On The Money Grain Commentary 11-29-12

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Corn Outlook:

     Optimism is creeping back into commodities as European finance ministers have cut Greece a deal in lowering interest rates and giving them more time to pay back their loans.  While investors are breathing a sigh of relief, Greece, as well as Europe, still face a financial cliff.  Meanwhile, corn is supported by wet conditions in Argentina delaying planting.  In addition, confidence is rising for an improvement in exports.  Inspections last week were 15.9 MB and below the average needed to reach USDA’s projection of 1.150 BB.  However, there was an uptick in the four-week average of shipments suggesting that better days may lie ahead.  In other news, the trend following funds added 220 MB to their long position last week increasing it to 895 MB.  This was the first increase to their position since late October.  The longs of the index funds fell 30 MB to 1.810 BB.       

     March corn has been in a steady up trend since bottoming on November 16th at 714.5 climbing to 767.5 on Wednesday.  The next area of resistance is the October high at 775.75.  If it is exceeded, a move up to 781-788 is likely.  Otherwise, the market seems content to stay in the trading range that has been ongoing since late September.  Currently, we are in a period for a top to develop.  A decline below 749 is needed to confirm one has occurred.  If it happens, a test of the lower end of the range can be expected.  Longer-term, the market is at risk for a sell-off below the September low at 708.75.  Seasonally, corn futures tend to erode until the last week of December unless there is a crop problem in South America.  Historically, corn values are down 53 percent of the time at the end of next month.  Next week, the odds are 70 percent that March futures will be lower.    

Bean Outlook:

      While conditions are wet in Argentina, they are dry in southern Brazil.  This is causing some concern but does not dampen the outlook for a large soybean crop.  Last week, inspections were below estimates at 45.4 MB and the smallest seen since early October.  In addition, there was a downtick in the four-week average of shipments.  This bears watching as soybean exports tend to peak around mid November.  Meanwhile, one week does not change a trend unless it continues.  China took 33.8 MB or 74 percent of shipments.  In other news, the trend following funds slashed 65 MB from their long position last week reducing it to 415 MB.  This is the smallest their position has been since late February.  The longs of the index funds were down slightly to 655 MB.       

      Last week’s comments mentioned that March soybeans were on track for a rally to 1428 or 1450 with a top possibly occurring during the period of November 28th-30th.  Prices traded to 1450.25 on Thursday with the short-term pattern showing a potential peak at 1455-1465.  Meanwhile, a close beyond 1472 projects the market advancing to 1545 and topping on December 6th, and possibly not until December 18th.  Seasonally, soybean futures usually trend upward until the first week of December.  However, next month, they close lower 58 percent of the time.  Longer-term, unless a crop problem develops in South America, a break below the low made earlier this month at 1356 puts the market at risk for a sell-off to 1170 or 1105.  Next week, the odds are even as to whether March futures will be higher or lower.

 Wheat Outlook:

     Weather is supporting wheat as conditions are wet in Argentina and Australia, while the southern Plains are dry as the crop goes into dormancy.  Last week, the ratings fell one point to 33 percent of the crop in good-to-excellent condition, the lowest on record.  While there is optimism that exports will improve, no signs are showing yet.  Inspections last week were less than expected at 7.8 MB and below the average needed to reach USDA’s projection of 1.1 BB.  The trend following funds have turned more bearish as they increased their short position 70 MB last week to 130 MB.  This is the largest short position they have held since late June.  Meanwhile, the longs of the index funds fell slightly to 895 MB.        

     March wheat has been on the upswing since bottoming on November 16th at 845 trading to 895.5 on Wednesday.  Support is expected at 870.  If you will notice on the chart, the choppy price action downward from 948.25 is characteristic of a correction suggesting the chance for rising to a new high.  A rally beyond 929.75 projects a move upward to 970-985.  In that event, be alert for a top on December 10th as wheat futures tend to stay firm into the first week of December.  In addition, wheat prices are higher next month 53 percent of the time.  Next week, the odds are 80 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.