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The bulls are dancing to the drum of a weather market in South America, which has been the source of the corn market’s recent strength. However, the situation must intensify in order to keep the drumbeat going. Meanwhile, the trend following funds have been adding to their long futures position the past couple of weeks increasing it to 375 MB. The longs of the index fund are up slightly to 1.970 BB. In other developments, export inspections shined last week at 21.2 MB. This was the best number seen since the third week of September. However, we have a lot of catching up to do as the pace of shipments is running 125 MB below the level needed to reach USDA’s target of 950 MB. Ethanol production is lagging 175 MB behind USDA’s projection.
March corn fell to 714.5 last week where support developed and rose past resistance at 735 to 744.5 on Thursday. The market is overbought, but unless there is a decline below 732, one short-term wave pattern shows the potential for climbing to 755, which should wrap up the recovery from this month’s low at 678. In this event, a top could unfold on February 5th. Currently, old crop spreads are not supportive of prolonged price strength. Once prices peak, a pullback to 715 or lower could occur. Keep in mind that, historically, corn futures are down in February 53 percent of the time. Next week, the odds are 60 percent that March corn will be higher.
Recently, the bulls have played up a weather market in South America even though the problem area is not widespread. If it worsens, however, soybean production could fall 1-2 million tons. Otherwise, we have the potential for a record crop. In other developments, exports are sound, but the pace has slowed since mid November. Inspections last week were 40.6 MB with China taking 27.2 MB or 67 percent of shipments. In the weeks ahead, as the South American crop becomes available, shipments from the U.S. will slacken. Meanwhile, the trend following funds have become more bullish the past couple of weeks with their long futures position rising to 315 MB. The longs of the index funds are up slightly to 530 MB.
After a setback to 1415 last week, March soybeans traded past resistance at 1460.75 to 1484.25 on Thursday. If you will notice on the chart, the market is hugging the upward trend line extending back to this month’s low at 1351.5. Right now, the short-term pattern shows prices working upward to 1493-1500 and maybe 1525 before the recovery is done. In that event, a top should be watched for on February 5th or February 8th. Meanwhile, a decline below 1452 turns the short-term trend down and increases the chance that the recovery has ended. Historically, soybeans futures are higher at the end of February 58 percent of the time. Next week, the odds are 60 percent that March soybeans will be higher.
There is not much fresh news in wheat with it being a follower of corn and soybeans. The southern Plains lacks precipitation while the Midwest is catching up from last year’s drought. Exports are struggling, but inspections were better than expected last week at 22.2 MB. As it stands now, it will be a photo finish as to whether USDA’s projection of 1.050 MB will be reached. The trend following funds are sporting a short futures position of 270 MB while the index funds are long 725 MB.
March wheat rose to 791 on Thursday, which may have ended the recovery from last week,’s low at 763. Unless there is a rally past resistance at 799.75 turning the trend up, a decline below 763 projects a sell-off to 730 or 718 and probably closer to 700-697. In that event, be alert for a bottom on February 11th or February 20th. During February, wheat futures are down 79 percent of the time. Next week, the odds are 80 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.