On The Money Grain Commentary 11-14-13

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Corn Outlook:

The bulls were pleasantly surprised when the USDA left 2013-14 ending stocks of corn below 2.0 BB in the November Crop Report.  The market rebounded as a result ending a three month price decline.  However, there is nothing bullish about ending stocks at 1.887 BB and world stocks jumping 8.5 percent to 164.3 million tons.  The reason for the market’s turn around is the trend following funds were short a record 1.170 BB of corn going into the report expecting it to bearish.  When it did not meet expectations, short covering developed.  Meanwhile, world stocks-to-usage are 17.6 percent and in the mid third of the twenty-year range suggesting supplies are ample.  Harvest is in the home stretch at 84 percent complete versus the average of 79 percent.  Export inspections were sluggish last week at 16.7 MB, and below the average needed to reach USDA’s projection of 1.4 BB.

Last week’s comments mentioned to be alert for a bottom on the day of the crop report, and that happened when December corn rebounded from 415.5.  As it stands now, a short or an intermediate-term low has occurred, possibly ending the decline from the high set in August at 508.25.  Prices rose to 438 on Tuesday and backed off.  Support is expected at 424.  For the next few days, the market will likely consolidate but, if additional fund short covering pushes prices past 438, look for the recovery continuing to 447-451.  Be alert for a top by November 20th in the event.  Seasonally, corn futures generally turn down around mid November followed by a sell-off through the first week of January.  Longer-term, the potential exists for falling to 380.  Next week, the odds are 62 percent that December corn will be lower.

Bean Outlook:

     Soybean futures staged a flurry after the crop report as 2013-14 ending stocks were less than expected at 170 MB, while world stocks fell 1.8 percent from September to 70.2 million tons.  However, world stocks-to-usage is 26.0 percent and in the upper third of the twenty-year range.  This implies that supplies are more than ample to meet demand.  In addition, planting is progressing well in South America amid favorable conditions suggesting that a record crop could be in the making.  Harvest is wrapping up in the Midwest, with the exception of double crop soybeans, and is 91 percent done.  Export inspections posted another solid week at 79.6 MB and were above the average needed to reach USDA’s projection of 1.450 BB.  Look for them to be raised again in December.  Meanwhile, the trend following funds are less aggressive as they trimmed their long futures position 90 MB to 300 MB.

      March soybeans have spurted higher from their bottom on November 5th at 1233.25.  Prices fell to 1288.25 on Thursday followed by a rally to 1304.  Short-term, the wave pattern shows the potential of rising to 1311 or 1322 with a top occurring by the end of the week.  Seasonally, soybean futures tend to peak by mid November, but more frequently in early December followed by a decline into the end of February.  For the intermediate-term, the market will likely consolidate until November 22nd, November 29th or December 4th before challenging 1233.25 again.  If broken, look for a sell-off to 1180 or 1103 with a bottom developing around January 6th.  Next week, the odds are 60 percent that March soybeans will be lower.

 Wheat Outlook:

Wheat has struggled even though corn and soybeans have rebounded.  This is largely because of 2013-14 ending stocks rising more than expected to 565 MB and world stocks climbing 1.2 percent to 178.4 million tons.  Meanwhile, world stocks-to-usage are 25.3 percent and in the lower third of the twenty-year range.  This warrants caution against being overly bearish.  Planting is winding down at 95 percent done with 65 percent of the crop rated in good-to-excellent condition, an increase of 2 percent.  Export inspections were 12.2 MB and below the average needed to reach USDA’s projection of 1.1 BB.  Recently, the trend following funds increased their short futures position 195 MB to 295 MB.  They can add more to their shorts, but the boat is getting crowded.

December wheat has been on a sharp downswing since topping in October at 711.25.  Prices fell to 643.25 on Wednesday and are attempting to recover.  Resistance is at 660.  If prices turn down from here, the chances are that they will fall below the contract low at 635.75.  Currently, the trend indicators are still pointed lower but their rate of decent has slowed.  Meanwhile, if 660 is exceeded, look for the recovery continuing to 669 or 677.  Seasonally, wheat futures tend to work lower until the first week of December followed by a rebound into early January.  Next week, the odds are 60 percent that December wheat will be higher.

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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.