If you would like to receive our grain comments and cash recommendations on a trial basis, go to the link below.
Wet conditions delaying planting in Argentina is heating up uncertainty about the potential size of South America’s corn crop. However, the market has been unable to capitalize on this and break out of the trading range that has been ongoing since September. This is because of dismal U.S. exports. Last week, inspections were a meager 9.6 MB. We are one-fourth of the way into the marketing year and on four occasions; a “9” has been attached in front of inspections. Based upon the current pace of shipments, USDA will have to lower their export projection by 190 MB or more if they do not improve. Meanwhile, for the past two weeks, the trend following funds have been adding to their long futures position. Last week, they increased their longs 30 MB to 925 MB. The longs of the index funds grew 10 MB to 1.820 BB.
March corn fell to 746.75 on Tuesday and rebounded to 759.25 Wednesday. However, prices could not hold onto their gains and backpedaled Thursday. In the event that 746.75 cannot hold, the short-term trend turns down and a decline to 735-725 is likely. Otherwise, a recovery past 759.25 gives us a shot for a rally beyond 767.5 to 775-780. Right now, a catalyst is needed for it to happen. Longer-term, the seasonal tendency is for corn futures to work lower until the end of December or early January. Unless conditions worsen in South America or there is no improvement in exports, prices are at risk for a sell-off below the low made in late September at 708.75. Next week, the odds are 60 percent that March corn will be lower.
Strong export demand, wet conditions in Argentina, and dryness in southern Brazil have been supportive to soybeans. Expectations have been high for a record crop this year in South America. However, analysts are backing off from earlier projections because of planting delays. Export demand has been sizzling this season because of China’s voracious appetite. Meanwhile, inspections were less than expected last week at 51 MB. It is possible that export demand has peaked as the four-week average of shipments has declined for two consecutive weeks. Seasonally, exports tend to peak around mid November. In other developments, the trend following funds continue to liquidate their long futures position. Last week, they sold 50 MB reducing their longs to 365 MB. The longs of the index funds is unchanged at 655 MB.
March soybeans continue to rise from last month’s low at 1356. We are in the thirteenth day of the recovery from this low and are likely approaching a top. If you will notice on the chart, the recovery from 1457 to 1545 took thirteen days to complete. Prices traded to 1487.5 on Thursday, and the short-term pattern shows them reaching 1495-1505. Once this occurs, the market will be in a position for a pullback lasting five days or longer in which there could be a setback to 1430-1420. Later, there is a chance of climbing to 1545, as the seasonal tendency is for a bounce into early January. Next week, the odds are 53 percent that March futures will be lower.
Egypt recently purchased 400,000 tons of wheat in which 280,000 tons was U.S. origin. This is increasing optimism that exports may start showing signs of improvement. However, that was not the case last week as inspections were less than expected at 14.1 MB. Conditions remain dry in the southern Plains, but the market does not seem amused and has shown little response. Meanwhile, the trend following funds are becoming less aggressive in pressing the short side as they bought 50 MB last week reducing their short futures position to 80 MB. The longs of the index funds were down slightly to 885 MB.
March wheat fell to 851.5 on Tuesday and rebounded. Additional support is at 845-840 while resistance is expected at 873-878. If you will notice on the chart, the market continues to trade within the channel beginning from 948.25. The choppy nature of the decline from this level implies it is a correction in which a new high is likely. Meanwhile, to turn the trend up, a rally beyond 895.5 is needed. In that event, a move upward to 970 is expected. From a seasonal perspective, wheat futures tend to strengthen from mid December through mid January. Right now, the market needs a catalyst for trading higher. Next week, the odds are even as to whether March wheat will be higher or lower.
Want the kind of intel that helps serious producers succeed? Sign up for a FREE! trial subscription to our daily newsletters.
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.