lows in deferred months. Funds sold 16,000 corn contracts (80 million bu.) today.
Meanwhile, harvest is slowly picking up steam. This will continue to limit buying interest in the market until at least half the crop is in the bin.
Technical analysis: December corn futures settled at a three year-low today, which opens up risk to the psychological $4.20 mark, which roughly coincides with the contract low. Former support at the August low of $4.45 3/4 is now resistance.
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 closed 31 1/2 to 37 cents lower through the March contract, while farther-deferred contracts were mostly 19 to 24 3/4 cents lower. Soybean futures ended near their daily lows.
Fundamental analysis: Soybean futures were lower ahead of USDA's reports amid profit-taking and quarter-end positioning. After USDA's Sept. 1 bean stocks figure came in higher than anticipated, losses were sharply extended. Given the bearish report data, the low-range close and harvest progress, bears carry momentum into the overnight session.
With short-term momentum now clearly on bears' side, fresh demand news is likely needed to stop the price slide. A strong daily export sale would suggest the price drop encouraged end-user buying. Otherwise, a deeper price pullback is likely.
Funds were active sellers of soybeans, dumping a net 18,000 contracts (90 million bu.) today. With funds still heavily long, speculative money flow will be a key to near-term price direction.
Technical analysis: November soybean futures violated support at $12.97. The contract has now retraced more than 50% of the rally from the August low to the September high. A 62% retracement would be around $12.56 3/4. The next level of proven chart support is at $12.25.
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 4 1/2 to 8 cents lower, HRW futures ended 2 3/4 to 7 3/4 cents higher and HRS wheat finished mostly steady to 3 1/4 cents lower.
Fundamental analysis: USDA's report data was neutral to friendly as Sept. 1 wheat stocks came in well below expectations, while the all wheat crop estimate was just above the average pre-report guess. While HRW wheat futures were supported by the data, SRW and HRS futures succumbed to heavy spillover pressure from soybeans and corn.
Sept. 1 stocks coming in well below expectations signals demand for U.S. wheat was stronger than anticipated through the first quarter of the 2013-14 marketing year. That's a positive sign for a market that's been starving for bullish demand news. But wheat futures will struggle to find consistent buying interest if corn and wheat face heavy seasonal pressure.
Technical analysis: Today's high at $6.94 3/4 in December SRW wheat futures stands as initial resistance. Above that, key resistance is at the July high of $7.05 3/4. A push above that level would open the upside to the $7.58 area. To the downside, a close below $7.67 1/2 would suggest the corrective rally has run out of steam.
Hedgers: 50% of 2013-crop is sold in the cash market.
Cash-only marketers: 25% of 2013-crop is sold.
Price action: Cotton futures enjoyed an upside day of trade, but most contracts finished well off session highs with gains of 35 to 51 points.
Fundamental analysis: Cotton futures enjoyed followthrough buying to start the week and to wrap up the month and quarter as traders still have concerns about the size and quality of the U.S. cotton crop after rains fell while much of the crop was opening bolls last week. USDA will provide an update on the development and condition of the crop this afternoon.
Production concerns in China also remain close at hand after the China Cotton Association last week cited the Ministry of Ag as forecasting the Chinese cotton crop at 6.32 MMT, down 5.6% from year-ago.
Technical analysis: December cotton futures traded through but settled just below resistance at the May high of 87.25 cents. A close above that level would have bulls eying the top of the Aug. 21 downside gap at 88.86 cents. The September low of 82.11 cents marks tough support.
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.