On The Money Grain Commentary 5-16-13

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Corn Outlook:

Corn planting is creeping along with producers working around the clock to get the crop planted.  The delay is underpinning old crop futures as stocks are tight.  As of last week, only 28 percent of the crop was planted compared to 85 percent a year ago and 65 percent for the average.  However, expectations that 50-60 percent of the crop will be in the ground by next week is pressuring new crop.  The lateness in planting has many in the trade circles thinking that the USDA will lower their yield estimate from the current projection of 158 bpa.  Meanwhile, usage has been the market’s Achilles heel.  Inspections last week were only 12.6 MB.  At the current pace, shipments are on track for 700-675 MB versus USDA’s present forecast of 750 MB.  In other developments, the trend following funds abandoned their short futures position last week and are long 10 MB.

July corn has been in a trading range since peaking in late April at 669 bound by last week’s low at 625.  The market rose to 661 on Monday where resistance was encountered.  Although the seasonal tendency is for a move lower until the end of the month, we will probably stay in a trading range until planting progresses further.  Right now, the trend indicators are pointed up.  Prices should be supported at 638 followed by 625.  If last month’s low at 610 cannot hold, a break to 595 is likely.  Look for resistance at 677 or 684 in the event that 669 is exceeded.  Next week, the odds are even as to whether July futures will be higher or lower.

Bean Outlook:

     Concerns about tight domestic supplies are supporting old crop soybeans, while the delay in corn planting is pressuring new crop.  Wetness throughout the Midwest not only delayed corn planting, but soybeans are behind as well.  Last week, only 6 percent of the crop was in the ground compared to 43 percent a year ago and 24 percent for the average.  However, there is still ample time to get the crop planted before yields are threatened.  In other developments, export inspections were a marketing year low at 3.3 MB with China being a no show.  This is the first time they have been absent on the books this season.  The trend following funds are less bullish as they sold 90 MB last week reducing their long position to 170 MB.

     July soybeans trended higher this week exceeding the high made in late April at 1423.75.  Resistance is expected at 1440 although prices could rise to 1453.  This should wrap up the recovery from 1341 with a top likely no later than May 23rd.  Right now, a decline below 1402 is needed to break the short-term uptrend.  Meanwhile, if you will notice on the chart, a head and shoulders pattern is unfolding from last November’s low at 1331.75.  These tend to be bearish patterns with the breakout generally in the direction of the existing trend, which, in this case, is down.  A rally beyond 1483.5 is needed to violate the pattern.  Otherwise, a decline below 1341 projects a sell-off to 1237, 1210 or possibly 1185.  Next week, the odds are 78 percent that July futures will be lower.

 Wheat Outlook:

Wheat futures, for the most part, are following corn.  Although potential yield losses in the southern Plains and late planting of spring wheat are supportive, prices failed to respond positively this week.  Last week, the crop ratings were unchanged at 32 percent in good-to excellent condition compared to 60 percent a year ago.  Planting of spring wheat continues to lag with 43 percent of the crop seeded, down from the average of 63 percent.  Scattered showers are forecast in the upper Midwest early next week which means progress will remain slow.  Export inspections were 23.9 MB and above expectations.  However, it will be a photo finish as to whether USDA’s projection of 1.025 BB will be reached.  The trend following funds are more bearish as they increased their short position 30 MB last week to 225 MB.

July wheat has fallen below support at 698.25 resulting in a downside breakout of the short-term trading range bound by last week’s high at 727.75.  Resistance is expected on a bounce to 693-700 followed by 710.  If you will notice on the chart, a head and shoulders pattern has unfolded from last month’s low at 664.75.  The decline below 687.75 constitutes a potential downside breakout and projects a sell-off below 664.75 to 630-620.  This means that prices could move lower until May 29th or June 17th.  Seasonally, wheat futures usually trend downward until the end of the month followed by a recovery into mid June.  However, it is not uncommon for the market to be on the defensive until the first week of July.  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.