On The Money Grain Commentary 12-27-12

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Corn Outlook:

     Fresh news in the grains is sparse because of the holidays.  While old crop stocks of corn are tight, the market faces a strong headwind because of poor exports and concerns of going over the proverbial fiscal cliff.  Last week, inspections were 15.1 MB with cumulative shipments running 53 percent below a year ago.  Currently, the focus is on weather and improving growing conditions in South America.  However, after the first of the year, attention will turn to spring planting intentions.  A recent survey by Informa Economics projects corn acres in 2013 rising 2.0 million to 99.0 million.  If realized, ending stocks next fall could grow to 2.0 BB.  In other developments, the trend following funds are becoming disenchanted with corn as they reduced their long futures position 255 MB last week to 510 MB.  The longs of the index funds were up 10 MB to 1.835 BB.     

     March corn rose to 707.25 late last week and has backed off.  Seasonally, corn futures tend to trend upward from the end of December until mid January.  However, if support at 687.5 cannot hold, a deviation from the norm is developing, and a move lower to 675 is likely.  A more bearish pattern shows prices sliding to 655, 640 or 630.  Longer-term, unless a weather problem arises in South America or exports improve significantly, the potential exists for a sell-off to 600 or 565 with a bottom occurring mid to late February.  For now, a rally past 707.25 is needed to turn the trend up.  Historically, January tends to be a weak month for corn futures with prices closing down 52 percent of the time.  Next week, the odds are 70 percent that March corn will be lower. 

Bean Outlook:

      Soybean futures are bumping into resistance from improving conditions in South America.  Meanwhile, exports are strong with China recently purchasing 115,000 tons.  However, the pace of shipments peaked in mid November and has since fallen 29 percent.  Last week, inspections were 44.4 MB with China taking 25.0 MB or 56 percent of shipments.  Looking ahead into 2013, Informa Economics projects soybean acres rising 1.7 million to 78.9 million.  If realized, ending stocks next fall could grow to over 300 MB.  In other developments, the trend following funds bought 25 MB of soybeans last week, increasing their long position to 470 MB.  The longs of the index funds rose 10 MB to 680 MB.       

     March soybeans traded to 1443 on Monday followed by a pullback to 1411.25 Thursday.  Additional support is at last week’s low of 1397.75.  Seasonally, soybean futures tend to work upward from late December until mid January.  If we follow the norm, a recovery to 1460 is due with the chance of challenging the high made earlier this month at 1501.25.  However, it is imperative that we hold 1397.75 as its failure would constitute a lower high and a lower low and likely trigger a sell-off below last month’s bottom at 1356 to 1275.  Be advised that January is typically not a good month for soybean futures as they close weaker 73 percent of the time.  Next week, the odds are even as to whether March soybeans will be higher or lower.    

 Wheat Outlook:

     Snow falling in the Plains recently pressured wheat this week.  More moisture is needed for conditions to improve as the southern Plains have been caught in the clutches of a drought for three years.  However, the market has been unable to muster a positive response to the crop’s dilemma.  Export inspections last week were 15.1 MB with cumulative shipments running 13 percent below a year ago.  Meanwhile, the trend following funds are becoming more bearish as they increased their short position 90 MB to 305 MB.  This is the largest short position they have held since May.  The longs of the index funds are down 15 MB to 900 MB.    

     March wheat has fallen below last week’s low at 782.5, which is counter to the seasonal tendency for working higher through mid January.  As it stands now, the market is on track for a decline to 755 and probably closer to 745 or 730 before the sell-off from 895.5 is done.  Look for a bottom around January 7th.  Historically, wheat futures close higher 52 percent of the time in January but that may not be the case this year.  Next week, the odds are 60 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.