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The grains are in a period in which there is not much fresh news. Weather in South America is becoming less of a factor, and we are a few weeks away before it plays a role in the U.S. In the meantime, old crop corn is supported from tight stocks while new crop is pressured from expectations of record production. Some light will be shed on world production with release of USDA’s estimates later this week. Meanwhile, exports are the sore spot for corn. Inspections were 15.7 MB and below the average needed to reach USDA’s projection of 900 MB. At the current pace, we will fall 140 MB short of their target. In other developments, the trend following funds are turning bearish as they are now short 25 MB of corn. This is the first time they have been short since June 2012.
July corn rose to 690.75 last week falling short of a target at 695. Prices have broken last month’s low at 667.5 falling to 664.5 on Thursday. Additional support is at 653. Resistance is expected at 680. If you will notice on the chart, the market has been setting a series of lower highs and lower lows from the contract high made last April at 824. Longer-term, the trend is down with the potential of falling to 640-630 or 615. Seasonally, corn futures usually peak by mid March followed by a decline until the end of April. Next week, the odds are even as to whether July corn will be higher or lower.
Strong exports and shipping delays in Brazil, because of logistical and labor issues, have underpinned soybeans and increased demand for U.S. supplies. However, this is only temporary and will eventually be resolved. For as long as I can remember, shipping problems always seem to occur when harvest begins in Brazil. U.S. exports have benefited from the delays with inspections last week better than expected at 40.2 MB. China took 23.8 MB or 59 percent of shipments. At the current rate, there will be no problem in exceeding USDA’s projection of 1.345 BB. Meanwhile, the trend following funds are bullish soybeans and increased their long position 20 MB last week to 525 MB. This is the largest long position they have held since last November.
July soybeans have been rising steadily since bottoming at 1405.5. Unless there is a decline below 1435, the market should continue upward to 1475-1480 and possibly 1505. A top could occur by March 13th. If you will notice on the chart, the recovery from the November low at 1331.75 is unfolding in a wedge type pattern suggesting that it is a correction and lower prices are forthcoming. If this is the case and 1331.75 is broken, a sell-off to 1238 or 1210 could occur. From a seasonal perspective, soybean futures tend to peak by mid March and trend lower until the end of April. Next week, the odds are 70 percent that July soybeans will be higher.
Improving moisture conditions in the southern Plains and Midwest have sent wheat futures lower. Although we are a long way in ending the drought in the Plains, conditions are headed in the right direction. Exports remain sluggish but were better than expected last week at 23.9 MB. At the current pace, they will fall 40 MB short of USDA’s current projection of 1.050 BB. In other developments, the trend following funds have trimmed 10 MB from their short futures position reducing it to 355 MB.
Last week, it appeared that the sell-off from 900 in July wheat had ended. However, the market fell below 702.5 to 686 on Wednesday indicating that additional downside potential exists. As it stands now, unless there is a rally beyond 711, we could work lower to 675 or 665. At that time, chances are that the sell-off from 900 will be done. 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.