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Corn is in a fragile state because of anemic exports, expectations for a larger crop this season, and fund liquidation. Exports are horrible with inspections last week a meager 9.5 MB. At the current pace, shipments will be closer to 775 MB rather than USDA’s projection of 900 MB. Adding to corn’s woes are expectations for 97-99 million acres planted acres this spring which translates to ending stocks of 2.0 BB next fall. Meanwhile, the trend following funds are liquidating their long futures position and reduced them 295 MB last week to 195 MB. The longs of the index funds were down 10 MB to 1.990 BB. Although old crop stocks are tight, traders are looking ahead at the potential for a bumper crop.
July corn bottomed last week at 676.75 ending the sell-off from the high made earlier this month at 738.75. From here, we could only muster a recovery to 690 even though the market is at its most oversold level since early January. Seasonally, corn futures tend to rise from the end of February until early to mid March. However, failure of 676.75 on Thursday forewarns of a possible deviation from the norm. Unless there is a rally past 690, the trend is down with the potential for a sell-off to 655 as the next low. This could occur on February 28th. Longer-term, the market is at risk for a sell-off to 640-630 or 615 with a bottom developing on April 8th or April 18th. Next week, the odds are 60 percent that July corn will be higher.
Soybeans are the bright spot for the grains as they have gained back most of the losses made earlier this month. Prices are underpinned from spots of dryness in Argentina and logistical snags in Brazil, which has increased shipments from the U.S. Exports are dynamic with inspections better than expected at 40.3 MB. China took 25.2 MB or 62 percent of shipments. China’s Lunar New Year celebration is over which led to a 120,000 ton purchase early this week. Although export sales are not running at the pace of last fall, they are more than enough to exceed USDA’s projection of 1.345 BB. In other developments, the long position of the trend following funds is unchanged from the previous week at 480 MB. The longs of the index funds are down 15 MB to 515 MB.
July soybeans have sizzled since bottoming last week at 1384.5. Prices rose to 1463 on Wednesday for a gain of 5.6 percent. We are in a period for a top to occur, but the short-term wave pattern shows the potential for rising to 1477 or 1487. If you will notice on the chart, this would challenge the upper trend line connecting the highs at 1462.25 and 1479.75. In the event this level is reached, a peak may not develop until February 28th. Although the seasonal trend in soybeans is higher from the end of February until mid March, it must be remembered that the rally began two weeks early. Longer-term, the market is at risk of falling below the low made last November at 1331.75. Next week, the odds are 60 percent that July futures will be higher.
Wheat futures are pressured from ample global stocks, subpar exports, and the prospect for increased moisture from a winter storm in the southern Plains. Last week, wheat inspections were better than expected at 40.3 MB. However, they are struggling for the season, and it will be a photo finish as to whether USDA’s projection of 1050 BB will be achieved. Meanwhile, the trend following funds are not as bearish as they were a couple of weeks ago and have reduced their short position 90 MB to 335 MB. The index funds are long 735 MB.
July wheat bottomed last week at 732 followed by a bounce to 754.25 on Tuesday. From here, the market turned down, fell to a new low on Thursday at 726.25 and is expected to decline to 718-710 or 701-697. This could occur during the period of February 28th-March 4th and should be an important bottom that wraps up the sell-off from the contract high made last October at 900. Once this occurs, a sizeable recovery is expected. Next week, the odds are 60 percent that July futures will be higher.
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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.