On The Money Grain Commentary 11-8-12

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Corn Outlook:

     Grain traders have had a lot on their plate this week with the Presidential election on Tuesday and the crop report due tomorrow.  The consensus is that the USDA will slightly raise the corn yield to 122.1 bpa with production at 10.6 BB and 2012-13 ending stocks of 635 MB.  In October, ending stocks were 619 MB.  Meanwhile, exports smell.  Inspections last week were below estimates at 14.6 MB with cumulative shipments 36 percent under a year ago.  Planting is running behind schedule in South America but conditions are improving.  Last week, the trend following funds sold 235 MB of corn reducing their long position to 880 MB.  This is the smallest it has been since July.  The longs of the index funds stand at 1.815 BB.  For now, traders are primarily focused upon exports and South America.    

     December corn found support at 733 on Monday and rebounded.  Since late September, the market has been locked in a range from 705-776.  More recently, the range has been from 732.25-769.  The trend indicators are flat suggesting additional consolidation is likely.  However, that could change after tomorrow’s crop report.  To turn the trend from sideways to higher, we must climb past 776.  In that event, a move upward to 795 is likely.  One of the momentum indicators is approaching an oversold level, which leans to a price bounce.  Meanwhile, a break below 732.5 implies a test of the lower end of the trading range at 705.  Next week, the odds are 70 percent that December futures will be higher.

Bean Outlook:

      Soybean exports are sizzling, but expectations that the USDA will increase the size of the crop in tomorrow’s report have kept prices throttled.  The consensus among traders is that the USDA will raise their yield estimate to 38.2 bpa, up from 37.8 in October.  This will put production at 2.892 BB with 2012-13 ending stocks of 133 MB.  Weather is improving in South America with expectations for a record crop.  However, a lot can go wrong between now and harvest.  Exports are stellar with inspections last week at 59.4 MB.  Cumulative shipments are running 51 percent ahead of a year ago.  Meanwhile, they will likely cool off after the first of the year.  The trend following funds were mostly inactive last week trimming their long position 10 MB to 680 MB.  There was some repositioning by the index funds as they increased their longs 55 MB to 680 MB.  After tomorrow’s report, news will be sparse with the focus centered on exports and weather in South America.      

     March soybeans fell to 1477.25 on Wednesday where a bottom developed.  Resistance is expected on a bounce to 1510-1520.  From a seasonal perspective, soybean futures tend to work higher until mid November.  However, we have deviated from the norm this season because of fund liquidation.  For the intermediate-term, the market is due for a recovery past 1545 to 1560, 1592 or 1625.  If it develops, a top could occur on November 15th or November 30.  A longer-term pattern shows the potential for advancing past the contract high at 1728.25 to 1763 or higher.  In that event, a top is not likely until the end of December or the first week of February.  Be advised that a sell-off below last month’s low at 1457 is bearish and means that we have probably seen the high for the season.  Next week, the odds are 80 percent that March futures will be higher.

 Wheat Outlook:

     Wheat is underpinned from dry conditions in the southern Plains and expectations for a smaller crop in Australia.  Last week, the rating for wheat fell one point to 39 percent of the crop in good-to-excellent condition.  This compares to 49 percent in the good-to-excellent category a year ago.  Exports are sloppy with inspections last week at 13.9 MB.  Cumulative shipments are running 9 percent below a year ago.  However, they will likely pick up in a couple of weeks when shipments from the Ukraine slacken.  Last week, the trend following funds increased their short position 30 MB to 75 MB.  There was repositioning by the index funds as they increased their longs 50 MB to 940 MB.      

     December wheat has been in an up trend since bottoming at 852.75 and risen beyond resistance at 895.  Keep in mind that this is a counter seasonal rally.  Provided that 852.75 holds, a move upward to 955-965 is expected and possibly closer to 995.  This should occur around November 16th or November 30th and end the advance from the low set in May at 629.5.  Next week, the odds are 80 percent that December 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.