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Traders have rung in 2013 and have a lot on their plate in the days and weeks ahead. The final crop production report for 2012 is on January 12th, weather is favorable in South America, corn exports reek, and attention will begin to focus on spring planting intentions. Meanwhile, we need not forget about the political shenanigans that could come from Washington. Although the fiscal cliff has been averted, short-term, politicians will face the debt ceiling and sequestration cliff in February. Fiscal irresponsibility cannot be avoided forever although our leadership apparently thinks otherwise. In the meantime, exports are a sore spot for the bulls as inspections were 7.9 MB last week. At the current pace, shipments are on track for 935 MB, possibly much less. The trend following funds are losing their bullish enthusiasm for corn as they sold 170 MB last week, reducing their long position to 340 MB. The index funds increased their longs 20 MB to 1.855 BB.
March corn rebounded to 707.25 on Wednesday forming a double top with the December 24th high. A reversal occurred at this level followed by a sell-off below support at 687.5. Last week’s comments mentioned that if this level was broken, a decline to 675 was likely with a more bearish pattern pointing to a sell-off to 655, 640 or 630. As it stands now, the short-term wave pattern shows prices falling to 660. Be alert for a bottom on January 9th or January 14th with resistance expected on a rebound to 705-715. Longer-term, however, the market is at risk for a sell-off to 600 or 565 with a bottom likely in mid to late February, possibly during the period of February 13th-15th. Next week, the odds are 60 percent that March corn will be lower.
The next mover and shaker for soybeans will be the final crop production report for 2012 that is due out on January 12th. It has the reputation of generating surprises and being a game changer. In other developments, weather in South America looks favorable for the next ten days. Planting intentions this spring will be a much talked about subject with the new crop soybean-corn ratio currently at 2.1:1. Exports are firm with inspections last week at 35.5 MB. However, they peaked in mid November and are trending lower. The trend following funds are losing their bullish zeal for soybeans as they sold 105 MB last week, reducing their longs to 365 MB. This is the smallest long position they have held since February 2012. The longs of the index funds fell 10 MB to 670 MB.
March soybeans traded to 1435 on Wednesday but could not hold onto their gains and a reversal lower occurred. Prices broke support at 1397.75, which projects a move downward to the November low at 1356 or possibly a sell-off to 1275. An intermediate-term bottom may develop on January 9th or January 14th in which there could be a rebound. Longer-term, the seasonal tendency is for a decline until the end of February provided there is not a crop issue in South America. Unless one occurs, we could be facing a sell-off to 1130 with a bottom developing on February 18th. Next week, the odds are 60 percent that March soybeans will be lower.
While moisture has fallen recently in areas of the Plains, drought is still a concern. Exports improved for a few weeks, but inspections were a disaster last week at 7.7 MB. The current pace of shipments shows that we will struggle to reach USDA’s projection of 1050 BB. Meanwhile, the trend following funds are becoming more bearish as they increased their short position 30 MB last week to 335 MB. This is the largest short position they have held since last May. The longs if the index funds were up 10 MB to 910 MB.
March wheat briefly recovered to 788 on Wednesday, which was followed by a nasty reversal lower. As it stands now, we are likely headed to 730 before the sell-off from 895.5 is over. Look for a bottom on January 9th or January 14th followed by a recovery to 790. 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.