On The Money Grain Commentary 1-17-13

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Corn Outlook:

     Corn futures have finally climbed out of the gutter pulling soybeans and wheat with them.  The USDA was generous in its supply-demand report last week when they increased feed consumption 300 MB.  Somehow, this does not add up considering hog numbers are unchanged from a year ago and cattle are down 6.0 percent.  However, I cannot argue with their export projection of 950 MB, although there is room for it to be lowered.  Last week, inspections were 9.2 MB, the third consecutive week they have been less than 10.0 MB.  For the past several weeks, the trend following funds have been reducing their long corn position with it falling 105 MB last week to 205 MB.  It will be interesting to see this week whether they are rebuilding their position.  Meanwhile, the longs of the index funds stand at 1.865 BB.  

     Since bottoming at 678 earlier this month, March corn has risen 8.4 percent in value to 735 and is in a period when a top could develop.  Last week’s comments mentioned that a peak could occur during the period of January 15th-17th or on January 22nd.  If 735 is exceeded, the next level of resistance is 740-745.  Otherwise, a setback to 712-705 is due.  Meanwhile, the decline from 767.5 is obviously over with the question being whether the sell-off from the contract high at 845 has ended as well.  As of now, it is too soon to say, as it is still a work in progress.  If the decline from 845 is not finished, after a pullback occurs, the recovery from 678 could extend to 762 and not end until later this month or early February.  Longer-term, however, the risk remains for a sell-off below 678.  Next week, the odds are 60 percent that March futures will be lower.

Bean Outlook:

      Soybean futures have risen since the crop report and are being pulled higher by corn and wheat.  Weather is mostly favorable in South America although a few dry spots are popping up in Brazil.  A few early-planted soybeans are being cut with harvest expected to get into full swing later next month.  Exports are holding up well with a 120,000-ton sale reported to China earlier this week.  Inspections were 39.1 MB with China taking 22.0 MB or 56 percent of shipments.  Last week, the funds sold 145 MB reducing their long position to 180 MB.  Like corn, it will be interesting to see this week if they are rebuilding their position.  Meanwhile, the longs of the index funds fell 30 MB to 640 MB. 

      March soybeans were higher this week and have risen beyond the downtrend line extending from the contract high at 1728.25.  Prices traded to 1448 on Thursday and, if exceeded, may rise to 1465.  Be aware, however, we are entering a period through January 23rd in which a top could develop.  Support is expected on a setback to 1410 followed by 1390.  The corrective nature of the decline from 1501.25 to 1351.5 implies that we may stay in a trading range until later this month.  Longer-term, there is a risk of falling below the low made last week at 1351.5.  Next week, the odds are 70 percent that March futures will be lower.

 Wheat Outlook:

     Wheat futures are underpinned from USDA’s forecast of tighter supplies, persistent dryness in the southern Plains, and concerns of frost damage to Russia’s crop.  Export inspections last week were disappointing at 10.5 MB and below the average needed to reach USDA’s target of 1.050 BB.  At the current pace of shipments, it will be a photo finish at the end of the marketing year as to whether their estimate will be reached.  Last week, the trend following funds lightened their short wheat position by 15 MB reducing it to 340 MB.  This was the first reduction in their position since the end of November.  Meanwhile, the longs of the index funds fell 20 MB to 900 MB.    

     Since bottoming last week at 736.25, March wheat has risen to 791 and may stand a chance of climbing to 800 but probably no more than 815.  Meanwhile, be aware that we are entering a period for a top to develop that extends through January 23d.  As it stands now, the decline from 895.5 is complete.  Once the recovery from 736.25 ends and unless there is a close beyond 835, the potential exists for a sell-off to 715 which should wrap up the decline from 929.75.  Next week, the odds are 78 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.