Corn
Price action: Corn futures traded in a very narrow, choppy range today. Most contracts ended low-range with fractional to 5-cent losses. September futures were the exception; they closed mid-range with 1 1/4 cent gain.
Fundamental analysis: This morning’s Weekly Export Sales Report shifted attention back to the demand side of the equation today. A net sales reduction of 33,700 metric tons (MT) for 2011-12 along with sales of 168,400 MT for 2012-13 fell well short of expectations and point to serious demand destruction.
But fears of additional yield destruction via wind and rain in some regions of the Corn Belt encouraged short-covering at times today. Concerns about the small crop will continue to limit downside risk for corn futures.
Technical analysis: December corn futures settled low-range but above support at the psychological $8.00 level today. Another move higher would have bulls’ eyeing resistance at last week’s high of $8.40, followed by the contract high of $8.49.
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 surged to an all-time high today, but the market backed off these levels into the close. Futures ended with gains of 7 to 17 1/4 cents in most contracts.
Fundamental analysis: Traders watched this morning’s weekly export sales report to see if historically high prices trimmed soybean demand, and today’s figures signal this has yet to occur. Sales of 731,400 metric tons (MT) for 2012-13 were only partially offset by a net sales reduction of 10,100 MT for 2011-12. Thus, traders believe more price rationing is needed. Plus heat and dryness in the Midwest is stressing the bean crop.
All of this kept attention away from dollar strength and news of strong demand at weekly Chinese government auctions of soybeans.
Technical analysis: November soybean futures hit a new contract high of $17.71 1/4 today, which is new resistance. The $17.00 mark is near-term, psychological support.
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: Chicago and Minneapolis wheat futures ended narrowly mixed with a downside bias. Kansas City wheat ended with losses of 1 1/4 to 6 1/2 cents.
Fundamental analysis: Action in the wheat market was highly choppy today due to uncertainty about the outcome of a meeting tomorrow to discuss Russian grain exports. While a Reuters survey indicates international grain traders expect Russia to curb its exports, possibly via a punitive tax, the country’s deputy ag minister continues to insist exports won’t be restricted. This will likely drive market action tomorrow, too.
Additional pressure comes from heavy rains in the Southern Plains that could improve winter wheat planting prospects (so long as they do not cause major flooding).
Technical analysis: December Chicago wheat futures remain within a consolidated trading range with near-term boundaries at last week’s high of $9.26 1/4 and this week’s low of $8.71 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 ended near the top of their narrow daily trading range with gains of 29 to 55 points.
Fundamental analysis: Cotton futures benefited from ideas the heavy rains associated with Tropical Storm Isaac will diminish the quality of the cotton crop in the southern U.S., as much of the crop in the Gulf Coast region has bolls open.
Additional support comes from disappointing monsoon rains in India that boost prospects for U.S. cotton when it comes to China’s stockpiling program. Today’s weekly export sales tally of 88,600 running bales (RB) sold for 2012-13 and 1,700 RB for 2013-14 were not impressive, but China was the lead buyer.
Technical analysis: December cotton futures continue to inch their way toward resistance at the Aug. 21 high of 77.49 cents. A move through that level would have the contract headed toward the May 11 gap from 79.37 cents to 79.17 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.
