Crops Analysis (VIP) -- September 4, 2012

September 4, 2012 10:26 AM
 

Corn

Price action: Corn futures fought back from an early afternoon price slump to end 3 3/4 to 7 3/4 cents higher, although that was well off session highs.

Fundamental analysis: Corn futures got the bulk of their price support from the soybean market today. But news that Japan purchased 180,000 metric tons of U.S. corn for 2013-14 did provide some fundamental support.

Additional support came from fund buying to start the new month. Funds bought an estimated 7,000 contracts (35 million bu.) of corn today to add to their large long position.

Technical analysis: December corn futures continue to hold within the short-term sideways range oulined by $7.45 1/2 on the downside and $8.49 on the upside. A breakout from this range is likely to spur the next strong move.

Hedgers: 100% sold on 2011-crop in the cash market. 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: 100% sold on 2011-crop. 35% forward priced on expected 2012-crop production -- 10% for harvest delivery; 10% for March 2013 delivery; and 15% for May 2013 delivery.

 

 

Soybeans

Price action: Soybean futures posted an all-time high of $17.89 on the weekly continuation chart, but ended low-range. September through January futures ended with gains of 6 1/2 to 15 1/4 cents, with the rest of the market closing mostly 30-plus cents higher. Meal ended mixed amid bull spread unwinding, with soyoil stronger.

Fundamental analysis: Early support in the bean pit came from ideas the market had more work ahead of it to ration shrinking supplies. Rains came too late for much of the soybean crop this weekend and are raising concerns about quality in the Delta due to localized flooding.

But traders have begun to unwind bull spreads, which led to some profit-taking in the nearby contracts. But with no technical chart damage done, bulls clearly have momentum on their side.

Technical analysis: November beans gapped to a new high and extended gains, but then filled the gap. Today's high of $17.89 is initial resistance, with support at last week's low of $17.01. Bulls' next upside objective is the psychological $18.00 level.

Hedgers: 100% sold on old-crop in the cash market. 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: 100% sold on old-crop. 50% sold on expected 2012-crop production for harvest delivery.

 

 

Wheat

Price action: Wheat futures saw a choppy day of trade and ended low-range. Chicago and Minneapolis wheat closed narrowly mixed, while Kansas City wheat settled with slight gains in all but the front-month, which was fractionally lower.

Fundamental analysis: A flurry of wheat export buys this weekend and today initially supported wheat futures, but as gains in the corn market waned, attention shifted to the fact many countries were meeting their wheat needs via cheaper alternatives to U.S. supplies. A firmer U.S. dollar index added profit-taking incentive, as did a general attitude of risk aversion after disappointing economic data from the U.S. and China.

But keeping losses in check was a strong weekly export inspections tally, which signals high corn prices have shifted some demand to wheat.

Technical analysis: December Chicago wheat saw an inside day of trade, leaving near-term support at last week's low of $8.71 1/4, followed by the Aug. 14 low of $8.57 1/4. Near-term resistance is last week's high of $9.14 1/2 followed by the Aug. 21 high of $9.26 1/4.

Hedgers: 75% cash sold on 2012-crop for harvest delivery. 100% sold on 2011-crop in the cash market.

Cash-only marketers: 75% of 2012-crop production is sold for harvest delivery. 100% sold on 2011-crop.

 

 

Cotton

Price action: Cotton futures saw a downside day of trade and ended low-range with losses of 98 to 158 points.

Fundamental analysis: A firmer U.S. dollar index as a result of disappointing economic data in both the U.S. and China today encouraged profit-taking in the cotton market after strong gains last week. Adding some incentive to book profits is news China's state stockpiler offered 35,708 metric tons (MT) in an auction to help textile companies on Monday. Additional government stocks will be auctioned moving forward.

But the market's downside is also limited by concerns Hurricane Isaac will result in some quality deterioration for the U.S. crop. Also, high corn and especially soybean prices are expected to reduce the number of acres planted to cotton in the coming marketing year, though supplies are still not expected to be worrisome.

Technical analysis: Support for December cotton futures extends from the Aug. 24 low of 74.72 cents to the Aug. 13 low of 71.59 cents. Resistance is the August high of 77.49 cents.

Hedgers: 100% sold on old-crop in the cash market. 50% priced on expected new-crop production via cash forward contract for harvest delivery.

Cash-only marketers: 100% sold on old-crop. 50% priced on expected new-crop production via forward contract for harvest delivery.

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