Temperatures are soaring in corn futures keeping traders nerves frayed. Prices were slammed two weeks ago because of the bearish stocks report. However, the heat turned up the following week when the USDA slashed their yield estimate to 155.8 bpa from 162.5 bpa. With over a $2.00 price swing within a two-week period, the corn market is not for the squeamish! During this time, the trend following funds trimmed their long corn position 115 MB to 1.745 BB. Meanwhile, the longs of the index funds stand at 2.420 BB. In other developments, export inspections were 30.6 MB and below the average needed to reach USDA’s projection of 2.0 BB. Harvest is forging ahead at 51 percent complete compared to 13 percent a year ago and 30 percent for the five-year average.
December corn traded to 588 on Wednesday, a gain of 29 percent from the low made last week at 454.25. Short term, we may work upward to 597-602 before there is a significant break. However, be advised that prices are vulnerable a 30-50 cent pullback lasting 5-8 days or longer. Once it is complete, the market should trade higher which will likely be a multi-month or a multi-year high. This could occur as soon as October 26th, but it will probably be closer to November 15th.
Currently, the sentiment index shows that 96 percent of traders are bullish corn, which reflects the hysteria and madness of the crowd. This is not sustainable and cannot continue for a prolonged period. Only 3 percent of traders are bullish the dollar.
Next week, the odds are 55 percent that December futures will be lower.
Volatility has gone through the roof in soybeans as there has been a price swing of nearly $2.50 within the past two weeks. During that time, the trend following funds trimmed their long position 120 MB to 595 MB, while the longs of the index funds rose slightly to 965 MB. Although the domestic supplies of soybeans have tightened, the global stocks-to-usage are in the upper third of the twenty-year range indicating an ample supply. Meanwhile, the recent price strength increases the prospect for additional acres in South America. In other developments, export inspections were 37.9 MB with China taking 15.6 MB, or 41 percent of the shipments. Harvest is well ahead of schedule at 67 percent complete compared to 22 percent a year ago and 48 percent for the five-year average.
November soybeans rallied to 1194.5 this week and are running on fumes. However, unless there is a decline into the gap at 1150.75, we may trade still trade. Meanwhile, the weekly chart shows that the long-term advance from the June low at 886.75 is likely in its final phase. If this is the case, a multi-month or a multi-year high is forthcoming. Currently, the sentiment index shows that 95 percent of traders are bullish soybeans, which means we are vulnerable to a sharp break.
Next week, the odds are even as to whether November futures will be higher or lower.
Wheat futures have risen recently in an effort to keep up with corn and soybeans. Global stocks have tightened but considered ample. Egypt bought 220,000 tons of wheat this week, all from the U.S. Export inspections were 21.9 MB and below the average needed to reach USDA’s projection of 1.250 BB. Currently, 70 percent of the winter wheat crop is planted compared to 65 percent a year ago and 68 percent for the five-year average. The short position of the trend following funds has risen to 465 MB, which suggests that if corn and soybeans work higher, they could be forced to cover.
December wheat traded to 739.75 on Monday, which is likely a short-term top. Unless there is a sell-off below 673, the market should trade higher and challenge the September price (see some of the fundamental reasons as to why, here). Meanwhile, there is a more bullish pattern showing the potential of advancing past the high set in August. While this is contrary to the seasonal pattern, which turns down in mid October, it could be overcome if dryness persists in the Plains.
Next week, the odds are 60 percent that December futures will be lower.
Producers can actually lose money in a bull market. How? They fail to act when the market tops, then wait around for a recovery as they worry about lost potential revenue, as the market slips below their own break even. The only way to avoid this scenario is by creating a plan and sticking to it.
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