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The bulls in corn are relieved to hear that EPA will not grant any waivers to the ethanol mandate. This is not good news, however, to the ears of livestock feeders who have been operating on negative profit margins for over a year. Optimism is rising that port congestion and shipping delays in Brazil will swing more export business to the U.S. However, no evidence is seen yet as inspections last week were a sluggish 14.3 MB. Exports have been a sore spot for the corn market as cumulative shipments are running 45 percent below last year, well behind the pace needed to reach USDA’s projection of 1.150 BB. Fund selling in corn has been prevalent since September but may be winding down. Last week, the trend following funds dumped 195 MB of their long position reducing it to 675 MB. This is the smallest their longs have been since July. The index funds are long 1.840 BB.
March corn bottomed mid month at 714.25 and recovered to 751 on Wednesday. Support is expected on a pullback to 732-728. If you will notice on the chart, a wedge type pattern is unfolding from 708.75, 775.75 and 714.25. These tend to be bearish formations with the breakout usually in the direction of the primary trend, which, in this case is down. Meanwhile, the momentum and trend indicators are pointed slightly upward favoring continued strength and the chance of rising to 760. A close beyond 763 negates the wedge pattern and projects climbing past 775 to 781-788. Right now, the cycles lean to a top occurring on November 28th. In the meantime, if 714.25 cannot hold, a downside breakout of the wedge pattern has developed and a decline to 677 can be expected. Next week, the odds are 80 percent that March futures will be lower.
The trend following funds were hefty sellers of soybeans last week as they sold 170 MB reducing their long position to 480 MB. This is the smallest their position has been since March. The index funds are long 660 MB. Meanwhile, optimism is rising from China’s plans to temporarily suspend auctions of soybeans from state reserves. For weeks, traders have been anticipating China’s appetite for U.S. soybeans to fizzle out. This frequently occurs in mid November but, so far, no evidence is showing. Last week, export inspections were a solid 61.9 MB with China taking 46.5 MB or 75 percent of shipments. Normally, prices would be going skyward on this news but are being held back from the prospect of a record crop in South America. However, the chances are unlikely that we will completely escape a weather scare this winter.
Last week’s comments mentioned that March soybeans would likely break support at 1369.5 and fall to 1355-1345 before the sell-off from 1545 and, possibly, 1728.25 were complete. That was done when the market fell to 1356 late last week. As it stands now, the decline from 1545 is over. Prices rallied to 1407 on Wednesday and are due for a recovery to 1428 or 1450. A top is likely during the period of November 28th-30th, although it could be as late as December 6th. Seasonally, soybean futures tend to rise until the first week of December. If there is a close above 1472, or prices stay up past December 6th, the sell-off from 1728.25 has ended, and the rebound will likely continue to 1545. In the meantime, a break below 1356 turns the trend down and projects a sell-off to 1273. Next week, the odds are 80 percent that March soybeans will be higher.
Wheat is underpinned from shrinking global supplies and deteriorating conditions in the U.S. Last week, the crop rating fell two points to 34 percent in good-to-excellent condition and compares to a rating of 50 percent a year ago. The winter crop in the southern Plains has gone into dormancy and lacks needed moisture, which could cause problems especially if snow cover is deficient during the winter. The trend following fund were mostly inactive last week and are sporting a short position of 60 MB. Meanwhile, the index funds are long 900 MB.
March wheat fell to 845 late last week and recovered. Resistance is expected at 880, 887 or 897. If you will notice on the chart, the market is trading in a channel pattern from the contract high at 948.25. The price action downward from this level is corrective suggesting the chance for rising to a new high. A rally past 929.75 projects an advance to 985. Meanwhile, next week, the odds are 90 percent that March wheat 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.