On The Money Grain Commentary 11-21-13

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Corn Outlook:

Getting a meaningful rally going in corn is like trying to climb a greased pole as there are a lot of hurdles to overcome!  First, production is projected at 13.9 BB with ending stocks of 1.887 BB.  However, by the final report in January, production could top 14.0 BB with ending stocks over 2.0 BB.  Second, the EPA has lowered the ethanol mandate in 2014 from 14.4 billion gallons.  Third, the market must seek a price level that stimulates demand, which may take a while.  Export inspections were better than expected last week at 30.7 MB and above the average needed to reach USDA’s projection of 1.4 BB.  However, the pace has fallen the past two weeks suggesting they may have peaked.  Harvest is essentially done at 91 percent complete with the upper Midwest in the home stretch.  Currently, the trend following funds are short 960 MB.

After rebounding to 449.5 last week, March corn fell to 420 on Tuesday where a short-term low developed.  The market has recovered and should encountere resistance 435-438.  Unless there is a rally beyond 449.5 setting a higher high, the trend is down with the chance for a decline to 412.  Longer-term, the potential exists for a sell-off to 387.  Seasonally, corn futures generally trend downward until the first week on January followed by a recovery.  Cycle analysis shows that a bottom could occur on December 6th, but a more important low is not likely until December 30th.  Next week, the odds are 80 percent that March corn will be lower.

Bean Outlook:

     Export demand for soybeans has been strong, but the market is having to contend with a potential record crop in South America and the prospect for an increase of 6-8 million acres planted in the Midwest next spring.  Right now, weather is cooperating in South America, but chances are there will be a flare up sometime during the growing season.  Harvest is essentially done at 95 percent complete, while it may be another week before double crop soybeans are wrapped up.  Export inspections last week were 87.8 MB with China taking 70.5 MB or 80 percent of shipments.  Their purchases the past few weeks have been mind boggling, but it could stop at the drop of a hat if they turn to South America to fulfill their needs.  Currently, the USDA projects exports at 1.4 BB.  However, if the pace continues, they could be raised to 1.650 BB.  Right now, the trend following funds are long 430 MB, their largest position since September.

      March soybeans fell to 1256.25 on Tuesday, which appears to be a short-term low ending the decline from last week’s high at 1304.  Resistance should be met at 1285.  Unless there is a rally past 1304, the trend is down with a sell-off to 1215-1202 likely as the next low.  Longer term, the potential exists for a decline to 1180, 1160 or 1100.  Seasonally, soybean futures tend to peak by mid November, but it can be the first week of December.  From here, prices generally trend downward until the end of February.  Cycle analysis shows a bottom developing around January 6th, January 21st or February 10th.  Next week, the odds are 80 percent that March soybeans will be higher.

 Wheat Outlook:

The wheat bulls have seen nothing but misery since October as the market has been entrenched in a strong down trend.  Bearish traders have held the upper hand because of the increase in global stocks and the declining pace of exports.  Meanwhile, inspections last week were better than expected at 18.1 MB and above the pace needed to reach USDA’s projection of 1.1 BB.  However, the pace has fallen 65 percent since peaking in late September.  So far, the winter wheat crop is off to a good start, although the ratings were down two points last week to 63 percent in good-to-excellent condition.  Currently, the trend following funds are holding their largest short position since September at 435 MB suggesting that the bears may be overstaying their welcome.

March wheat fell to 652 on Monday followed by a bounce to 663 Wednesday.  Unless there is a close beyond 670.5, the short-term wave pattern points to a decline below the contract low at 647.75 which should be major bottom.  This may occur by December 10th, but it could be sooner.  Wheat futures generally trend lower until the first week of December followed by a recovery into January.  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.