Sensitive news in corn will be scarce until planting commences late next month. Meanwhile, USDA’s 2011 baseline acreage projection for corn is larger than expected at 92.0 million, up from 88.2 million in 2010. In addition, there are other private forecasts expecting an increase in acres as well. This briefly tempered bullish enthusiasm, but the market has since risen to a new high. Export inspections were 26.1 MB and below the average needed to reach USDA’s forecast of 1.950 BB. Last week, the trend following funds lightened their long position 40 MB to 1.740 BB, while the index funds shed 50 MB reducing their longs to 1.960 BB.
July corn fell to 694 on Tuesday for a decline of 4.3 percent from the contract high made last week at 725.5. Prices recovered and have since traded to a new high. Right now, the wave pattern shows the market climbing to 738-745 or possibly 768, which has the potential of being a major top. This could occur at the end of February or the first week of March. Be advised that the pattern of the longer-term weekly chart shows that we are in the mature stage of the advance from the low made last November at 532 and contract low at 374.5. This suggests that when a peak occurs, it could be a multi-year high. Next week, the odds are 60 percent that July futures will be lower.
Soybeans have run into a head wind because of improving conditions in Argentina and the beginning of harvest in northern Brazil. According to estimates, Brazil will produce a record crop. In their baseline projection, the USDA forecasts soybean acres in 2011 at 78.0 million, up from 77.7 million in 2010. Export inspections last week were 33.8 MB and above the average needed to reach USDA’s target of 1.590 BB. China took 19.8 MB or 58 percent of the shipments. However, there are reports of China cancelling sales indicating their interests are turning to South America. In other developments, the long position of the index funds has risen to 790 MB, which is 10 MB short of the record set last November. Meanwhile, the longs of the index funds fell slightly to 905 MB. Combined, the funds are long 51 percent of total U.S. production. This should tell you who is in charge.
July soybeans fell to 1377.5 on Wednesday for a decline of 6.5 percent from the contract high set last week at 1474.5. This is the steepest sell-off since prices bottomed last November at 1186.5. The previous decline was 4.5 percent. In addition, it is the first time a lower low has occurred since that bottom was made. This indicates the market is losing momentum meaning it may be more difficult to trade to a new high. However, there is one wave pattern showing that it is still in the cards. For greater confidence that it will happen, two things need to be accomplished. One is 1377.5 has to hold, while the second is for prices to close past 1450. If this is achieved, the chances increase for advancing past 1474.5 to 1510. Right now, resistance is at 1437. More will be mentioned in the updates as events unfold. Next week, the odds are 60 percent that July futures will be higher.
Wheat futures have backpedaled after a muted response to bullish news. Iraq and Tunisia booked wheat recently, and there is potential freeze damage from the cold snap in the Plains. This should have sent prices skyward but it did not happen. The lack of response to positive input is disappointing. Meanwhile, export inspections last week were 24.1 MB and below the average needed to reach USDA’s projection of 1.3 BB. In other developments, the trend following funds have increased their long position 30 MB to 80 MB, while the longs of the index funds stand at 1.040 BB.
July wheat fell to 885.5 on Wednesday for a decline of 6.8 percent from the high made last week at 950.75. This is a concern as it slightly exceeds the previous pullback of 6.0 percent. In addition, if you notice on the chart, a lower low and a lower high has developed. However, the setback appears to be a correction, so far. This still keeps the chance alive for prices rising past 950.75 to 975 or 990. If it happens, a top could develop at the end of the month. Meanwhile, be advised that if 885.5 does not hold, the advance from the low made last November at 629.5 and the contract low of 540 are probably over. Right now, the bulls are on notice. Next week, the odds are 80 percent that July futures 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.