On The Money Grain Commentary 4-10-14

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Corn Outlook:

Field preparation and planting have gotten off to a slow start this season because of wet, cold conditions.  While weather is expected to improve in the western Corn Belt, the east may dodge rain drops another week.  USDA delivered a friendly 2013-14 ending stocks estimate for corn by lowering it to 1.331 BB from 1.456 BB in March.  Exports were raised 125 MB to 1.750 BB.  Meanwhile, world stocks were unchanged at 158.4 BB.  Export inspections were strong last week at 51.5 MB with shipments showing significant improvement over the past three weeks.  In other developments, the long position of the trend following funds is getting dicey as it rose 160 MB last week to 950 MB.  This is short of the high set in December 2012 at 1.015 BB.  With lower ending stocks, the market will focus on weather and planting progress in the weeks ahead.

July corn shot up to 524.25 on Wednesday after the report followed by a setback to 499.75 Thursday as prices became overextended on the upside.  However, support developed on the break and the market rebounded to 509.  Usually, corn futures trend lower during April, but it remains to be seen if that will happen this season as field work and planting are off to a slow start.  The rally beyond last week’s high at 517 implies that the advance from the contract low at 421.75, and the low made in late March at 480.25, could extend higher.  Right now, the trend is up unless there is a close below 495.75 setting a lower low.  Unless it happens, the potential exists for rising to 532-536, possibly higher.  If this develops, a top could occur on April 17th or April 24th.  Next week, the odds are 55 percent that July corn will be lower.

Bean Outlook:

     Soybeans are the tale of two crops.  One is of extremely tight old crop supplies, while the other points to record planting this spring that could result in ending stocks exceeding 350 MB this fall.  In an attempt to reduce old crop tightness, sales originally slated from Brazil to China are being diverted to the East coast.  As a result, scorching exports from the U.S. to China have cooled in recent weeks.  Inspections last week were 18.7 MB with China taking 7.1 MB or 38 percent of shipments.  Earlier this season, they were taking 60-70 percent of shipments.  The USDA has lowered their 2013-14 ending stocks estimate for soybeans 10 MB to 135 MB.  World ending stocks fell 1.0 million tons to 69.4 million because of Brazil’s crop being lowered 1.0 million tons to 87.5 million.  Argentina’s crop was unchanged at 54.0 million tons.  In other developments, the trend following funds bought 55 MB last week increasing their long futures position to 765 MB.

      July soybeans surged to 1490 after the report on Wednesday where resistance was encountered.  A decline below 1437 setting a lower low is needed for evidence of a top.  Unless it happens, the trend is up and a rally past 1490 projects rising to 1507.  A more bullish pattern points to 1545.  Be alert for a top on April 17th or April 22nd if prices are moving upward.  Meanwhile, be aware that the weekly chart shows that we are in the advanced stage of the rally from the low made in December at 1234.  Next week, the odds are 70 percent that July futures will be higher.

 Wheat Outlook:

Wheat has struggled the past few weeks, but remains underpinned from dryness in the southern Plains and tensions between Russia and the Ukraine.  Meanwhile, there have been no disruption of shipments in that region.  USDA increased their 2013-14 wheat ending stocks estimate 15 MB this month to 583 MB.  World ending stocks rose 2.9 million tons to 186.7 million.  Export inspections were better than expected last week at 22.2 MB.  In the first crop progress report of the season, 35 percent of the winter wheat crop is rated in good-to-excellent condition.  This is down from 62 percent in late November.  The trend following funds continue to abandon their short futures position and have whittled it down to 20 MB.

July wheat bottomed last week at 665.25 and rebounded to 695.25 on Wednesday where it turned down and fell to 663.75 Thursday.  Unless 695.25 is exceeded, the intermediate-term trend is down with the potential for a decline to 640-635.  Be alert for a bottom around April 17th if we are trading lower.  Longer-term, the market will likely stay in a trading range until May 21st.  Next week, the odds are 60 percent that July wheat will be 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.