On The Money Grain Commentary 3-20-14

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Corn Outlook:

Last weekend, Crimea voted to secede from the Ukraine and form an alliance with Russia.  While tensions have eased, the U.S. and EU are placing sanctions against Russia.  However, sanctions sometimes backfire.  Since the vote passed without incident, traders are relieved that grain shipments from the Black Sea region will likely be unaffected.  Ukraine is the world’s third largest exporter of corn.  Corn found support early this week from rain in Brazil slowing harvest, as well as cool temperatures in the Midwest delaying fieldwork.  Export inspections were 38.4 MB with the pace of shipments running 100 MB short or reaching USDA’s projection of 1.625 BB.  Meanwhile, the trend following funds are bullish as the added 250 MB to their long position last week increasing it to 710 MB.  The corn market may be quiet the next few days, but will become more erratic as we approach the Grain Stocks and Planting Intentions Report on March 31st.

Since last week, July corn has fluctuated in a range from 477.25-496.75.  We are in a period for a top to develop, and the seasonal tendency is for corn futures to trend lower though the end of April.  Falling below 477.25 constitutes a downside breakout of the range and projects a sell-off to 468 or 462.  However, one wave pattern shows that an upside breakout cannot be ruled out with prices rising beyond 496.77.  In that event, the odds improve for climbing to 506 and, if exceeded, possibly to 516-521.  Watch for a top during the period of March 26th-28th if it happens.  This is just before the USDA report on March 31st.  Be prepared for fireworks before and after the report. Next week, the odds are 60 percent that July corn will be lower.

Bean Outlook:

     Early this week, soybeans rebounded from last week’s sell-off amid fund buying.  Rain in parts of Brazil slowing harvest offered support, as well as a private firm lowering production to 85.4 million tons.  In addition, dock workers in Argentina threatening to strike over a pay raise has also underpinned prices.  Rumors of sales cancellations by China of Brazilian soybeans, and reports of 2-3 cargoes being diverted to the U.S. East coast pressured the market on Monday that was followed by a recovery until Thursday.  Export inspections last week were 34.5 MB with China taking 19.1 MB or 52 percent of shipments.  Currently, we are on track to ship 1.610 BB compared to USDA’s target of 1.530 BB.  Meanwhile, the trend following funds shed 105 MB of their long position last week reducing it to 785 MB.  Looking ahead, the next mover and shaker for soybeans will be the Planting Intentions Report on March 31st.

      July soybeans rose to 1429 on Thursday forming a double top with the high set on March 7th.  This was followed by a swift decline to 1397.25.  Last week’s comments mentioned that a top could occur around March 19th.  A sell-off below 1397.25 will show five waves down on the intra-day chart increasing the chance that a major top has developed and that lower prices are forthcoming.  In this event, the odds become greater for falling to the low made earlier this month at 1350.25.  Otherwise, the pullback from 1429  to today’s low consists of three waves, so far, which is characteristic of a correction.   If it is exceeded, resistance is expected at 1440.  Next week, the odds are 60 percent that March soybeans will be higher.

 Wheat Outlook:

While traders are still assessing the situation between Russian and the Ukraine, they seem more preoccupied with the declining conditions in the southern Plains.  Conditions in parts of Kansas, Oklahoma and Texas are dry and the forecast for the next ten days shows little relief.  The crop will soon come out of dormancy and moisture will be needed for development.  Additional support came from a tender by Egypt.  Export inspections last week were 18.2 MB and are on track to reach USDA’s projection of 1.175 BB.  In other developments, the trend following funds are dumping their short wheat position as they shed 70 MB last week reducing it to 125 MB.

July wheat rose to 725.25 on Thursday meeting a target mentioned in last week’s comments at 717.   This was followed by a sharp break to 695.75 creating a candlestick top.  Last week’s comments mentioned that a top could develop around March 19th.  The rally from the low at 594.5 is probably complete, and possibly the advance from the bottom made in January at 557.25 as well.  However, one longer-term pattern shows that the rally from 557.25 is not done, and that support should be found at 675 followed by a move upward to 742-750 or 770 ending the advance.  If this is the situation that plays out, a major top may not occur until April 4th, April 11th, and it could be as late as May 21st.  Right now, this pattern is still a work in progress.  Next week, the odds are even as to whether July wheat 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.