Ag Watch Market Advisors

Corn Outlook:

     A wetter pattern is forecast in Argentina this week, which will help late-planted corn.  However, weather is becoming less of a factor as harvest has begun in northern Brazil.  In the meantime, domestic basis levels are strong and providing underlying support.  Additional support is sponsored from the rally in wheat.  EU leaders met in Brussels this week and agree to tighter budget controls.  However, getting a unified plan to work among all members will be a different story.  Export inspections were 22.6 MB, the smallest level seen since early November.  Last week, the trend following funds sold 85 MB of corn reducing their long position to 470 MB.  The longs of the index funds grew 20 MB to 1.740 BB.  During the next few weeks, the focus in the grains will center on the acreage debate between corn and soybeans.  Right now, corn has the edge.    

     March corn traded to 650 on Wednesday where a candlestick top occurred.  Right now, the market is at an important juncture.  The momentum indicators have not quite reached an overbought status and the short-term wave pattern shows the potential for rising to 657.  However, a decline below 627 means that all bets are off and points to a sell-off to last month’s low at 592.5, and possibly a test of the lower end of the trading range that began in October.  If you will notice on the chart, the market has been in a broad sideward pattern since last fall.  For now, a rally past 664.25 is needed to turn the intermediate and longer-term trend higher.  Next week the odds are 60 percent that March futures will be higher. 

Bean Outlook:

       Rain in Argentina this week will help the soybean crop with showers forecast in southern Brazil by the weekend.  However, weather is becoming less of a factor as harvest is soon approaching.  Export inspections were better than expected at 41.5 MB, but cumulative shipments are running 27 percent below a year ago.  China took 26.8 MB or 64 percent of shipments.  Last week, the trend following funds bought 60 MB of soybeans increasing their long futures position to 125 MB.  Meanwhile, the longs of the index funds grew 15 MB to 850 MB.  For the moment, soybeans are riding on the coattails of corn and wheat.   

     Like corn, March soybeans are at an important juncture.  If you will notice on the chart, since peaking in January at 1244.75, a coiling pattern has been unfolding consisting of lower highs and higher lows.  This suggests that a breakout is forthcoming with the question being which direction.  Seasonally, soybean futures tend to work lower until the end of February, which favors a downside breakout.  However, in order for it to be confirmed, a decline below the low made earlier this week at 1184.25 is needed.  In this event, the bears gain the edge in which there could be a sell-off to 1150 or the low made in December at 1104.5.  Otherwise, a close beyond 1231 puts the ball in the bull’s court and projects a counter seasonal rally to 1290.  Next week, the odds are 60 percent that March futures will be higher.

 Wheat Outlook:

     The wheat market has sprung to life as large traders became too bearish.  This is evident from the short position of the trend following funds rising to a record 475 MB.  In addition, concerns of winterkill in the Ukraine are providing support and have triggered short covering.  Although the fundamentals for wheat are not bullish, do not underestimate the upside potential that could occur if the funds bail on their position.  In the meantime, world stocks are ample and Australia appears headed for a record crop.  Precipitation is forecast in the Plains this weekend, which should give conditions a boost.  Export inspections were 18.6 MB with cumulative shipments running 14 percent behind last year.      

     March wheat traded to 683.75 on Wednesday where either a short or an intermediate-term top developed.  Right now, it is too early to tell which it is.  Support is at the low made Thursday at 657 followed by 650.  However, a break below this level suggests that that we are headed to 635 and possibly closer to 620-615.  Keep in mind that February is historically not a good month for wheat futures as they trade lower 79 percent of the time.  Meanwhile, a rally beyond 683.75 opens the door for a counter seasonal move upward to 720.  Next week, the odds are 80 percent that March futures will be lower.

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Comments and suggestions are provided for information purposes only. Information contained herein is obtained from sources believed to be reliable but not guaranteed to its accuracy or completeness. Readers using the information contained herein are responsible for their own actions. No presentations can be made that recommendations will be profitable or that they will not result in losses. This information is neither an offer to sell nor solicitation to buy of the commodity futures mentioned herein. The writer may be trading in the commodities mentioned.

