On The Money Grain Commentary 4-19-12

Corn Outlook:

     Improving weather in the Midwest during the past couple of weeks and rapid planting progress has dampened bullish enthusiasm in corn.  This is apparent by the long position of the trend following funds falling 45 MB to 650 MB, while the longs of the index funds are down 20 MB to 1.995 BB.  Planting is progressing at breakneck speed with 17 percent of the crop planted compared to the average of 5 percent.  If Mother Nature cooperates this season and 96.0 million acres are planted, ending stocks for 2012-13 could top 1.7-1.8 BB.  In other developments, Europe’s debt crisis is back in the news as Spain’s bond yields have risen.  Be aware that Spain’s financial woes engulf those of Greece.  On the bright side, export inspections were the best seen since mid December at 42.8 MB.  Prices rebounded sharply on Thursday from rumors of China buying corn.      

     Since peaking earlier this month at 659.75, July corn has fallen 10.3 percent where it bottomed on Wednesday at 591.75.  The market broke last month’s low at 603 but held the one in December at 591.  Short-term, we are overextended on the downside and a rebound to 618-626 is due.  Seasonally, prices tend to bottom in late April and recover into early-mid May.  As it looks now, we bottomed a week early.  Longer-term, the market is expected to stay within the trading range that has been ongoing since last fall.  Next week, the odds are even as to whether July corn will be higher or lower. 

Bean Outlook:

      Soybean futures have drifted for nearly a week as fresh news is lacking.  The reduction of South America’s crop has largely been discounted, while concerns of China’s slowing economy lingers.  However, the bulls have not abandoned ship yet as the long position of the trend following funds rose 10 MB last week to a record 1.040 BB.  Meanwhile, the longs of the index funds fell 20 MB to 750 MB, the sharpest decline since May 2010.  This may stem from financial concerns in Europe.  In other developments, export inspections were 18.0 MB with China taking 6.7 MB or 37 percent of shipments.  During the past couple of weeks, shipments to them have fallen considerably.       

     July soybeans have drifted sideways to lower since peaking on April 10th at 1453.25.  Prices fell to 1409.5 on Wednesday breaking support at 1416.75.  In addition, they trading are below the upper boundary of the channel line that has served as support until this week.  Right now, the market is at a crossroad.  The trend indicators have turned down but the pullback from 1453.25 resembles a correction.  This still gives the bulls an edge for a rally to a new high, possibly 1480. In the meantime, a break below 1409.5 favors backing off to 1382 or 1345.  Next week, the odds are even as to whether July soybeans will be higher or lower.

 Wheat Outlook:

  Rain across the Plains, the Midwest, and parts of Europe has weighed on wheat.  World stocks are ample although they are less than a year ago.  As a result, the funds are turning more bearish as the short position of the trend following funds grew 45 MB last week to 445 MB.  The longs of the index funds are 1.095 BB.  In other developments, export inspections were 25.7 MB and above the average needed to reach USDA’s projection of 1.0 BB.  The U.S. crop is improving at 64 percent in good-to-excellent condition, up 3 points from a week ago and compares to a rating of 36 percent last year.  However, reports are surfacing of freeze damage in areas of the Midwest.  Spring wheat planting is progressing rapidly at 37 percent completed compared to the average of 9 percent.       

     July wheat fell to 609.25 on Wednesday and bottomed possibly ending the decline from 680.  Short-term, the market is oversold and due for a rebound to 636 and maybe 645.  Seasonally, wheat futures tend to set a low during the third or last week of April and rise into early-mid May.  Longer-term, the trend is down with the potential for a sell-off to 555.  Next week, the odds are 70 percent that July wheat will be lower.

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