On The Money Grain Commentary 4-25-13

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Corn Outlook:

Corn producers have been dodging raindrops all month, which has slowed planting efforts.  Only four percent of the crop is planted, well behind last year’s pace of 26 percent and the average of 16 percent.  This ties the record low set in 1993.  However, light may be at the end of the tunnel as warmer, drier conditions are forecast for next week.  While traders are edgy about the delay, it is too soon to become overly concerned as the optimum window for planting does not pass until mid May.  If the majority of the crop is in the ground by that time, the potential exists, barring  other issues, ending stocks of 2.0 BB this fall.  In other developments, export inspections were dismal at 14.7 MB with shipments on track for 715 MB versus USDA’s estimate of 800 MB.  The trend following funds increased their short futures position 10 MB last week to 60 MB.

July corn fell to 610 on Wednesday breaking the low made earlier this month at 615.  The market recovered to 627 Thursday with additional resistance expected at 630, 633 and 637.  Seasonally, corn futures tend to rise from the end of April until early to mid May with the question being whether we follow the norm.  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 reflecting the strong downtrend.  Once the recovery from 610 is complete, the longer-term pattern points to a decline to 595, 583 or 567.  This could occur around May 23rd or June 6th.  During May, corn futures are higher 52 percent of the time.  Next week, the odds are even as to whether July corn will be higher or lower.

Bean Outlook:

     There is the tale of two crops in soybeans with old crop supported by tight stocks while new crop is meeting resistance from expectations of increased acres because of late corn planting.  Meanwhile, concerns are rising about the slowing demand from China because of the recent outbreak of bird flu.  Last week, export inspections were below estimates at 4.9 MB.  This was the second consecutive week that they have been less than 5.0 MB, which is evidence that China is backing away.  Shipments to them last week were only 24,000 bushels while the previous week was a mere 8,000 bushels.  In other developments, the trend following funds added 65 MB to their long futures position last week increasing it to 210 MB.  While this is not a large position, it could haunt the market.

      July futures fell to 1341 on Wednesday where support developed.  If you will notice on the chart, there is a line of support that extends back to the low made last November at 1331.75.  Resistance is likely on a bounce to 1378-1385 although a rally past 1400.5 cannot be ruled out.  Seasonally, soybean futures tend to rise from the end of April until early to mid May.  Like corn, the question is whether we follow the norm, especially with the slowing demand from China.  Longer-term, the trend is down with the chances being there will be a downside breakout of the trading range that has been unfolding since November.  In that event, look for a sell-off to 1237 or 1210 with a bottom developing around June 3rd, June 15th or June 21st.  During May, soybean futures are lower 52 percent of the time.  Next week, the odds are 60 percent that July soybeans will be higher.

 Wheat Outlook:

Wheat futures are underpinned from potential yield losses caused from recent freezing temperatures in the southern Plains and slow planting of the spring wheat crop.  Last week, the crop ratings fell one point to 35 percent in good-to-excellent condition.  A year ago, 63 percent of the crop was in the good-to-excellent category.  Meanwhile, planting of the spring wheat crop is off to a slow start with only 7 percent of the crop seeded compared to 52 percent last year and 24 percent for the average.  Conditions in the Dakotas are expected to remain cool and wet suggesting further delays are likely.  Export inspections were 12.4 MB and below the average needed to reach USDA’s projection of 1.025 BB.  The trend following funds have strengthened their bearish stance by increasing their short position 50 MB to 270 MB.

July wheat fell to 688.25 on Wednesday and recovered to 706.5 Thursday.  So far, the pullback from 720.5 resembles a correction suggesting that prices could rise past this level and possibly challenge last month’s high at 740.5.  Support is expected at Wednesday’s low followed by 679.  Seasonally, wheat futures tend to work higher until early to mid May.  Look for a top during the period of May 6th-9th or May 15th if we are higher.  Meanwhile, once the recovery from 664.75 is done, a decline to 630 is expected which should wrap up the sell-off from 900.  During May, wheat futures are lower 58 percent of the time.  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.