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Corn futures have mustered a bounce lately from stronger export sales, wintry conditions in the Midwest restricting movement, and short covering by the funds. Additional support is from Informa Economics lowering South America’s production estimate 3.4 million tons. Last week, the trend following funds shed 70 MB from their short position reducing it to 665 MB. This was the fourth week of liquidation suggesting that additional short covering may be forthcoming. Traders are still keeping an eye on weather in South America, but it is becoming less of a factor. Attention is turning more toward planting intentions and long-term weather in the Midwest this spring. Although export sales have picked up recently, inspections last week were disappointing at 21.6 MB and below the average needed to reach USDA’s projection of 1.450 BB. Currently, the pace of shipments is lagging 50-100 MB under their target.
March corn was stronger this week rising past the January high at 435.5. Prices traded to 447.25 on Thursday and should meet resistance at 450-459. The cycles show that a top could develop around February 10th, which is the day of the crop report. Be advised that the momentum indicators are at their highest level since June 2013. A decline below 439 forewarns that the rally is stalling. Once the recovery is done, the chances are there will be a setback to support at 421 and, maybe, revisit the low made last month at 406.25. Be aware that although the market has not followed the seasonal norm the past week, there is a strong tendency for corn futures to work lower until the end of February. Next week, the odds are 60 percent that March corn will be higher.
Soybeans have rebounded off of their recent low from the forecast of hot, dry conditions in Brazil over the next several days. While it will accelerate harvest that is currently 6 percent complete in the northern areas, late planted soybeans in the south could undergo some stress. This gave prices a boost this week. In the meantime, a large crop is still on tap. Export inspections last week were on the low end of estimates at 45.4 MB with China taking 26.7 MB or 58 percent of shipments. Recent data out of China shows that their economy is contracting, which will likely effect sales and the economies of emerging markets. In other developments, the trend following funds have lightened their long position by 30 MB reducing it to 505 MB.
March soybeans bottomed in late January at 1260 and have risen five consecutive days to 1334.5. If you will notice on the chart, the market has traded in a wedge type pattern since peaking last September at 1377.75. There is considerable resistance at 1339.25. However, if exceeded, it violates the pattern and could lead to a move upward to 1365. In the meantime, falling below 1315 breaks the short-term upswing and warrants a pullback to 1297, 1288 or 1278. Be aware that the seasonal tendency is for soybeans to trend lower until the end of February. Next week, the odds are 60 percent that March futures will be higher.
Wheat has rebounded as recent cold conditions in the Plains and Midwest may have caused winterkill in areas lacking snow cover. Prices were also underpinned from declining crop conditions during January in Kansas from the lack of moisture. In other news, export inspections last week at 11.6 MB were the smallest seen since October. The current pace of shipments reflects that reaching USDA’s projection of 1.125 BB may be a struggle. The trend following funds have recently increased their short position 30 MB to 480 MB. While it is below the record short of 520 MB., it leaves the market ripe for short covering.
March wheat bottomed in late January at 550.25 and has risen for six consecutive sessions to 592.75 where a reversal occurred on Thursday. While there is a chance that the sell-off from the contract high at 912.75 is complete, the wave pattern on the weekly chart shows that only the decline from 674.75 is over and that another leg down is likely once the recovery is done. Look for resistance to be encountered at 598 with the rebound ending around February 11th. Once the correction is complete, a decline to 530 could follow that ends the long-term sell-off. Next week, the odds are 80 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.