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After weeks of trading in a sideward pattern, corn futures finally succumbed to bearish psychology in soybeans. Improving weather in South America, allowing for an increase in planting progress, has also brought pressure. Although corn inventories remain tight, the latest crop report shows a slight rise in domestic and global stocks. Exports are pathetic with weekly inspections a marketing year low of 9.4 MB. Adding to corn’s woes is the fact that cumulative shipments are 42 percent less than a year ago. Last week, the long position of the trend following funds fell 10 MB to 870 MB, while the longs of the index funds rose 15 MB to 1.830 BB. Now that harvest is over, the focus will be on weather in South America and whether exports will improve in the weeks ahead.
On Monday, December corn broke support at 732.25 and fell to 710.5 Tuesday where a bottom developed. At this juncture, we will likely follow one of two paths. The first is for a recovery through the end of the week with resistance encountered at 733. From here, a decline below 705 to 697 or 677 can be expected. If this is the pattern that unfolds, a bottom is likely around November 21st, although it may be as late as December 10th if prices fall to 677. The other path is that a close above 733 gives rise to a recovery to 743 or higher. In that event, we are looking at the trading range from 705-776 continuing. Next week, the odds are 62 percent that December futures will be lower.
Last week, the bulls swallowed a bitter pill when the USDA raised global stocks of soybeans 4.3 percent. This sent prices tumbling and was the straw breaking the bulls back. Weather is nonthreatening in South America, which means export demand must carry the load in supporting the market. Demand has been stout this year, but exports have a tendency to peak in mid November. They currently bear watching because in years when they remained strong beyond November, they peaked in February. Inspections last week were a marketing year high at 64.0 MB. Shipments are running 38 percent above a year ago and show no sign of letting up. Last week, the long position of the trend following funds fell 30 MB to 650 MB, while the longs of the index funds were unchanged at 680 MB.
March soybeans fell to 1369.25 on Tuesday followed by a rebound to 1408.75 Thursday. From here, there was a downward reversal. Additional resistance is expected at 1415. As it stands now, we are due for another leg down to 1355-1345 or 1325 before wrapping up the sell-off from 1545 and possibly 1728.25. This should occur around November 21st although it could be as late as November 30th. At that time, a broader based recovery is likely. Unless a crop scare occurs in South America, one longer-term pattern shows that a sell-off to 1275 could unfold. Next week, the odds are 60 percent that March futures will be lower.
Wheat is being pressured from the sell-off in soybeans. USDA recently raised their domestic ending stocks estimate, but global stocks grew only slightly with stocks-to-usage in the lower third of their twenty-year range. Supporting prices are Australia’s forecast to have a smaller crop while dryness persists in the southern Plains. Last week, crop conditions deteriorated three points to 36 percent in good-to-excellent condition. This is a record low rating for this time of the season. Export inspections last week were disappointing at 10.4 MB with cumulative shipments running 13 percent below a year ago. Last week, the trend following funds trimmed their short wheat position 10 MB to 65 MB, while the index funds reduced their longs 40 MB to 900 MB.
December wheat fell to 843.25 on Tuesday followed by a one-day bounce to 858 Wednesday. Additional resistance is at 870-880. Meanwhile, prices are likely headed to 830 before the sell-off from 916.5 is over. If you will notice on the chart, the market is bound in a downward sloping channel from the contract high at 953.25. The corrective nature of the pullback suggests that a new high could occur. However, time is limited for it to happen in the December contract. Next week, the odds are 60 percent that December futures 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.