The bullish enthusiasm for corn has cooled, as weather in South America is becoming less of a factor. In addition, traders are concerned about reduced ethanol demand and more wheat finding its way into feed rations. Looking ahead, attention is beginning to focus on planting intentions for 2012 and the potential increase in supply. Expectations are that a record 94 million acres of corn will go in the ground this spring. If realized, ending stocks for 2012-13 could reach 1.6-1.7 BB. Export inspections were 29.0 MB and below the average needed to reach USDA’s projection of 1.7 BB. In other developments, the trend following funds added 85 MB to their long futures position increasing it to 715 MB. The longs of the index funds are unchanged at 1.750 BB.
July corn peaked last week at 659.75 backing off to 629.75 on Thursday. The market has turned up and expected to meet resistance near 648-652. Later, prices could work lower to 625-618. From a seasonal perspective, corn futures usually trend downward until the end of February followed by a recovery into mid March. The short-term cycles point to a bottom developing during the period of February 28th-March 1st. Longer-term, prices have traded in a range since October and there is not much reason for this pattern to change. However, a decline below 604 would be bearish indicating a downside breakout. Right now, a rally past 679 is needed to turn the trend higher. Next week, the odds are 60 percent that July corn will be lower.
Soybeans have assumed leadership in the grains as weather in southern Brazil is still a factor. Heat has returned this week, which is raising concerns that additional yield losses could reduce USDA’s production estimate of 72 million tons. Meanwhile, a Chinese delegation visiting Iowa has agreed to purchase 8.6 million tons of soybeans during 2012-13. Export inspections were 38.5 MB with China taking 24.6 MB or 63 percent of total shipments. Cumulative shipments are running 25 percent behind a year ago. The trend following funds are turning more bullish as they added 125 MB to their long futures position increasing it to 220 MB. Meanwhile, the longs of the index funds fell 10 MB to 840 MB.
July soybeans traded to 1285 on Wednesday, which was near a target mentioned in last week’s commentary at 1295. Right now, the market bears watching as a decline below 1250 implies that the recovery from the low made in December at 1125.25 is running out of steam. Otherwise, a rally beyond 1285 points to a move higher to 1310, while a more bullish pattern shows prices climbing to 1340. In this event, be alert for a top occurring on February 24th or February 28th. Next week, the odds are 60 percent that July futures will be higher.
Wheat continues to be a follower of corn and soybeans. Egypt recently purchased 55,000 tons of U.S. wheat for April shipment giving the market a lift. However, it will be difficult for prices to launch a serious bounce, as global stocks are abundant on top of a record crop in Australia. Export inspections were 16.5 MB and below the average needed to reach USDA’s projection of 975 MB. Cumulative shipments are running 15 percent behind a year ago. The short futures position of the index funds increased slightly last week to 380 MB, while the longs of the index funds are unchanged at 1.050 BB.
July wheat has been on a downward slide since peaking on February 1st at 704. However, the market is oversold and the short-term wave pattern shows that a bottom may be near. If you will notice on the chart, prices have found support at a trend line connecting the lows at 613 and 628.5. Seasonally, wheat futures tend to bounce into early March. If 656 is exceeded, look for a recovery to 673-680 with a top on March 1st. Longer-term, the trend is down with the potential for a sell-off to 555 or lower with a bottom occurring in late April. Next week, the odds are 80 percent that July 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.