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Corn Outlook:
Grain traders have been in the dark the past few weeks because of the government shutdown. Much information provided by the USDA, such as export sales and the weekly crop progress reports, has been unavailable. As a result, trading has been in a vacuum. Meanwhile, lawmakers reached an agreement on Wednesday that keeps the government open through January 15th. Then the circus reopens! Corn is supported from rain slowing harvest, and rumors of purchases by China. However, it faces a headwind from a potential record crop and EPA’s proposal to reduce its bio fuel mandate. If realized, corn demand will be reduced in 2014. Harvest is progressing with estimates of it being 30-35 percent complete compared to the average of 38 percent. Yields are favorable with the consensus at 158-161 bpa versus USDA’s projection of 155.3 bpa in September. This implies production could top 14.0 BB with ending stocks in excess of 2.0 BB.
December corn fell to 432 on Monday followed by a rebound to 446.5 Thursday. Additional resistance is at 450. Corn futures tend to move lower through the end of October and turn up into early to mid November. However, if 450 is exceeded, a higher high will have occurred suggesting that we could climb to 460 and peak around November 1st. Meanwhile, longer-term, the trend is down with the potential for a decline to 420 or 412. A more bearish pattern points to a sell-off to 380 or 364. Seasonally, the corn market usually does not establish an important bottom until the first week of January. Next week, the odds are 78 percent that December corn will be lower.
Bean Outlook:
Soybeans are caught in a cross current from better than expected harvest yields and rumors of Chinese purchases. However, because of the government shutdown, sales information has been lacking. The market has been supported this week from the rumor that China has purchased 2.0-2.5 million tons of soybeans since the shutdown. Meanwhile, rain has slowed harvest, which is estimated at 35-45 percent complete compared to the average of 58 percent. Traders estimate yields in a range from 42-44 bpa versus USDA’s projection of 41.2 bpa in September. If realized, production could exceed 3.2 BB with ending stocks of 180-200 MB. Moisture prospects in South America are decent for the next couple of weeks, which should kick off a favorable growing season.
November soybeans bottomed on Monday at 1261.75 and recovered to 1296 Thursday. Seasonally, soybean futures tend to be on the defensive until the end of October followed by a recovery into mid November or early December. However, if 1305.75 is exceeded, a bottom has occurred early projecting a rebound to 1335. The spreads are acting positively suggesting there may be additional strength. Meanwhile, longer-term, the trend is down. Failure of support at 1261.75 projects a move downward to 1237. Next week, the odds are 70 percent that November futures will be higher.
Wheat Outlook:
Wheat is underpinned from potential interest of Brazil purchasing U.S. wheat, and the likelihood of reduced seeding in the Midwest this fall because of delayed corn planting last spring. Brazil’s primary supplier, Argentina, was hit with an early frost and has reduced exports to increase domestic supplies. Meanwhile, recent moisture in the Plains will likely curb enthusiasm short-term.
December wheat traded to 699.75 on October 8th which appears to be an intermediate-term top. If so, a setback to 675-668 could occur during the next few days. Seasonally, wheat futures tend to peak in mid October followed by a decline into the first week of December. However, if an important low developed in August at 635.5 ending the sell-off from the high made last November at 913, we may be in the beginning stages of a longer-term rally. Right now, the trend is up with the wave pattern showing the potential for rising to 742. Cycle analysis points to a top on October 29th or November 6th. Next week, the odds are 70 percent that December 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.