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Give producers a window of opportunity, and the planters will roll. Last week, Mother Nature cooperated for most in the Corn Belt and allowed producers to plant 30 percent of their crop. So far, 59 percent of the crop is in the ground compared to the average of 58 percent. Iowa, Indiana and Illinois made the most progress while North Dakota saw the least. Minnesota and Wisconsin also have issues. Episodes of showers are forecast into next week, which may slow progress in the upper sections of the Midwest. In other developments, export inspections last week were 47.2 MB and above the average needed to reach USDA’s projection of 1.9 BB. I think that they are optimistic in their outlook as the pace of shipments is lagging the level necessary to meet their target, while sales peaked in early April. Right now, the most precarious issue facing corn is that the trend following funds are long 1.035 BB. To sustain a position of this size, bullish input is needed.
July corn has traveled south since last week’s downside reversal at 522.75. Prices have fallen below support at 497.5 and the April low at 490.75. This constitutes a lower high and a lower low from 524.25 turning the trend down. As it stands now, a decline to 473 can be expected or possibly a sell-off to 461. Resistance is likely on a bounce to 490-493. Seasonally, corn futures tend to peak either the first or second week of May and work lower through the end of the month. From here, there is generally a bounce into early to mid June. Cycle analysis points to a bottom occurring around May 20th-23rd or June 3rd. Next week, the odds are 80 percent that July corn will be lower.
With world stocks at a record high, 2014-15 ending stocks projected at 330 MB and exports to China fading, soybeans will likely face an uphill struggle. Meanwhile, after a slow start in planting, producers have caught up with 20 percent of the crop planted compared to the average of 21 percent. Export inspections last week were 8.8 MB with China being a no show. USDA currently projects exports at 1.6 BB but may need to raise them another 20 MB. Last week, the trend following funds shed 175 MB of their long position reducing it to 445 MB.
July soybeans fell to 1441.75 last week followed by a rebound to 1496 on Monday. Meanwhile, prices posted an outside day down from 1493.5 on Thursday. The short-term wave pattern shows that a trading range may develop from 1441.75-1496 over the next few days. While I cannot rule out rising past 1496, there is little fundamental justification for climbing beyond the contract high at 1521. Seasonally, soybean futures tend to work lower through the end of May followed by a recovery until mid June. A decline below 1441.75 projects falling to 1415. In the event, be alert for a bottom around May 28th or June 4th. Next week, the odds are 70 percent that July soybeans will be lower.
Wheat has been slam dunked in light of deteriorating crop conditions in the southern Plains and the forecast for colder temperatures. Last week, the ratings fell one notch to 30 percent of the crop in good-to-excellent condition. Offsetting concerns of declining conditions are rising world stocks that are currently 187.4 million tons. Spring wheat planting remains slow at 34 percent complete compared to 53 percent for the average. More rain is forecast in the upper Midwest which means producers may think of switching to soybeans. Export inspections last week were 22.8 MB. It will be a photo finish as to whether we reach USDA’s projection of 1.185 BB. Currently, the trend following funds have a token long position of 5 MB. Right now, the market is struggling and not responding to bullish input.
July wheat has been a disappointment for the bulls recently. The market peaked last week at 744 and has been on the defensive ever since sinking to 676.75 on Thursday. If you will notice on the chart, the uptrend line extending back to the contract low at 557.25 has failed. Short-term, the wave pattern shows that we should be close to a bottom in which resistance can be expected on a bounce to 695-700. Meanwhile, for the intermediate-term, the chances are for a test the low made in April at 663.25 or falling to 650. From a seasonal perspective, wheat futures usually peak by mid May and trend lower through the end of the month followed by a rebound into early June. Cycle analysis shows a bottom developing around May 23rd, May 29th or June 4th. Next week, the odds are 80 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.