On The Money Grain Commentary 4-24-14

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Corn Outlook:

Corn planting has gotten off to a slow start at 6 percent complete compared to the average of 14 percent rekindling memories of last year’s delay.  However, with today’s equipment, producers can soon catch up given a few days of decent weather.  If you recall from a year ago, nearly 50 percent of the crop was planted in one week.  Longer-term the forecast shows normal temperatures and moisture for May, June and July.  Exports have been strong the past few weeks with inspections last week a marketing year high at 62.9 MB.  While sales have been strong, shipments are lagging the pace needed to reach USDA’s projection of 1.750 BB.  However, the gap is narrowing.  Last week, the trend following funds shed 40 MB of their long position reducing it to 935 MB.

July corn peaked on April 9th at 524.25 and fell to 490.75 Monday from where it turned up with prices climbing to 513.5 Thursday.  While the rally from the January low at 421.75 may be done at 524.25, the pullback from this level resembles a correction, plus Wednesday’s strong bounce implies that a new high may be forthcoming.  See the alternate labeling on the chart as a double zigzag pattern from 421.75 may be unfolding.  These are rare patterns, and it may be tomorrow or early next week to determine if it is developing.  Right now, a decline below 500 is needed to break the short-term uptrend and, if it occurs, look for a setback to 490.75 or lower.  Otherwise, a close beyond 513 increases the chance for a rally past 524.25 to 535.  If it happens, be alert for a top around May 1st which is close to the seasonal time frame for a peak.  Next week, the odds are even as to whether July corn will be higher or lower.

Bean Outlook:

     Soybeans were under the gun this week from rumors of additional sales cancellations by China, and the inability of their processors to acquire bank letters of credit.  This has haunted the market since the beginning of the year, but has made more headlines recently as China’s PMI Index shows that their economy has been contracting the past four months.  Meanwhile, exports are dwindling with inspections last week a meager 5.0 MB.  China was basically a no show taking only 5,000 bu.  In other developments, I was surprised in conversation with producers last week at the number that intend to abandon their standard rotational practice and plant all soybeans.  This implies that the USDA may be on the short side of the stick in their projection of plantings at 81.5 million.  Last week, the trend following funds increased their longs 30 MB to 725 MB.  While this is smaller than the position they held in February, it is still huge.  For now, most of the positive news seems to be priced in the market.

      Last week, July soybeans peaked at 1521 which probably ended the advance from the January low at 1234.  If you will notice on the chart, an uptrend line has been broken.  Prices fell to 1460.5 on Wednesday and tested it again Thursday forming a double bottom.  Resistance is expected on a rebound to 1480 followed by 1495.  For the intermediate-term, unless there is a rally to a new high, the market is at risk for a pullback to support at 1442 with the chance for a decline to 1410.  Seasonally, soybeans usually do not peak until the first week of May, but a top has apparently developed early.  If this is the case, we could work lower until May 16th or May 26th followed by a recovery into June.  Next week, the odds are even as to whether July futures will be higher or lower.

 Wheat Outlook:

Wheat has been confined in a trading range since March, as neither the bulls nor the bears can seem to get the upper hand.  Showers have occurred in areas of the Plains but missed others.  Some rain is being taken out of the forecast next week which supported the market on Thursday.  In the meantime, the ratings were unchanged last week at 34 percent of the crop in good-to-excellent condition compared to 35 percent a year ago.  Spring wheat planting has begun and is 10 percent complete, which is behind the average of 19 percent.  Export inspections were nothing to be thrilled about at 18.1 MB, which is below the average needed to reach USDA’s projection of 1.175 BB.  Meanwhile, the trend following funds have increased their short position slightly to 10 MB.  The conflict between Russia and the Ukraine remains tense and could escalate, but there have been no disruptions to exports in the region.

After peaking last week at 718.25, July wheat fell to 669 on Tuesday that was followed by a recovery to 702.75 Thursday.  Look for resistance at last week’s high.  Since March, the market has traded in a range from 725.25-663.75.  The seasonal tendency is for wheat futures to work higher into May, but a catalyst is needed for a breakout of the current range.  If 669 cannot hold, look for support at 663 followed by 650.  In the meantime, a rally beyond 725.25 projects rising to 748.  Next week, the odds are 70 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.