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Corn futures have been pulverized since June from expectations of a record crop. Next week, the USDA sheds light on the situation in the supply-demand report, which will address acreage adjustments and the first field survey. Weather is non-threatening with the ratings improving one point to 64 percent of the crop in good-to-excellent condition. This compares to the five-year average of 57 percent. According to Ag Watch’s yield model, the national yield is 159.1 bpa. Meanwhile, the crop lags in development in which an early frost would pose a threat in Iowa and Minnesota. Exports are anemic with inspections last week at 15.1 MB. The short position of the trend following funds has risen 125 MB to a record 905 MB. Look for next week’s USDA report to have the price effect of a bouncing ball.
December corn has been walloped since peaking in June at 571. Prices fell to 455 on Tuesday setting a short-term low. A recovery is due going into the USDA report on August 12th with resistance expected at 470-473 and, maybe, 480. The flipside is if 455 fails, we could ease lower to 448-445 before the decline from last month’s high at 528.25 ends and a meaningful recovery gets underway. Longer-term, the trend is down with the potential for the sell-off continuing to 420 or 412. If an early frost does not materialize, we may see 393. Currently, the cycles show that an important low will probably not develop until late August or early September. Next week, the odds are 60 percent that December corn will be lower.
Favorable growing conditions in soybeans have been a nightmare for the bulls as prices have been tumbling since mid July. Conditions improved one point last week to 64 percent of the crop in good-to-excellent condition, and compares to the average of 57 percent. While the crop looks good now, if cooler temperatures persist, traders will focus on the what ifs of an early frost. If one were to occur, the crops in Iowa, Minnesota, Missouri and Wisconsin would be the most vulnerable. Exports were the talk of the town earlier this season, but are now treading water in reaching USDA’s projection of 1.330 BB. Inspections last week were meager at 1.361 MB. For the past eleven weeks, China has been AWOL. Meanwhile, the trend following funds are losing interest and have reduced their long position 170 MB to 155 MB.
November soybeans fell to 1162.5 on Wednesday which appears to have ended the sell-off from last month’s high at 1297. If so, a rebound to 1196 or 1213 is due with 1230 being the extreme. The recovery could end by August 14th or August 19th. Seasonally, the tendency is for soybean futures to work higher until the first week of September. However, this largely depends upon whether concerns of an early frost arise. Longer-term, the trend is down with the potential for a sell-off to 1100 or 1040 while a more bearish pattern points to a decline to 950. Cycle analysis shows that an important low is unlikely until early or late September. Next week, the odds are 60 percent that November soybeans will be higher.
Wheat gave the bulls some encouragement a few weeks ago, but that has changed with the market falling to a new low. Exports have improved but the market cannot overcome weakness in corn. While export demand has grown, the U.S. faces strong competition from the Black Sea region. Inspections last week were 25.4 MB, and if the current pace continues, shipments could top 1.2 BB compared to USDA’s target of 1.075 BB. Ninety-seven percent of the spring wheat crop has headed with harvest just around the corner. The trend following funds are less bearish as they trimmed their short futures position 35 MB last week to 375 MB.
December wheat fell to a new low on Wednesday at 651.25. Wheat futures typically bottom during early August, but that may not be the case this year because of the decline to a new low. Unless there is a recovery beyond 679.75 setting a higher high, the trend is down with the potential for a move lower to 630-623. Cycle analysis points to a bottom developing around late August or early September. Next week, the odds are 66 percent that December 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.