On The Money Grain Commentary 3-27-14

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Corn Outlook:

Below normal temperatures in the Midwest during March, along with an increase in exports, has underpinned corn.  While this has created an environment for late planting in areas of the Corn Belt, it is too early to get alarmed as a warming trend is forecast.  Export inspections simmered last week and were a marketing year high at 44.9 MB.  While sales have shown a dramatic improvement, shipments are running  90 MB below USDA’s projection of 1.625 BB.  Next week, the eagerly awaited Grain Stocks & Planting Intentions Report will be released and will likely cause some fireworks.  Guesstimates are for 90.5-94 million acres of corn to be planted compared to 95.4 million a year ago.  If realized, and with a normal yield, ending stocks could reach 2.0 BB.  The trend following funds have turned more bullish as they have increased their long position to 755 MB, the largest since December 2012.

July corn has been locked in a range from 506-477.25 since March 7th.  More recent resistance is at 496.75.  If you will notice on the chart, a wedge type pattern is unfolding.  Usually, the breakout of these formations is in the direction of the existing trend, which, in this case, is up.  Closing past 496.75 projects rising to 506 and, if exceeded, a rally to 516-521.  Prime time for this happening would be on Monday, the day of the Grain Stocks & Planting Intentions Report.  A cycle high is due March 31st-April 2nd followed by April 7th.  Meanwhile, falling below 477.25 constitutes a downside breakout of the trading range that could result in a decline to 468-462.  Be aware that April is generally not a good month for corn futures as they trend lower 84 percent of the time.  Next week, the odds are 60 percent that July corn will be down.

Bean Outlook:

     Soybeans have recovered from last weeks sell-off, but have not reached the levels of a couple of weeks ago.  Rumors are circulating that as many as 10 cargoes of soybeans have been diverted from Brazil to the U.S. East coast.  Meanwhile, traders continue to wait for the other shoe to drop expecting China to cancel previous sales.  So far, no major cancellations have occurred.  Inspections last week were the smallest since September at 26.9 MB.  China took 14.0 MB or 52 percent of shipments.  Shipments taken by them have slowed dramatically the past seven weeks.  On March 31st, all eyes will be on planting intentions with trade guesstimates running at 78.5-83.6 million acres compared to 76.5 million a year ago.  If realized, and with an average yield, ending stocks could be as low as 200 MB, or possibly top 400 MB.  In other developments, the long position of the trend following funds has fallen the past three weeks and fell 25 MB last week to 760 MB.

    July soybeans have been trending upward since bottoming last week at 1368 rising to 1418.75 on Thursday.  Additional resistance is expected at 1426.  The rebound from this level resembles a correction, so far, suggesting that climbing beyond the double top at 1429 could be a formidable task.  A decline below 1380 is needed to break the short-term uptrend and imply that the recovery is done.  In the meantime, if you will notice on the chart, the lows are rising creating a wedge type pattern with the double top.  This is a positive development giving an edge for an upside breakout. However, this is still a work in progress.  In the event that 1429 is exceeded, look for a rally to 1459-1477 that should be done by April 7th.  During April, soybean futures are down 53 percent of the time.  Next week, the odds are 60 percent that July soybeans will be higher.

 Wheat Outlook:

Wheat has been the star performer in the grains as it has risen 30 percent since late January.  Tensions between Russia and the Ukraine, in addition to continued dryness in the southern Plains, are the supporting factors.  Only token moisture has been received in western Oklahoma and Texas during the past two months.  Export inspections last week were 19.2 MB and are on track to reach USDA’s projection of 1.175 BB.  Trade guesses for all wheat acres in the Planting Intentions Report are 54.8- 57.7 million.  The trend following funds continue to abandon their short position as the shed 40 MB last week reducing their shorts to 85 MB.  This is down from the record of 520 MB late last year.

On Tuesday, July wheat swung in a broad range from 688.75-720.75.  The market turned up on Thursday from 696.5 forming an outside day higher, which implies that the pullback from 725.25 may be done.  Last week’s comments mentioned that one longer-term pattern showed the potential for rising past this level to 742-750 and, maybe, 770 before ending the advance from 557.25.  However, much valuable time has been spent in the setback, as previous corrections in the rally from 557.25 have lasted only two days, and we are currently in day five.  Meanwhile, the trend is still up as long at 688.75 holds.  In the event that 725.25 is exceeded, a top is likely around April 4th or April 8th.  Otherwise, failure of 688.75 breaks the uptrend.  In April, wheat futures are down 53 percent of the time.  Next week, the odds are 60 percent that July wheat will be higher.

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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.