On The Money Grain Commentary 1-19-12

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 25th or on February 1st.  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 24th.  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 25th or on February 1st.  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.