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Diminishing exports have weighed on grain values, especially corn. Last week, inspections were chump change at 7.1 MB with cumulative shipments running 55 percent below a year ago. At the end of this week, the USDA gives their final production estimate for 2012 along with adjustments for demand. Traders are looking for a slight decline in production and usage coupled with an increase in ending stocks. After the report is released, attention will focus on spring planting intentions and the crop in South America. Meanwhile, large traders have lost their lust for corn as the trend following funds sold 30 MB last week reducing their long futures position to 310 MB. This is the smallest position they have held since June 2012. The longs of the index funds were up slightly to 1.860 BB. However, they have been in a liquidation phase since August 2010.
March corn fell to 678 on Monday, January 7th and recovered. Last week’s comments mentioned that a bottom could occur on January 9th. As it stands now, the initial sell-off from the November high at 767.5 has ended and a recovery to 707-712 or 723 is likely. A top is expected during the period of January 15th-17th although it could be closer to January 22nd. Unless the crop report is a game changer putting the bulls in control, the longer-term trend is down with the potential for a decline to 640 or 630. A more bearish pattern points to prices falling to 600 or 565. From a seasonal perspective, corn futures tend to be on the defensive until the end of February. Cycle analysis shows a bottom developing during the period of February 13th-15th. Next week, the odds are even as to whether March corn will be higher or lower.
Soybean futures are being held in check from favorable weather in South America and expectations for a large crop. At the end of the week, the USDA wraps up the book for the 2012 crop with traders expecting a slight increase in production and ending stocks from last month. Traders will also take a hard glance at production estimates in South America. Exports have been sensational this season but have diminished since mid November. Inspections last week were 39.6 MB and are running well ahead of exceeding USDA’s projection of 1.345 BB. China took 25.3 MB or 63 percent of shipments. However, look for them to turn to South America to fulfill the majority of their needs in the weeks ahead. The trend following funds have lost their bullish zeal for soybeans as they sold 40 MB last week reducing their long futures position to 325 MB. This is the smallest position they have held since February 2012. The longs of the index funds stand at 670 MB. They have been in a liquidation mode since November 2010.
March soybeans bottomed on January 4th at 1356 which was sooner than the low mentioned in last week’s comments that was expected on January 9th. Unless there is a bearish crop report, a trading range could develop with resistance likely on a recovery to 1415 followed by 1428 and 1445. Be alert for a top that may develop on January 16th although it may be closer to January 23rd. Longer-term trend is down with the potential for a sell-off to 1265. A more bearish pattern points to prices falling to 1130. Seasonally, soybean futures tend to work lower until the end of February. The cycles show that a bottom could occur on February 18th. Next week, the odds are even as to whether March soybeans will be higher or lower.
The southern Plains continue to suffer from parched soils but the wheat crop may get a slight boost in moisture during the next few days. At the end of the week, traders will get a glimpse at USDA’s winter wheat acreage and production estimates. Export inspections were 13.3 MB and are running slightly short of the pace needed to reach USDA’s projection of 1.050 BB. The trend following funds are becoming more bearish as they added 20 MB to their short futures position last week increasing it to 355 MB. This is the largest position they have held since last May. The index funds are long 920 MB.
March wheat bottomed on January 4th at 739.75 and rebounded to 760.5 earlier this week. As it stands now, the sell-off from 895.5 may be over although the trend indicators have not yet confirmed it. However, if the decline is done, and provided we do not set a new low, there could be a recovery to 778-783 or possibly 800. This could occur around January 18th or January 23rd. Seasonally, wheat futures tend to bounce into the middle of the month. Meanwhile, if 739.75 cannot hold, look for prices to work lower to 725 or 705. Next week, the odds are 60 percent that March wheat will be down.
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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.