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The vicious decline that began as a result of the bearish stocks report in late March seems to have run the gauntlet. Last week, the trend following funds dumped 655 MB of their long futures position in corn reducing it to 210 MB, which puts it at a more manageable level. Meanwhile, recent cold, wet weather in the Midwest is raising concerns of a delay in planting. However, additional delays are needed to pose a serious threat. The USDA projects 2012-13 ending stocks of corn at 757 MB compared to 632 MB in March. World ending stocks are forecast at 125.3 million tons, up 7.9 million tons. Stocks are on the upswing and a large crop is expected to be planted this spring. The focus the next few weeks will be upon weather and planting progress.
July corn bottomed on April 5th at 615 and rebounded to 647.25 on Wednesday after the supply-demand report was released. The trend indicators have turned up meaning that if 647.25 is exceeded, the recovery could continue to 655. In the meantime, if you will notice on the chart, the market has been setting a series of lower highs and lower lows from the contract high at 824 meaning that it is entrenched in a strong down trend. Once the recovery from 615 ends, a decline to 595, 583 or 567 could develop. Seasonally, corn futures tend to work lower until the end of April. A bottom could occur as soon as April 26th if the recovery ends soon; however, it may be closer to May 8th. Next week, the odds are even as to whether July corn will be higher or lower.
Expectations for a large crop in South America and an outbreak of bird flu in China that could diminish demand is overhanging the soybean market. Meanwhile, liquidation of long positions by the funds seems to have run its course as prices have begun to stabilize. Last week, the trend following funds sold 135 MB reducing their long futures position to 290 MB. The USDA projects 2012-13 ending stocks of soybeans at 125 MB, unchanged from March. However, world stocks are forecast to rise to 62.6 million tons, up 2.4 million from last month. With a large crop in South America expected to be exported, prices will have difficulty holding gains unless weather becomes an issue in the U.S. this season.
July soybeans bottomed on April 5th and rebounded to 1382 on Wednesday. If you will notice on the chart, the market traded below trend line support a couple of days and recovered. Seasonally, the trend is down through the end of April. However, if 1382 is exceeded, the recovery could continue to 1400. Meanwhile, the longer-term trend is down with the potential for a sell-off below the November low at 1331.75 to 1237 or 1210. This could be accomplished as soon as April 26th, but it may be closer to May 10th. Next week, the odds are even as to whether July futures will be higher or lower.
Wheat futures have risen recently supported by cold weather forecast in the southern Plains and purchases by China. The crop ratings in the U.S. improved two points to 36 percent in good-to-excellent condition. A year ago, 61 percent of the crop was in the good-to-excellent category. In other developments, USDA projects 2012-13 ending stocks of wheat at 731 MB, unchanged from last month. Meanwhile, world stocks rose to 182.3 million tons, up 4.1 million from March. The funds have strengthened their bearish stance on wheat as they increased their short position 15 MB to 260 MB.
July wheat traded to 720 on Monday followed by a setback to 693.75 Wednesday. If 720 is exceeded, the recovery may continue a few more days to 740 before the correction from 664.75 is complete. However, unless there is a close beyond this level, the trend is down as seen by the series of lower highs and lower lows from the contract high at 900. The wave pattern shows that unless there is a trend change, a decline to 652, 630 or 615 could develop before the sell-off from 900 is over. Seasonally, wheat futures are usually on the defensive until the end of the month. Cycle analysis points to a bottom on April 24th, April 26th, and it could be closer to May 9th. 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.