On The Money Grain Commentary 1-24-13

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Corn Outlook:

     There is not a lot of fresh news in corn.  Since the crop report a couple of weeks ago, the market has risen from concerns of tight stocks even though exports are dismal.  In addition, planting intentions are expected to exceed 99.0 million acres compared to 97.1 million a year ago.  These two factors weighed on corn values this week causing them to back off.  Meanwhile, after five weeks of fund liquidation, the trend following funds added 105 MB to their long futures last week increasing them to 310 MB.  The index funds tacked on 95 MB to their longs raising them to 1.960 BB.  This was mostly the result of rebalancing.  In other developments, export inspections were a paltry 10.9 MB and well below the average needed to reach USDA’s projection of 950 MB.  We must ship 20.8 MB each week to achieve their target.    

     March corn traded to 734.75 on Tuesday but was unable to get past last week’s high at 735.  Prices backed off and broke support at 722.25 suggesting that the rebound from the low made earlier this month at 678 is over.  Previous comments mentioned that the recovery could end on January 22nd.  As it stands now, a pullback to 706-700 can be expected.  Seasonally, corn futures tend to move downward until the end of February, which means that we are at risk of breaking 678.  If it happens, look for a decline to 656 or 643.  Right now, the cycles are pointing to the market to being on the defensive until the period of February 4th-8th.  Next week, the odds are 60 percent that March corn will be lower.

Bean Outlook:

      After playing second fiddle to corn the past several weeks, soybeans have assumed the leadership role in grains.  Exports are supportive with a few dry spots noted in South America.  However, a wetter pattern is forecast  during the next few days which is causing a setback.  In the meantime, some analysts are projecting Brazil’s crop to top 83.0 million tons.  Inspections last week were better than expected at 48.0 MB with China taking 26.0 MB or 54 percent of shipments.  The trend following funds turned more bullish last week as they added 40 MB to their long futures position increasing them to 220 MB.  Meanwhile, the index funds liquidated 220 MB of their longs reducing them to 520 MB.  This was because of rebalancing. 

      March soybeans rallied to 1460.75 and peaked on Tuesday, January 22nd.  Last week’s comments mentioned that a top could develop at 1465 on January 23rd.  As it stands now, the recovery from the low made earlier this month at 1351.5 is probably done.  If so, a pullback to 1406 or 1393 can be expected.  Cycle analysis points the market working lower until February 1st or February 5th.  If you will notice on the chart, a trading range may be developing as shown by the trend lines.  However, a note of caution is warranted, as there is a strong seasonal tendency for soybeans to fall until the end of February, especially if there are no problems in South America.  In the event that the low at 1351.5 cannot hold, a sell-off to 1130 is expected.  Next week, the odds are 60 percent that March futures will be lower.

 Wheat Outlook:

     Dry weather in the southern Plains is the supportive influence in wheat.  However, it has been well publicized and fresh news is needed to sustain the bulls’ interest.  Export inspections were better than expected at 21.8 MB but below the average needed to reach USDA’s projection of 1.050 BB.  Meanwhile, the trend following funds are becoming less bearish as they covered 60 MB of their short position last week reducing it to 265 MB.  The index funds decreased their longs 165 MB to 735 MB because of rebalancing.  

     March wheat traded to 799.75 on Tuesday where a downside reversal occurred.  This was short of a target mentioned in previous comments at 800.  As it stands now, the recovery from the bottom made earlier this month at 736.25 is over.  Support is at 760.  However, there is a five-wave pattern showing in the decline from 779.75, which increases the chance for a sell-off below 736.25 to 715 or 697.  From a seasonal perspective, there is a strong seasonal tendency for wheat futures working lower until the end of February.  If we cannot hold 736.25, the cycles point to a bottom developing on February 8th, February 11th, or possibly February 20th.  Next week, the odds are even as to whether March wheat will be higher or 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.