Corn futures cratered this week amid sluggish demand, weakness in the outside markets, and ongoing uncertainty surrounding the debt crisis in Europe. Conditions are becoming worse as bond yields in Italy, Ireland and Spain are soaring and reaching the point of being unsustainable. Meanwhile, the next crisis in Europe will likely be political causing a breakup of the Euro zone. Harvest is wrapping up at 93 percent complete, although Ohio is lagging at 51 percent. Export inspections were better than expected at 27.7 MB but below the average needed to reach USDA’s projection of 1.6 BB. Cumulative exports are running 22 percent behind last year. The trend following funds were active last week adding 85 MB to their long corn position increasing it to 745 MB. The longs of the index funds were down 25 MB to 1.660 BB. Be advised that the index funds have been in a liquidation mode since August 2010 when their position peaked at 2.520 BB.
December corn staged a downside breakout this week of the sideward pattern that has been ongoing since mid October. On Wednesday, the market traded to 648 and turned down falling short of resistance at 650. However, on Thursday, prices broke support at 630.25 falling sharply to 610.25. This exceeded a downside target mentioned last week at 620. Short-term, we could work lower to 595. Longer-term, there may be a sell-off to 535 if time permits before the December contract expires. Seasonally, corn futures generally trend downward until late December or early January. Cycle analysis points to a low developing on November 28th, December 8th or December 14th. However, these periods may only be an intermediate-term low. Next week, the odds are 62 percent that December futures will be lower.
Soybean futures fell this week because of the rising dollar, uncertainty in Europe, and sell-off in the outside markets. While exports have improved the past few weeks, they are running 33 percent behind last year. Inspections were solid last week at 53.5 MB, which was the fifth consecutive week they have exceeded 40 MB. China took 46.2 MB or 86 percent of the shipments. However, we are entering a period when exports taper off. In other developments, harvest is essentially done at 96 percent. Weather in South America has been beneficial and a record crop is in the making. Last week, the trend following funds sold 30 MB of soybeans reducing their long position to 75 MB. Meanwhile, the longs of the index funds stand at 805 MB. The index funds have been in a liquidation mode since October 2010 when their position peaked at 1.005 BB.
March soybeans rebounded to 1216 on Tuesday and sold off to 1172.25 Thursday breaking last month’s low at 1173.5. This projects a sell-off to longer-term targets at 1135, 1100, or 1060. A more bearish pattern points to a decline to 980. As mentioned in previous comments, the market has been setting a series of lower highs and lower lows since peaking in October at 1290. Right now, a rally past 1216 in needed to turn the trend up. Seasonally, soybean futures tend to work lower until the end of November followed by a bounce into early December. From here, the downward trend resumes until early February or early March. Currently, cycle analysis points to a bottom occurring on November 29th, December 14th or December 19th. However, these periods may only be an intermediate-term low. A long-term low may not occur until February 9th. Next week, the odds are 60 percent that March futures will be lower.
Wheat continues to sink because of strength in the dollar and poor export demand. The Black Sea region has become more competitive nudging out the U.S. on sales to traditional customers, such as Egypt. This is being reflected in export inspections, which were 10.3 MB last week. This was the second week they were at the 10 MB mark. In other developments, the crop rating improved one point to 50 percent in good-to-excellent condition and compares to 44 percent a year ago. Last week, the trend following funds covered 45 MB from their short position reducing it to 330 MB. Meanwhile, the index funds are long 950 MB.
December wheat rallied to 639.75 on Wednesday followed by a sharp break Thursday to 590.25. This broke the contract low at 596.75, which projects a sell-off to longer-term targets at 555 or 535. There could be a decline to 455 if time permits before expiration of the December contract. Seasonally, wheat futures usually trend lower until mid December before bottoming. Cycle analysis points to a bottom occurring on November 28th, December 8th or December 14th. Next week, the odds are 60 percent that December futures will be higher.
Want the kind of intel that helps serious producers succeed? Sign up for a FREE! trial subscription to our daily newsletters.
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.