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Corn continues to grind lower, but its rate of descent has slowed as traders are evening positions ahead of tomorrow’s crop report. Since there was no report last month because of the government shutdown, this one will be scrutinized closely. The points of interest are harvested acres and USDA’s yield estimate. Expectations are for an increase in yield from the September estimate of 155.3 bpa, that could push production over 14.0 BB and ending stocks in excess of 2.0 BB. Meanwhile, harvest is progressing without a glitch at 73 percent complete compared to the average of 71 percent. Because of interest from China, the export pace has risen with inspections last week at 31.3 MB. In other developments, the trend following funds have increased their short futures position to a record 1.225 BB.
December corn has been on a slippery slope since peaking in August at 508.25. The market has fallen to a longer-term target mentioned in previous comments at 420 with the next target at 412. Meanwhile, a more bearish pattern eventually points to a sell-off to 380 or 364. Be alert for a bottom that could develop tomorrow, November 11th or closer to the 15th that may be an intermediate-term low. A more important bottom could occur on November 22nd. However, if we follow the seasonal norm, corn futures may stay on the defensive until the first week of January. Current resistance is at 426-429. A rally beyond 437 is needed to signify that the trend may be turning up. Next week, the odds are 70 percent that December corn will be higher.
All eyes are on tomorrow’s crop report for any significant changes from September. Harvest yield reports are better than expected increasing the chance that USDA will raise their estimate from 41.3 bpa in September. Traders project production rising to 3.2 BB with ending stocks at 183 MB. One source puts ending stocks as high as 240 MB. Harvest is in the homestretch at 86 percent complete compared to 92 percent a year ago and 85 percent for the average. Sales to China have caused exports to sizzle with inspections last week at 80.5 MB. Shipments to China were 62.2 MB or 77 percent of the total. Meanwhile, be advised that the pace may not last much longer as they tend to peak in November. Planting in Brazil is 44 percent done under favorable weather conditions. In other developments, the long futures position of the index funds rose 40 MB last week to 390 MB.
Last week’s comments mentioned that a wedge pattern was unfolding from 1247.25-1294.25 in March soybeans in which a downside breakout was likely. That occurred with prices falling to 1233.25 on Tuesday. This was short of a target mentioned at 1220-1215. This appears to be a short or an intermediate-term low with resistance expected at Thursday’s high of 1256.25 followed by 1268-1275. Longer-term, the trend is down with the potential for a sell-off to targets at 1180-1165 or 1103. Cycle analysis points to a bottom during the period of November 19th-21st or on November 29th. However, a more important bottom may not develop until January 6th and, if we follow the seasonal norm, it may not occur until the last week of February. Next week, the odds are 80 percent that March soybeans will be higher.
Wheat has been trending downward the past few weeks because of improving conditions in the Plains, falling exports, and weaker corn futures. Last week, 63 percent of the crop was rated in good-to-excellent condition with planting 91 percent complete compared to the average of 90 percent. Export inspections were dismal at 7.1 MB, a marketing year low. Since peaking in September, the export pace has fallen 54 percent. Traders anticipate the USDA lowering their ending stocks estimate tomorrow to 527 MB. In other developments, the short position of the trend following funds fell 15 MB last week to 100 MB.
December wheat has been heading south since peaking last month at 711.25. This is a deeper decline than expected earlier and brings up the question as to whether the low made in August at 635.75 will hold. Right now, the market is oversold and in a period in which a bottom should develop. Look for resistance on a bounce to 675-682. Unless there is a break below 635.75, the wave pattern still shows the potential for rising past 711.25. Next week, the odds are 80 percent that December wheat will be lower.
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