On The Money Grain Commentary–4-14-11

Corn Outlook:

      The planting intentions and grain stocks reports are in the record book and attention has turned to weather, the economy, and developments in Japan.  Aftershocks from the earthquake and severity of the nuclear crisis in Japan are raising concerns that their economy will slip back into a recession.  This is increasing anxiety among the bulls. In their first progress report of the season, the USDA estimates that 3 percent of the corn crop is planted, which is in line with a year ago.  Meanwhile, conditions have turned wet and delays are likely.  Export inspections were 38.7 MB and below the average needed to reach USDA’s projection of 1.950 BB.  In other developments, the trend following funds increased their long position 165 MB to 1.330 BB, while the longs of the index funds stand at 1.945 BB.  There is room for the position of the funds to grow.      

     July corn peaked on Monday at 788.75 and is undergoing a correction.  Last week’s comments mentioned that we were due for a 3-5 day pullback.  The decline may have ended on Thursday at 747.5 but, if not, should be over no later than early next week.  Once it ends, the market will be in a position for a rally to 810 with a more bullish pattern pointing to 825 or 840.  This could occur during the last week of April or the first week of May depending upon when the setback from 788.75 is finished.  Be advised the wave pattern shows that we are in the later stage of the advance from the contract low at 374.5 in which a major top is likely.  In addition, the pattern on the CRB Index chart points to a major top developing in commodities during May or June, and no later than October.  Next week, the odds are even as to whether July futures will be higher or lower.   

Bean Outlook:

           A record soybean harvest in Brazil, China cutting back on U.S. purchases, and the IMF’s forecast of slower growth in the U.S. and Japan is stealing the bulls thunder.  In addition, conditions are wet in the Midwest delaying corn plantings and could swing more acres to soybeans.  However, it is too soon to become alarmed about an increase, just yet.  Export inspections last week were 20.8 MB with China taking 15.1 MB or 72 percent of the shipments.  In other developments, the long position of the trend following funds stands at 495 MB, while the index funds are long 805 MB. 

      July soybeans have struggled since peaking in late March at 1442.25.  This week prices broke support at 1348 and fell to 1328.25 on Thursday.  If you notice on the chart, they challenged a long-term up trend line that held.  However, if it fails, we are headed for last month’s low at 1278.  So far, the decline from the contract high at 1474.5 resembles a correction, which means the chance still exists for climbing to a new high.  Historically, the odds of this happening are 71 percent.  Meanwhile, they become less if 1278 does not hold, as a bearish pattern will emerge.  Right now, a rebound beyond 1360 is needed to turn the trend in the bulls favor.  Next week, the odds are even as to whether July futures will be higher or lower.    

 Wheat Outlook:

     Traders remain concerned about dryness in the Plains reducing wheat output.  However, rain is in the forecast.  Currently, the market is struggling, which means fresh bullish input is needed.  In the meantime, the crop continues to deteriorate as the ratings fell one point last week to 36 percent in good-to-excellent condition.  Conditions in Kansas and Oklahoma fell 4 and 5 points, respectively.  Export inspections were 28.2 MB and below the average needed to reach USDA’s projection of 1.275 BB.  In other developments, the trend following funds are short 45 MB, while the index funds are long 1.085 BB.    

     July wheat has fallen sharply since peaking on Monday at 843.25.  Support is at Thursday’s low of 768.5 followed by 750.  Resistance is at 805.  From a seasonal perspective, wheat futures tend to decline until late April followed by a rally into early May.  Cycle analysis shows that we should bottom during the third week of April.  Historically, the odds are 85 percent that we will trade past 843.75.  However, the chance of this happening is less if there is a close below 729.  Meanwhile, the longer-term pattern is beginning to show some bearish signs.  Next week, odds are even as to whether July futures will be higher or lower. 

Want the kind of intel that helps serious producers succeed? Sign up for a FREE! trial subscription to our daily newsletters. 

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.