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Corn values have fallen to their lowest level in three years as harvest yields are much better than expected. Traders believe that in November the USDA will raise their yield estimate from 155.3 bpa pushing production to 14.0 BB with ending stocks near or exceeding 2.0 BB. While harvest got off a slow start this year, the tempo has quickened with 59 percent of the crop in the bin compared to 62 percent for the average. China has shown interest in U.S. corn as the pace of shipments has risen. Last week, shipments were 26.5 MB, which is above the average needed to reach USDA’s projection of 1.225 BB. However, shipments tend to peak in October or early November. In other developments, the trend following funds have loaded the boat with a record short position of 1.110 BB.
December corn continues to grind lower in the sell-off from the high made in August at 508.25. Unless there is a rally beyond 447.75, the trend is down with prices on track for a decline to a target mentioned in previous comments at 420 or 412. A more bearish pattern points to a sell-off to 380 or 364. An intermediate-term low could develop on November 8th, but it may be as late as November 22nd. Seasonally, corn futures generally do not establish an important low until the first week of January suggesting the bulls may have a long wait. During November, corn futures are down 61 percent of the time. Next week, the odds are 60 percent that December corn will be lower.
Soybean futures have traded in a sideward pattern during October as demand from China may be factored into the market. While their purchases provide support, harvest and above average yields are weighing on bullish optimism. Because of an expected increase in production, traders look for ending stocks this fall to reach 180-200 MB. Meanwhile, planting is progressing in South America and weather is favorable for a bumper crop. As of last week, 77 percent of the U.S. crop had been harvested which is on par with the average. Exports are shining because of China with inspections last week posting a record 83.6 MB. China took 59.8 MB or 71 percent of shipments. However, keep in mind that shipments tend to peak in November. The trend following funds have been lightening their long futures position since September reducing it to 350 MB.
March soybeans fell to 1248.25 on Tuesday and recovered to 1269.5 Thursday. Additional resistance is expected 1274-1281. If you will notice on the chart, a wedge type pattern is developing. Generally, the breakout of these formations is in the direction of the existing trend, which, in this case, is down. Unless we climb past 1290, the chances are that prices will fall below support at 1247.75 to 1220-1215. This could occur around November 7th, but may be later depending upon when the break below 1247.75 develops. Longer-term, the potential exists for a sell-off to 1180, while a more bearish pattern points to a decline to 1103. Seasonally, soybean futures tend to trend lower until the end of February. During November, the market is higher 68 percent of the time. Next week, the odds are 66 percent that March soybeans will be higher.
Wheat prices have backed off recently as they are weighed by the expectation of a bumper corn crop and planting that is progressing smoothly. Last week, 86 percent of the crop had been sewn compared to 87 percent a year ago and 85 percent for the average. Currently, 61 percent of the crop is rated in good-to-excellent condition, down 4 points from a week ago. Export inspections were 16.3 MB, slightly below the average needed to reach USDA’s projection of 1.1 BB. Shipments peaked in September with the pace declining 40 percent. Export competition is expected with Australia and India. India has announced that they are cutting prices to boost exports. In other developments, the trend following funds are less bearish as they have reduced their short futures position to 115 MB.
Last week, December wheat set an intermediate-term top at 711.25 and has traded lower since. Support is expected at 665-655. Look for a period of consolidation until November 7th, 13th or 18th. At that time, an up turn is expected with the potential for advancing to 742 or possibly 774. Seasonally, wheat futures tend to work higher from early December into January. During November, wheat values are down 52 percent of the time. Next week, the odds are 60 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.