Corn Outlook:

      Corn futures have been on a downhill roll since the crop report last week.  Large traders were overly exuberant going into the report as the trend following funds bought 180 MB increasing their long position to 755 MB.  Right now, those positions are under water with the funds jumping ship.  Traders are still monitoring weather in South America, but conditions have improved from the moisture received last week.  In the meantime, additional rainfall is expected this weekend or early next week, which may dampen bullish enthusiasm.  There is little fresh news in Europe other than the debt rating of nine countries being downgraded.  In other developments, export inspections were on the low end of estimates at 30.0 MB and below the average needed to reach USDA’s projection of 1.650 BB.    

     March corn has fallen 10.1 percent since last week’s crop report.  Prices traded at 592.5 on Wednesday, which is likely a short-term low ending the decline from the high made earlier this month at 664.25.  This assumption is supported by a candlestick-bottoming pattern developing during Thursday’s session.  If a bottom has occurred, we are due for a recovery to 615, 620 or possibly 628 with a top occurring as soon as January 25^th or on February 1^st.  Longer-term, however, the trend is down with the potential for a sell-off to 530-520.  Meanwhile, a more bearish pattern points to a decline to 475.  From a seasonal perspective, corn futures generally trade downward until the end of February.  Next week, the odds are 60 percent that March corn will be lower. 

Bean Outlook:

       Soybean futures are consolidating after sliding from last week’s bearish crop report.  Like corn, traders were bullish going into the report as they bought 50 MB increasing their longs to 120 MB.  While weather has improved in South America, it could still be an issue if timely rains are not received.  However, rain is forecast in Brazil this weekend.  In other developments, export inspections were 40.9 MB, the highest level seen since the last week of November.  China took 28.8 MB or 70 percent of the shipments.  In the weeks ahead, traders focus will turn to the acreage debate between corn and soybeans for spring planting.   

     March soybeans are recovering from last week’s low at 1150 and should meet resistance at 1208.  The recovery could end as soon as Friday, although it may continue until January 24^th.  The rebound resembles a correction, which suggests that once it ends, we are likely headed below the December low at 1104.5 to 1060.  A more bearish pattern points to a decline to 1015.  Seasonally, soybean futures tend to work lower until the end of February or the first week of March.  Right now, a rally past 1244.75 is needed to turn the trend higher.

 Wheat Outlook:

     There is not much news in wheat as the market is following the direction of corn and soybeans.  Global stocks are abundant, and the U.S. faces stiff competition from the Black Sea region because of the increase in their stocks.  Crop conditions in the Plains are improving but snow cover is needed for protection against frigid temperatures.  Export inspections were less than expected at 13.4 MB and below the average needed to reach USDA’s projection of 950 MB.    

     March wheat fell to 590 on Wednesday in its probe for a low from the high made earlier this month at 670.75.  If a bottom has developed, the market is due for a recovery to at least 613 and possibly closer to 620 or 630.  Look for a top as soon as January 25^th or on February 1^st.  Longer-term, the trend is down with the potential for a sell-off to 550, 530 or 520.  If you will notice on the chart, the market continues to set a series of lower highs and lower lows.  This pattern will not be violated unless 670.75 is exceeded.  From a seasonal perspective, wheat futures tend to trade lower until the end of February or the end of April.  Next week, the odds are 78 percent that March wheat will be lower.

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Comments and suggestions are provided for information purposes only. Information contained herein is obtained from sources believed to be reliable but not guaranteed to its accuracy or completeness. Readers using the information contained herein are responsible for their own actions. No presentations can be made that recommendations will be profitable or that they will not result in losses. This information is neither an offer to sell nor solicitation to buy of the commodity futures mentioned herein. The writer may be trading in the commodities mentioned.

Corn Outlook:

     Very little news is coming out of Europe, which has prompted speculators to shift their focus to weather in South America rather than the debt crisis.  Conditions are dryer than normal, especially in Argentina, which has created a surge in grain futures.  During the holidays, volume tends to be thin as commercial activity dries up and can lead to exaggerated price swings.  This season is no exception as corn prices have risen 12.1 percent in a two-week period.  While a reduction in South America’s corn crop is possible, world stocks are sufficient to meet demand.  Export inspections were 39.0 MB with cumulative shipments running 6 percent behind a year ago.  The trend following funds continue to reduce their longs as their position has fallen 30 MB to 220 MB.  Meanwhile, the index funds added 30 MB to their long futures increasing them to 1.820 BB.      

