On The Money Grain Commentary 11-1-12

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Corn Outlook:

     The Drought of 2012 is one for the history books as corn harvest draws to an end.  Eyes are now centered upon weather in South America and exports.  Planting has been slow in Argentina because of wet conditions.  Expectations are for South America to produce a record crop, but that comes into question with the planting delay.  Meanwhile, there is not a lot that can be said for exports other than they stink.  Although U.S. corn values have fallen in relation to Argentina, they remain at a $30 premium.  Inspections improved somewhat last week to 15.5 MB but are below the pace needed to reach USDA’s projection of 1.150 BB.  So far, sales are running 48 percent behind a year ago while shipments lag 37 percent.  After six weeks of liquidation, the trend following funds added 135 MB to their long position increasing it to 1.115 BB.  The longs of the index funds were down slightly to 1.815 BB.       

     December corn fell to 732.5 on Monday and rebounded to 763.25 Thursday.  Since late September, the market has been confined in a range from 705-776.  We must exceed 776 for an upside breakout.  In that event, a recovery to 795 can be expected.  Meanwhile, Thursday’s weak close gives the edge for setback to support at 732.5 or a test of the lower end of the range again.  One pattern shows the potential for rising beyond the contract high at 849.  However, this will be a tall order to achieve in the December contract unless conditions in South America worsen, or there is a stark improvement in exports.  During November, corn futures are down 61 percent of the time.  Next week, the odds are 60 percent that December futures will be lower.

Bean Outlook:

      A record soybean crop is expected in South America, but wet conditions are hampering planting.  It is still early, but unless conditions improve, some analysts may lower their projections.  In the meantime, demand for soybeans is staggering.  Inspections last week were a marketing year high at 63.3 MB.  Sales are 36 percent above a year ago while shipments are 53 percent higher.  China has an insatiable appetite as they took 46.5 MB last week or 73 percent of shipments.  In other developments, the trend following funds added 20 MB to their long position increasing it to 138 MB.  This ended a five-week period of liquidation.  The longs of the index funds were up slightly to 625 MB.      

      March soybeans had a sharp break to 1502 on Monday, but have since rebounded and risen slightly past resistance at 1543.  For the intermediate term, a recovery to 1560 is expected and probably closer to 1592 or 1625.  Seasonally, soybeans tend to work higher until mid November.  Cycle analysis points to a top as soon as November 5th, but it may be closer to November 15th and could be as late as November 30th.  Meanwhile, a longer-term pattern in the early stages of development shows the chance for advancing past the contract high at 1728.25 to 1762 or 1832.  In that event, an important top may not occur until late December or the first week of February.  During November, soybean futures are up 68 percent of the time.  Next week, the odds are 66 percent that March futures will be higher.

 Wheat Outlook:

     Traders are monitoring weather conditions in the Plains and signs of improvement in exports.  Inspections last week were disappointing at 9.5 MB.  Sales this season are running 10 percent below a year ago while shipments are lagging 13 percent.  However, some improvement is likely in mid November when Ukraine halts grain exports.  Currently, 40 percent of the wheat crop is rated in good-to-excellent condition compared to 46 percent a year ago.  This is a record low rating for this time of the season.  Last week, the trend following funds bought 35 MB of wheat reducing their short position to 45 MB.  The longs of the index funds stand at 890 MB.

     December wheat fell to 852.75 on Tuesday and turned up.  Since late July, the market has been in a correction from 953.25.  A rally beyond 895 is needed to confirm that it is over.  In that event, look for a move upward to 955 or 995 with a top occurring as soon as November 13th.  Meanwhile, a break below Tuesday’s low implies a test of support at 840.25 again.  During November, wheat futures are down 52 percent of the time.  Next week, the odds are 60 percent that the December contract 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.