On The Money Grain Commentary–3-24-11

Corn Outlook:

      It has been a bumpy ride in grain futures the past couple of weeks because of confusion created by the earthquake in Japan and the unrest in the Middle East.  Prices cratered shortly after the earthquake, but have since stormed back.  During the sell-off, the trend following funds dumped 275 MB from their long corn position reducing it to 1.280 BB, while the index funds shed 85 MB trimming their longs to 1.885 BB.  However, much of the funds position was added back when the market surged after the collapse. In other news, there are rumors that China is interested in buying corn.  Meanwhile, no sales have been reported.  Export inspections were less than expected at 29.5 MB and below the average needed to reach USDA’s projection of 1.950 BB.  The next mover and shaker in the grains will be the planting intentions report on March 31st.   

     July corn bottomed last week at 615.25, which ended the sell-off from the contract high at 745.  Since then, prices have risen in an impulsive manner to 704.75 where they peaked on Monday.  There was a one-day pullback to 680 on Tuesday followed by a rally to 708.5 on Thursday.  Currently, the wave pattern on the daily and weekly charts shows the potential for climbing to a new high.  Unless there is a decline below 680, the market is on course for a move upward to 795, and possibly 825, which should end the advance from the contract low at 374.5.  Cycle analysis points to this occurring during early April or near the middle of the month depending upon how quickly the short-term pattern unfolds.  Next week, the odds are 60 percent that July futures will be lower. 

 Bean Outlook:

      Volatility in soybeans has risen sharply causing headaches for traders.  The situation in Japan and the Middle East has created uncertainty, along with excessive rain in South America, raising concerns regarding the size and quality of their crop.  In addition, fewer acres of soybean are expected to be planted this spring because they are less profitable than corn.  Right now, traders have a lot on their plate.  In other developments, the trend following funds shaved 160 MB from their long position during last week’s sharp sell-off reducing it to 425 MB.  The longs of the index funds fell 25 MB. to 780 MB.  Export inspections were disappointing at 27.7 MB with China taking 19.6 MB or 70 percent of the shipments.      

      July soybeans bottomed at 1278 last week ending the correction from the contract high at 1474.5.  Prices have since risen in an impulsive manner, which increases the odds for trading to a new high.  The market peaked on Monday at 1393.75, which is likely a short-term top.  Support is expected on a pullback to 1335.  Provided we do not trade below 1278, the wave pattern points to a rally to 1510, 1550, or possibly as high as 1600.  Be advised this will likely be a major top that ends the advance from the low made last June at 917.25.  Look for this to occur early next month, or the second week of April depending upon how quickly the short-term wave pattern unfolds.  Next week, the odds are 60 percent that July futures will be higher. 

  Wheat Outlook:

     Dryness in the Plains continues to be a problem for wheat, but the bulls response is not exactly overwhelming.  This is because wheat stocks are not as limited as corn and soybeans.  However, this may change if crop conditions continue to deteriorate.  Export inspections were 25.7 MB and below the pace needed to reach USDA’s projection of 1.275 BB.  In other developments, the trend following funds recently reduced their short position 30 MB to 20 MB.  The longs of the index funds has fallen 35 MB to 1.035 BB.     

     July wheat rebounded to 784 late last week and found support on a setback to 740.75.  The decline from last week’s high resembles a correction, which favors prices working higher to 820-835 before the recovery from 691 is over.  Seasonally, there is usually a bounce from mid March until the first week of April. Longer term, the seasonal tendency is for wheat futures to trend lower until the end of April.  This suggests that the market is at risk for a decline to 640 with a bottom developing during the first or second week of May.  Next week, the odds are 60 percent that July futures will be higher. 

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