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For months, traders’ stomachs have been twisted in knots awaiting the outcome of the Planting Intentions Report. On Monday, the report showed that the USDA expects 91.7 million acres of corn to be planted in 2014, down 3.6 million from a year ago, as well as being at a five-year low. If realized, using the yield estimate of 165.3 bpa in the USDA February Outlook Forum and usage of 13.380 BB, ending stocks for 2014-15 could be 2.040 BB. However, a yield of 162.0 bpa puts ending stocks closer to 1.750 BB, while 158.0 bpa leaves us at 1.415 BB. In other news, export inspections were strong last week at 52.2 MB. While shipments have picked up recently, they are running 80 MB below the pace needed to reach USDA’s projection of 1.625 BB. Current cool, wet conditions delaying fieldwork offers price support . Be aware that the long position of the trend following funds is getting dicey as it has risen to 790 MB, the largest since December 2012.
July corn rallied to 517 on Tuesday, the day after the Planting Intentions Report, and turned down. Last week’s comments mentioned the chance of trading to a target at 516-521 with prices topping during the period of March 31st-April 2nd. Right now, it is tough to say whether a five-wave pattern is visible in the decline from 517. If there is and yesterday’s low at 495.75 cannot hold, the market could work lower to 470 with a bottom occurring during the period of May 12th-15th. Be aware that April is usually not a good month for corn futures with them being down 84 percent of the time. Meanwhile, until a five-wave pattern down is clearly visible, a rally beyond 517 cannot be ruled out as the trend indicators are flat, and it would not take much to turn them up. Next week, the odds are 60 percent that July corn will be higher.
USDA projects planted acres of soybeans to rise to 81.5 million, up 5.0 million from a year ago. If realized, using the yield estimate of 45.2 MB in the USDA February Outlook Forum and usage of 3.430 BB, ending stocks for 2014-15 could be as high as 365 MB. However, using the five-year average yield of 42.5 bpa, ending stocks could be as low as 168 MB. Bear in mind that acres will be greater if cool, wet conditions persist in the Midwest delaying corn planting. In addition, be aware that global stocks-to-usage are already in the upper third of the twenty-year range. Long story short, we are adding to an existing global surplus. In other developments, export inspections last week were 18.5 MB with China taking 6.5 MB or 35 percent of shipments. This is the smallest quantity taken by them since September. Currently, cumulative shipments are on track for 1.610 BB compared to USDA’s projection of 1.530 BB. Since late February, the trend following funds have lightened their longs reducing their position from 895 MB to 760 MB.
July soybeans spurted to 1470 on Wednesday where a downside reversal occurred. Last week’s comments mentioned that if the double top at 1429 was exceeded, we could rally to 1459-1477 with a top developing by April 7th. Right now, a five-wave decline is visible from 1470 suggesting that the advance from the January low at 1234 may be done. In addition, the weekly chart shows five waves up from this level indicating that the rally may be over as well. A sell-off below Wednesday’s low at 1434.25 is needed for confirmation and, in that event, look for a move downward to 1395 followed by 1368 and the March low at 1350.25. Meanwhile, if we trade past 1470, resistance is expected at 1488. Next week, the odds are even as to whether July soybeans will be higher or lower.
Not as much attention was paid to planting intentions for wheat as corn and soybeans took center stage. The USDA projects all wheat acres at 55.8 million, down 300,000 from a year ago. While limited precipitation is forecast in the southern Plains during the next ten days, and cold conditions in the Ukraine could effect their crop, concerns do not appear to be great as prices have failed to react. In other developments, export inspections last week were 18.0 MB and below the average needed to reach USDA’s projection of 1.175 BB. However, the pace of shipments are on track to reach their target. Since December, the trend following funds have been liquidating their short position and have reduced it to 35 MB. This is down from the record set late last year at 520 MB.
July wheat has spent a lot of time and energy in the pullback from 725.25. Previous setbacks in the rally from the contract low at 557.25 have lasted only two days suggesting that the recovery may be over. If so, a period of consolidation is likely until April 14th-18th with the chance of working lower to 660 or 640. The spreads have been losing ground recently which implies that it may be difficult to muster much price strength. Longer-term, a trading range in wheat is expected until May 21st. Next week, the odds are 70 percent that July futures 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.