     December corn closed higher for eight consecutive sessions before peaking on Wednesday at 646.25.  Additional resistance is at 650-655.  Open interest declined on the rally meaning that it is short covering, not new buying.  Bulls beware!  The short-term cycle points to a top occurring by January 3^rd.  Meanwhile, a close below 630 suggests that the recovery is over.  As it stands now, an irregular correction appears to be developing from the October low at 586, the high made in November at 676.25, and the low made earlier this month at 576.25.  Once it is complete, the downtrend should resume.  The long-term wave pattern points to a decline to 530, while a more bearish outlook shows the potential for a sell-off to 475 or 440.  Currently, the cycles indicate a more important bottom developing on January 25^th or during the period of February 7^th-10^th.  In January, corn futures are lower 52 percent of the time.  Next week, the odds are 70 percent that March corn will be down. 

Bean Outlook:

       Soybean futures have rallied 10 percent during the past couple of weeks fueled by dryness in South America.  Although rain has fallen, it has not met the bulls’ satisfaction.  Volume is light because of the holidays, which is allowing speculators to have their way, as cash sales are lacking to offset buying interest.  Meanwhile, export inspections were 38.2 MB and trail last year by 32 percent.  China took 30.8 MB or 80 percent of shipments.  Right now, traders are betting that if a shortfall in South America occurs, it could increase demand for U.S. soybeans.  Meanwhile, the trend following funds have reduced their short position 20 MB to 60 MB, while the index funds increased their longs 15 MB to 800 MB.   

     March soybeans are following a pattern similar to corn in that prices rose nine consecutive sessions where a candlestick top developed on Wednesday at 1218.75.  Open interest declined on the rally, which means that it is not new buying, but rather, short covering.  The recovery may be over, but unless there is a close below 1193, a rally to 1232 or 1243 cannot be ruled out.  The short-term cycles point to a top occurring by January 3^rd.  Once the recovery is complete, the downtrend should resume with the long-term pattern showing the potential for a sell-off to 1060 or possibly 980.  Right now, the cycles are not clear on a bottom, but one could occur on January 31^st or February 9^th which coincides with a seasonal low.  In January, soybean futures are lower 73 percent of the time.  Next week, the odds are even as to whether March futures will be higher or lower.

 Wheat Outlook:

     Wheat futures are riding higher on the coattail of corn and soybeans although world stocks are climbing.  Meanwhile, conditions in the southern Plains are improving from recent rain and snowfall.  Export inspections were 13.4 MB and are running 10 percent below a year ago.  At this time, the major supportive influence for wheat, which could cause additional price strength, is that the trend following funds are short 420 MB.  This is just below the record of 435 MB set a few weeks ago.  Meanwhile, the index funds are long 925 MB.   

     March wheat rose for eight straight sessions where a top occurred on Wednesday at 656.  If it is exceeded, there is a chance of working higher to 661-667 before the rally from the low made earlier this month at 577.25 ends.  Be alert for a top that could occur by January 4^th.  Unless prices close beyond 689, we are subject to a decline to 530.  Meanwhile, a close past 689 breaks the series of lower highs and lower lows that have been unfolding from the contract high at 994.75 and turns the trend higher.  In January, wheat futures are higher 52 percent of the time.  Next week, the odds are 60 percent that March wheat will be lower.

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Comments and suggestions are provided for information purposes only. Information contained herein is obtained from sources believed to be reliable but not guaranteed to its accuracy or completeness. Readers using the information contained herein are responsible for their own actions. No presentations can be made that recommendations will be profitable or that they will not result in losses. This information is neither an offer to sell nor solicitation to buy of the commodity futures mentioned herein. The writer may be trading in the commodities mentioned.

