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Traders who were bullish corn heading into last week’s grain stocks and planting intentions report were handedly caught with their pants down in a chilly breeze! Prior to the report, the trend following funds had accumulated a long position of 865 MB. Those positions are now under water. With stocks increasing 400 MB and planting estimates at 97.3 million acres, the highest since 1936, concerns of tight stocks are merely a memory. The increase in stocks translates into a 1.0 BB potential ending stocks for the 2012-13 crop. Meanwhile, in other developments, export inspections were 19.1 MB. At the current pace, shipments are on track for 718 MB as opposed to USDA’s estimate of 825 MB. With the biggest mover and shaker behind us, the focus will turn to weather and planting progress in the weeks ahead.
July corn fell to 619.25 on Monday followed by a recovery to 638.5 Tuesday. We have since turned down, made a new low on Thursday at 616 and are likely headed to 607 before the sell-off from last month’s high at 718.75 is over. Once prices bottom, resistance is expected on a bounce to 635 or 650. Meanwhile, the seasonal trend is weaker through the end of the month suggesting that prices could decline to a target mentioned in previous comments at 595, or possibly 583. Cycle analysis shows a bottom occurring on April 19th or during the period of April 24th-26th. Next week, the odds are 55 percent that July futures will be lower.
Concerns of tight soybean supplies have eased because of the increase in domestic stocks and a record South American crop ready to flood the market once the logistical snags are resolved. U.S. soybean plantings at 77.1 million acres will be smaller this season but still the fourth highest in history. Export inspections were better than expected at 16.3 MB with China taking 9.5 MB or 58 percent of shipments. However, reports of an outbreak of bird flu may diminish their interest. Meanwhile, shipments remain on track to exceed USDA’s export projection of 1.345 BB. Prior to the grain stocks and planting intentions report, the trend following funds had accumulated a long position of 425 MB, which are now sucking wind. Unless weather becomes a factor this season, price gains will meet heavy resistance.
Since peaking last week at 1436.25, July soybeans have fallen and broken the upward trend line shown on the chart. If you will notice, a rising wedge pattern has been unfolding from the low made in November at 1331.75. These tend to be bearish formations with the breakout usually in the direction of the existing trend, which, in this case, is down. That may be occurring now with Thursday’s decline to 1340.25. Resistance is expected on a bounce to 1370 followed by 1385. Be advised that the seasonal tendency is for prices to remain on the defensive until the end of the month. A break below 1331.75 projects a sell-off to 1237 or 1210 with a bottom occurring around April 26th. Next week, the odds are 70 percent that July futures will be lower.
Wheat futures tumbled recently in sympathy with the sell-off in corn but have recovered because of a missed moisture event in the southern Plains. In the first rating of the season, the USDA has 34 percent of the wheat crop in good-to-excellent condition compared to 58 percent a year ago. Export inspections last week were 25.7 MB. It will be a close finish as to whether USDA’s projection of 1.025 BB is reached. In other developments, the short position of the trend following funds has fallen 40 MB to 245 MB. Shortly, the wheat crop will emerge from dormancy and enter its most critical stage of development.
July wheat fell to 664.75 on Monday followed by a rebound to 710.25 Thursday. Additional resistance is at 717 and 740. As it stands now, the wave pattern shows that the sell-off from the contract high at 900 may not be done. If this is the case, the recovery from 664.75 may last a few more days before prices turn down and fall to 652 or 617. If we follow the seasonal norm and unless there is a close beyond 740.5, the market will likely stay on the defensive until the end of the month with a bottom occurring on April 24th or April 30th. Next week, the odds are 60 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.