On The Money Grain Commentary 10-24-13

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Corn Outlook:

Trading in the grains is returning to normal as the government shutdown has ended and more information from the USDA is becoming available.  Recently, corn has been underpinned from purchases by China and a slow harvest.  As of last week, only 39 percent of the crop had been cut compared to 85 percent a year ago and 53 percent for the average.  However, it should accelerate after mid week when weather improves.  Meanwhile, yield reports are exceeding expectations with traders anticipating yields at 157-161 bpa compared to USDA’s present estimate of 155.3 bpa.  If realized, production this fall will top 14.0 BB with ending stocks exceeding 2.0 BB.  Export inspections were better than expected at 32.2 BB with the pace on track to reach USDA’s projection of 1.225 BB.  Information regarding the fund position will not be available until next week.

December corn has been marking time since bottoming earlier this month at 432.  The wave pattern shows that this is likely an intermediate-term low.  For the past week, prices have been bound in a range from 447.75-437.  The trend indicators are neutral which means the market has no direction and may stay in a range for a while.  Meanwhile, a bounce to 453 with 460 the extreme cannot be ruled out.  Seasonally, corn futures generally trend sideways to higher until early November followed by a decline into the first week of January.  Cycle analysis shows that the market could turn down during the period of October 29th-November 1st.  Longer-term, the trend is lower with the potential for a sell-off to 420-412.  A more bearish pattern points to a decline to 380 or 364.  Next week, the odds are 70 percent that December corn will be higher.

Bean Outlook:

     Soybeans have received a lot of attention lately from Chinese purchases.  Inspections last week were a marketing year high at 59.3 MB with China taking 48.9 MB or 82 percent of shipments.  Currently, we are on track for exceeding USDA’s export projection of 1.370 BB.  As a result, they may increase their estimate in November.  Meanwhile, be advised that soybean exports usually peak in late October or November.  Harvest is lagging at 63 percent complete compared to 79 percent a year ago and 69 percent for the average.  Yield reports are above average.  Most traders project them in a range from 42-44 bpa compared to USDA’s estimate of 41.2 bpa.  If realized, production could exceed 3.2 BB with ending stocks this fall of 180-200 MB.  A few guesses are as high as 220 MB.  While it is early, traders are beginning to look at planting next spring.  Currently, profit margins favor soybeans over corn with traders expecting a 6.0 million acre increase in 2014.

      March soybeans have been in a short-term uptrend since bottoming early last week at 1249.  Prices traded to 1290 on Wednesday falling short of resistance at 1294.25.  If you will notice on the chart, a wedge type pattern appears to be developing.  The breakout of these formations is generally in the direction of the existing trend, which, in this case, is down.  Short-term support is expected on a pullback to 1265.  In the event that 1249 fails, look for a break to 1220 as the next low.  Meanwhile, a rally beyond 1294.25 violates the wedge pattern and projects climbing to 1310.  Seasonally, soybean futures tend to work higher into early November and, sometimes, into the first week of December.  Cycle analysis shows the market should turn down by November 6th, but it could be as soon as October 30th.  Longer-term, the potential exists for a sell-off to 1180, while a more bearish pattern points to a decline to 1103.  Next week, the odds are even as to whether March futures will be higher or lower.

 Wheat Outlook:

Traders have been friendly to wheat because of strong exports, but improving weather for the winter crop in the southern Plains may soon offer resistance.  Export inspections were disappointing last week at 20.5 MB and below the average to reach USDA’s projection of 1.1 BB.  For the fourth consecutive week, the pace of shipments has fallen, and is down 29 percent from its peak in late September.  Keep in mind that wheat exports generally peak for the season in September.  Planting is progressing at 79 percent complete compared to 80 percent a year ago and is on par with the average.  Sixty-five percent of the crop is reported in good-to-excellent condition.

December wheat peaked at 711.25 on Monday and tested it again Wednesday at 710.5.  As it stands now, an intermediate-term top appears to have developed ending the rally from 635.5.  If so, a pullback to 675-665 could occur with a bottom around November 13th.  Seasonally, wheat futures tend to peak mid to late October followed by a decline until the first week of December.  From here, prices work higher into early to mid January.  Longer-term, the trend is up with the potential for advancing to 735 or 742.  Next week, the odds are even as to whether December 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.