Corn Outlook:

     Grain futures can be listless during the holidays but, at times, erratic because of lack of liquidity and year-end position squaring as we are seeing now.  Sometimes, it does not require much news to push prices to an extreme.  For example, recent dryness in South America sparked an 8.4 percent rise in corn futures during the past five days.  Rain has fallen, but there are fears that once it passes, stressful conditions will continue.  In other developments, export inspections were better than expected at 44.0 MB, but cumulative shipments are running 6 percent below a year ago.  In the meantime, the funds continue to liquidate their long position.  Last week, the trend following funds sold 10 MB reducing their longs to 250 MB, while the index funds liquidated 15 MB trimming their position to 1.790 BB.                

     March corn has rallied from the low made on December 15^th at 576.25 surpassing resistance at 603.25.  This verified that the sell-off from last month’s high at 676.25 is over and that an intermediate-term bottom has developed.  Prices rose to 625 on Thursday and due for a short-term top.  Support is expected on a pullback to 606, 601, or 595.  Once the setback is over, the market will be in a position for a move upward until January 13^th with the chance of reaching 638.  From a seasonal perspective, corn futures tend to work higher until mid January.  Longer-term, the trend is down with the potential for a sell-off to 530.  A more bearish pattern points to a decline to 475 or 440.  Cycle analysis shows that a longer-term low could occur on February 7^th, although it may be in March.  Next week, the odds are 70 percent that March futures will be higher.

Bean Outlook:

      Dry conditions in South America have mustered a rebound in soybeans.  While it is early in the growing season to become alarmed about yield losses, the market has little else to trade.  The debt crisis in Europe is not going away anytime soon with banks snatching up loans as quickly as possible from the ECB.  This may ease concerns of a credit crunch short-term, but the root cause of their debt still exists.  Export inspections were less than expected at 31.2 MB with cumulative shipments running 35 percent behind last year.  China took 19.5 MB or 62 percent of shipments.  In other developments, the trend following funds covered 35 MB of their short futures position reducing it to 80 MB.  Meanwhile, the index funds are abandoning their longs as they sold 20 MB trimming their longs to 785 MB.      

     The bottom that was made in March soybeans on December 14^th at 1104.5, which was expected to be a short-term low, is an intermediate-term low instead.  This was verified when prices traded past resistance at 1158.75 breaking the series of lower highs and lower lows from 1290.  In addition, if you will notice on the chart, a downtrend line was violated as well.  Prices have since risen to 1177.25 and become overbought short-term.  Support is expected on a setback to the gap left at 1139.75.  For the intermediate-term, the trend is higher with the potential for a recovery to 1197 with 1220 being the extreme.  From a seasonal perspective, soybean futures tend to work upward until early or mid January.  Cycle analysis shows that a top could develop on January 6^th or January 13^th.  Longer-term, the trend is down with the potential for a sell-off to 1060, while a more bearish pattern points to a decline to 980.  A longer-term low may not occur until February 9^th or later.  Next week, the odds are even as to whether March futures will be higher or lower. 

 Wheat Outlook:

     Wheat is at the mercy of corn and soybeans.  World supplies are abundant and the winter storm in the southern Plains should recharge soil moisture.  Last week, export inspections were at the low end of estimates at 16.3 MB, but the pace has improved during the past three weeks.  However, it may not last if the dollar continues its upward path.  Right now, the bulls’ primary advantage is that the trend following funds are short 420 MB, which is 15 MB shy of the record set in late November.  Meanwhile, the index funds continue to reduce their long position that currently stands at 935 MB.

     The cycle low that was due in March wheat on December 20^th occurred on the 16^th at 577.25 instead.  This appears to be an intermediate-term low in which there could be a recovery to 637 that should be complete by January 4^th, although it may not end until January 16^th.  This coincides with the period for a seasonal top.  Longer-term, the trend is down with the potential for a sell-off to 530 or 520.  Next week, the odds are 60 percent that March futures will be higher. 

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Comments and suggestions are provided for information purposes only. Information contained herein is obtained from sources believed to be reliable but not guaranteed to its accuracy or completeness. Readers using the information contained herein are responsible for their own actions. No presentations can be made that recommendations will be profitable or that they will not result in losses. This information is neither an offer to sell nor solicitation to buy of the commodity futures mentioned herein. The writer may be trading in the commodities mentioned.

