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Corn futures began on a strong note Monday from heavy rains in Iowa and Illinois over the weekend along with increased tensions between Ukraine and Russia. Planting has gotten off to a slow start at 3 percent complete compared to 2 percent a year ago and 6 percent for the average. However, it is too soon to become alarmed as warmer temperatures and drier weather are on the way. If you recall last year, late planting was an issue, but when the planters began to roll, over 50 percent of the crop was planted in one week. This remembrance may have been the reason prices backed off Tuesday. Exports have been strong the past three weeks with inspections last week at 57.0 MB. The trend following funds continue to add to their long position as it has risen to 975 MB. While it is not near the record, it is their largest position since 2012 and a reason for concern.
Last week, July corn met resistance at 513 and backed off to 498.75 on Thursday. As I have mentioned in previous comments, there is a wave pattern that points to climbing near 524.25, or possibly 532. However, this scenario is becoming long in the tooth and with the trend indicators turning down, it does not bode well for it happening. If you will notice on the chart, a head and shoulders topping pattern may be unfolding from the highs at 517 and 524.25. A decline below 495.5 confirms this pattern and projects a sell-off to 480-473. If it occurs, look for a bottom around April 28th or May 12th. For now, a close beyond 513 is needed for evidence that the market is headed higher. Next week, the odds are even as to whether July corn will be higher or lower.
The March crush at 153.8 MB versus 141.6 MB a month ago was higher than expected shooting the soybean market higher Tuesday and Wednesday. This was the largest crush since 2001 and gives the bulls ammunition that additional price rationing is needed. However, be aware that shipments from Brazil destined for China are being diverted to the East coast, which will help alleviate tight domestic stocks. Meanwhile, harvest in South America is winding down with only minor transportation and port loading issues being reported. Export inspections last week were the smallest since mid September at 9.8 MB with China taking only 2.4 MB. However, unless shipments come to a screeching halt, the USDA could raise them an additional 40 MB. In other developments, the long position of the trend following funds fell 70 MB last week to 695 MB.
Last week’s comments mentioned that July soybeans were probably headed to 1507. We exceeded that level rising to 1521 on Thursday. From here, prices fell to 1492.5 creating candlestick top. A decline below 1485 is needed to break the short-term uptrend. Unless it happens, additional upside potential to 1535 cannot be ruled out. Watch for a top around April 23rd-24th or April 28th if we are higher. Meanwhile, the momentum indicators have not kept up with the advance and are lagging. This forewarns of an impending top. In addition, the wave pattern of 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 even as to whether July futures will be higher or lower.
Too cold, too dry was the story behind the jump in wheat this week. A hard freeze in the Plains early this week has likely caused some damage to wheat that is jointing. In addition, the western Plains are dry and in need of moisture. Escalation of tensions between Ukraine and Russia also underpinned. However, so far, there have been no disruption of exports. In the meantime, the U.S. crop is deteriorating as the ratings fell one point last week to 34 percent in good-to-excellent condition. Export inspections were 25.1 MB and above the average needed to reach USDA’s projection of 1.175 BB. For weeks, the trend following funds have been abandoning their shorts and have a token position of 5 MB.
July wheat rose to 718.25 on Wednesday falling short of the high at 725.25. The rebound from last week’s low at 663.75 to 718.25 resembles a correction suggesting that we could revisit 663.75 again. If you will notice on the chart, the trend line extending back to October has offered solid resistance. If exceeded, there could be a rally to 748. Otherwise, we may stay in a trading range until April 28th or May 21st. 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.