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Anticipation regarding the March Planting Intentions and Quarterly Grain Stocks Report is finally over. USDA projects planted acres of corn at 97.3 million, which was in line with trade guesses and compares to 97.2 million acres planted in 2012. However, corn stocks were a smoking gun. Stocks as of March 1st are 5.4 BB which was above the highest trade guess and reflects that usage was not a great as expected. Last week, the trend following funds added 310 MB to their long futures position increasing it to 505 MB. These positions are currently underwater. Now that the planting and stocks report is history, the focus will be on field progress and weather.
Previous comments mentioned the potential for July corn climbing to 725-730 or 740 with a top likely around March 26th. As it turned out the market peaked at 718.75 on March 21st. On Thursday, prices fell the 40 cent limit from disappointment in the stocks report. Failure to hold the low made earlier this month at 664.5 projects a sell-off to 640-630 and maybe as low as 595.. Be advised that April is generally not a good month for corn futures as they are down 84 percent of the time. Next week, the odds are 60 percent that July corn will be higher.
USDA projects soybean plantings at 77.1 million acres, which was less than traders expected and compares to 77.2 million acres planted in 2012. Meanwhile, stocks as of March 1st were higher than anticipated at 1.0 BB. This, along with record production in South America, will keep a lid on old crop soybeans. Meanwhile, the trend following funds are less bullish as they shaved 195 MB from their long futures position last week reducing it to 380 MB. Unless weather becomes a factor this summer, it may be a long season for the bulls.
July soybean traded to 1436.25 on Thursday and turned sharply lower which probably ended the recovery from the low made earlier this month at 1386.25. Previous comments mentioned that a top was expected at 1435-1445. If you will notice on the chart, a rising wedge pattern is unfolding from the low made last November at 1331.75. These tend to be bearish formations with the breakout usually in the direction of the existing trend, which, in this case is down. Longer-term, the seasonal tendency is for a move lower until the end of April. This suggests that the chances are we will break the low at 1331.75 and fall to 1238 or 1210 before the July contract expires. This could occur around April 26th. Historically, soybeans are down 52 percent of the time during April. Next week, the odds are even as to whether July soybeans will be higher or lower.
USDA projects all wheat acres at 56.4 million, which is in line with trade guesses and above 2012 seedings at 55.7 million. Stocks as of March 1st were higher than expected at 1.23 BB. The trend following funds are less bearish as they trimmed 40 MB from their short futures position last week reducing it to 285 MB. For the moment, wheat is at the mercy of corn regarding a price direction. However, the crop in the U.S. will soon emerge from dormancy and enter its most critical stage of development.
July wheat traded to 740.5 on Thursday and fell sharply with the decline in corn. Previously, it was mentioned that the sell-off from 900 ended at 686. This outlook is in jeopardy as it appears that there may be one more leg down before the decline is done. In the event that 686 does not hold, look for the sell-off to continue to 652. Historically, wheat futures are down 52 percent of the time in April. Next week, the odds are 70 percent that July futures will be lower.
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.