Corn Outlook:

      The ship for the grains is listing, and the funds are bailing.  Although domestic stocks of corn are tight and dryness is creeping into South America, they are overshadowed by other issues.  World stocks are on the upswing, China’s production is rebounding, and U.S. exports face stiff competition from the southern hemisphere.  In addition, the debt crisis in Europe poses deflationary implications, and the funds are reducing their exposure to commodities.  Last week, the long position of the trend following funds fell 85 MB to 260 MB, while the longs of the index funds were down 20 MB to 1.805 BB.  If deleveraging continues, corn futures could be headed much lower.  In other developments, export inspections were 35.6 MB with cumulative shipments running ten percent behind a year ago.      

     March corn fell to 576.25 on Thursday breaking last week’s low at 580.  Failing to trade past resistance at 603.25 and falling below support instead suggests that the sell-off from the November high at 676.25 could be extending.  If this is the case, a decline to 565 or 545 may be the next low.  A bottom is due late this month or early January, but it may be an intermediate-term low.  This coincides with the timing for a seasonal bottom.  Longer-term, the wave pattern shows the potential for a decline to 475 or 440, while a head and shoulders pattern points to a sell-off to 377.  Cycle analysis indicates a longer-term bottom developing early February or later.  Right now, a rally and close beyond 603.25 is needed to turn the trend higher.  Next week, the odds are 60 percent that March futures will be higher. 

Bean Outlook:

       Worries regarding the European debt crisis were trumped this week by recent dryness in South America.  Although no major weather threats are on the horizon, close tabs are being kept on the situation.  Keep in mind that global stocks-to-usage are in the upper third of the twenty-year range suggesting that soybean supplies are abundant.  Export inspections were less than expected at 29.7 MB, the lowest level seen since early October.  The pace peaked in early November and has fallen 25 percent.  Meanwhile, cumulative shipments are running 33 percent below last year.  China took 19.9 MB or 66 percent of shipments.  In other developments, the trend following funds are short 115 MB of soybeans, while the index funds are long 805 MB.   

     March soybeans traded to 1137.5 on Tuesday followed by a decline to 1104.5 Wednesday.  This is likely a short-term bottom with resistance is expected on a bounce to 1130.  Since peaking in October at 1290, a series of lower highs and lower lows have been developing.  Unless 1158.75 is exceeded, the trend is down with a decline to 1085 or 1060 likely.  Longer-term, the wave pattern points to a sell-off to 980.  Cycle analysis shows a bottom occurring late December or early January.  However, it will probably be an intermediate-term low.  A longer-term low may not develop until mid January or early February.  Next week, the odds are 60 percent that March futures will be lower.

 Wheat Outlook:

     U.S. and global wheat stocks are rising, while exports are declining, which does not bode well for a higher price outlook.  Fundamentally, wheat is the weakest of the grains.  In addition, the market faces stiff competition from strength in the dollar and increased exports from the Black Sea region.  Export inspections last week were 16.6 MB with cumulative shipments running seven percent below last year.  In other developments, the trend following funds reduced their short futures position 20 MB to 395 MB, while the longs of the index funds grew 15 MB to 940 MB.  Be advised that the longs of the index funds are down 18 percent from the peak of 1.145 BB in May 2010.        

     March wheat peaked at 609 on Tuesday and fell to 579.75 Thursday, which is likely a short-term bottom.  Unless 609 is exceeded, we are on track for heading to 555 as the next low.  Since peaking in May at 994.75, a series of lower highs and lower lows have been unfolding.  Unless there is a close beyond 637, the longer-term trend is down with the potential for a sell-off to 530, 520 or 500.  Cycle analysis points to a bottom occurring late December.  However, it may be an intermediate-term low.  A longer-term low may not develop until mid January or later.  Next week, the odds are 80 percent that March futures will be higher.

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Comments and suggestions are provided for information purposes only. Information contained herein is obtained from sources believed to be reliable but not guaranteed to its accuracy or completeness. Readers using the information contained herein are responsible for their own actions. No presentations can be made that recommendations will be profitable or that they will not result in losses. This information is neither an offer to sell nor solicitation to buy of the commodity futures mentioned herein. The writer may be trading in the commodities mentioned.