Corn
Price action: Corn futures ended low-range with losses of 11 3/4 to 17 1/4 cents in the September through May contract, while farther deferred months closed steady to slightly lower.
Fundamental analysis: USDA data yesterday showed that harvest was 10% complete as of Sept. 2. The market expects harvest-related hedge pressure to mount, regardless of the pitiful state of the crop. This has caused basis levels to soften around the country and has encouraged profit-taking in corn futures.
In addition, the fact that high corn prices have caused demand destruction is garnering more attention now that crop woes have largely been factored into prices.
Technical analysis: December corn futures settled near initial support at the Aug. 13 low of $7.86. A move through this level would open downside risk to the $7.71 area, followed by the July 24 spike low of $7.45 1/2.
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 closed with losses of 17 1/2 to 23 cents in the September through March contracts. Farther deferred futures posted losses in the 5 to 10-cent range.
Fundamental analysis: Soybean futures faced pressure from weakness in the cash market. The bulk of the pressure on soybean basis is coming from interior bids in anticipation of the start of harvest. Still, basis remains strong overall amid tight supplies and active global end-user demand. That should limit near-term downside pressure on basis and futures.
With the cash market softening this week, traders have a reason to let the market correct. The corrective selling today came in the form of profit-taking and bull spread unwinding. Given strong fundamentals and the likelihood fresh end-user buying will be seen on even a modest price pullback, the downside should be limited.
Technical analysis: Despite today’s losses, November soybean futures remain strong technically. Key near-term support is at the old high of $16.91 1/2. Falling to that level wouldn’t even retrace 25% of the rally from the June low, which is at $16.53.
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 weakened into the close to finish with losses mostly in the upper teens at all three exchanges.
Fundamental analysis: Wheat saw spillover from neighboring pits, as well as from concerns U.S. wheat isn’t competitively priced on the global market. Traders were also encouraged to take profits as recent rains have helped recharge soil moisture across the key wheat-growing areas of the Central and Southern Plains. Otherwise, there wasn’t any “fresh” news for traders to digest.
Technical analysis: December Chicago wheat posted a downside day of trade on the daily chart. Followthrough pressure tomorrow and violation of support at the August low of $8.57 1/4 would strongly suggest a high has been posted. But to confirm a high, the contract needs to post a 38% retracement of the rally from the June low, which lies near $8.37.
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 narrowly mixed, with nearbys slightly lower.
Fundamental analysis: Choppy price action was due to traders reevaluating positions, as well as a lack of news. Weakness in the U.S. dollar index limited pressure, but uncertainty surrounding the global economic situation also limited buying interest. Traders are especially concerned about poor manufacturing data out of China, which suggests demand uncertainties from the country will continue to linger.
Technical analysis: December cotton futures spent much of the day pivoting around support at yesterday’s low of 75.27 cents and closed just above it. Key near-term boundaries are support at the mid-August low of 71.59 cents and resistance at 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.
