Uncertainty breeds uncertainty. This is the situation traders face in the grains. What will the Planting Intentions Report show at the end of the month? Will weather cooperate this spring? Will unrest in the Middle East and escalating energy prices put a damper on the global economy? Traders are currently gazing in a crystal ball searching for answers. In corn, tight stocks are the supportive influence. On Thursday, the USDA kept their 2010-11 ending stocks estimate unchanged at 675 MB. Export inspections were better than expected at 43.8 MB, but below the average needed to reach USDA’s projection of 1.950 BB. Last week, the trend following funds bought of 60 MB, increasing their long corn position to 1.685 BB. The longs of the index funds fell 25 MB to 1.950 BB.
Last week, July corn set a new contract high at 745. From here, the market has treaded on a slippery slope falling to 687 on Thursday. One wave pattern shows that the requirements have been fulfilled for completing the advance from the contract low at 374.5. For this to be verified, a sell-off below 672.25 is needed. In this event, a lower low will have developed confirming the trend is turning down. Meanwhile, Thursday’s close below trend line support is a concern for the bulls. The market is currently oversold and due for a rebound to 715. Right now, until 672.25 fails, a bullish wave pattern still remains that points to a new high. Be advised that we are in the mature stage of the advance from the contract low in which a multi-year high is forthcoming. Next week, the odds are even as to whether July futures will be higher or lower.
Concerns of rising energy prices and the forecast for record soybean production in Brazil are overshadowing stong exports and tight domestic stocks. This is evident by the recent setback in prices. In addition, inspections last week were less than expected at 26.3 MB., the smallest seen since December. China took 18.9 MB or 72 percent of the shipments. On Thursday, the USDA left 2010-11 ending stocks unchanged at 140 MB. Argentina’s crop did not change at 49.5 million tons, but Brazil’s production increased 1.5 million to a record 70.0 million tons. In other developments, the trend following funds were on the sidelines last week and are holding a long position of 520 MB. The longs of the index funds fell 20 MB to 805 MB.
July soybeans have been sucking wind since they peaked last week at 1431.5. Support is expected at Thursday’s low of 1330 followed by 1305. Right now, the decline from the contract high at 1474.5 resembles a correction, which means there is still a chance for trading to a new high. However, failure of support at 1305 will turn the trend down by setting a lower low and a lower high. If this happens, the long-term advance from the contract low at 917.25 is likely over. Otherwise, the trend remains up with the potential for prices rising past 1474.5 to 1540. Cycle analysis points to a top at the end of March during the first week of April in this event. Be advised the market is in the later stage of its long-term advance in which a major top is forthcoming. Next week, the odds are 70 percent that July futures will be higher.
Business has picked up recently from North Africa, but the price response has been disappointing. This is because traders are wary that the unrest in the Middle East could slow the global economy, and from the improvement of weather in the Plains. Last week, inspections were disappointing at 21.4 MB and below the average needed to reach USDA’s projection of 1.3 BB. On Thursday, the USDA increased their 2010-11 ending stocks estimate 25 MB to 843 MB. World stocks grew 2.3 percent to 181 million tons. In other developments, the trend following funds increased their short position 10 MB to 50 MB. If they continue to add to their shorts, prices will struggle. Meanwhile, the longs of the index funds grew 35 MB to 1.070 BB.
July wheat has fallen below support at 790 to 765.75 on Thursday, which constitutes a lower low and a lower high turning the trend down. If you notice on the chart, an uptrend line has been broken as well. This projects a move lower to 745 or possibly 700. Cycle analysis shows a bottom developing during the period near mid month, although it may be closer to the end of March or the first week of April. From a seasonal perspective, wheat futures generally trend lower until the last week of April. Resistance is expected on a rebound to 803 followed by 815. Next week, the odds are even as to whether July futures will be higher or 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.