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Corn futures are weighted own from improving crop potential in South America, and the prospect that USDA will increase production and ending stocks in the January Crop Report to be released on the 10th. Expectations are that ending stocks could top 2.0 BB. In other developments, export inspections were below estimates at 24.9 MB and the average needed to attain USDA’s projection of 1.450 BB. While sales are on track to achieve their target, the pace of shipments indicate that we could fall 100 MB short of their estimate. The trend following funds remain bearish but lightened their short position 90 MB last week to 785 MB. In the weeks ahead, traders will be focused upon weather in South America and estimates for 2014 planting intentions.
March corn rebounded to 436 before Christmas and has worked lower. After a bounce to 427.25 on Thursday, the market fell to challenge the contract low at 418.5. Resistance is expected at 427.25 followed by 432. Unless there is a recovery beyond 440.75, the longer-term trend is down with prices headed to 405 and probably 387. While a bottom could occur as soon as January 8th, it may be closer to January 24th or January 30th. Once a bottom develops, a seasonal up swing is expected into March-April. During the month of January, corn futures are down 53 percent of the time. Next week, the odds are 70 percent that March corn will be lower.
Rainfall last weekend in Argentina and Brazil has dampened bullish enthusiasm in the soybean complex. As much as 2.5 inches fell in some areas that will improve the chance for producing a record crop. Meanwhile, harvest for early planted soybeans is just around the corner. Export inspections have slowed and were below estimates last week at 43.1 MB. Since peaking in November, the pace has fallen 33.0 percent. China took 18.0 MB or 41 percent of shipments, the smallest quantity taken since September. The trend following funds are beginning to capture profits as their long position fell 15 MB last week to 680 MB. If crop prospects remain favorable in South America, and China backs away from U.S. soybeans in favor of Brazil, additional liquidation can be expected.
My comments a couple of weeks ago mentioned that a break to 1286-1274 was expected in March soybeans. As it turned out, we blasted through the target zone to 1262.5 on Thursday without any hesitation. Short-term support is at 1256. Meanwhile, the longer-term pattern points to a sell-off below the November low at 1233.25 to 1195, 1167 or 1140. Seasonally, the tendency is for soybean futures to trend lower until the end of February. The cycles show that a bottom could occur as soon as January 21st; however, if we follow the norm, it may be closer to February 10th, February 19th or March 10th. Historically, January is not a good month for soybeans as they are down 74 percent of the time. Next week, the odds are even as to whether March futures will be higher or lower.
There is not much fresh news in wheat. Prices are struggling from expectations of increased global supplies. Canada is projecting a record crop, while Australia is expecting to produce its third largest. In other developments, export inspections were dismal last week at 13.3 MB and below the average needed to reach USDA’s target of 1.1 BB. However, shipments are still on track to reach their projection, but just barely. The trend following funds are less bearish as they trimmed 10 MB from their short position last week reducing it to 510 MB. However, this is just under the record of 520 MB.
March wheat simply cannot win a cigar! The market has been in a relentless downward spiral since topping early last month at 674.75. Unless there is a rally past 610, the wave pattern points to prices falling to 580 or possibly 564. A bottom is likely by January 8th. Once it occurs, a 3-5 percent rebound lasting 5-8 days is probable. When complete, look for a final decline that ends the sell-off from the contract high at 912.75. This could unfold by January 29th or February 7th. Historically, wheat futures are up 53 percent of the time at the end of January. Next week, the odds are 60 percent that March wheat 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.