On The Money Grain Commentary–5-17-12

Corn Outlook:

      Corn futures have rebounded after shaking off USDA’s bearish report last week.  While old crop stocks remain tight, end users are now looking ahead at the potential increase in supplies and early harvest this fall.  Planting is progressing at blazing speed and 87 percent complete compared to 56 percent a year ago and 66 percent for the average.  Fifty-six percent of the crop has emerged, which is well ahead of the norm at 28 percent.  So far, conditions have been favorable suggesting that yields could exceed USDA’s forecast of 166 bpa.  However, that will depend upon Mother Nature’s cooperation.  In other developments, export inspections were below estimates at 26.8 MB and the average needed to reach USDA’s projection of 1.7 BB.  Although corn futures tumbled last week, the trend following funds added 20 MB to their longs increasing them to 335 MB.  The longs of the index funds grew 175 MB to 2.080 BB.   

     July corn bottomed on May 11th at 572.25, the day after the USDA report, and has since recovered.  As you can see on the chart, all that we have done is to expand the trading range that has been ongoing since last fall.  Prices could work upward to resistance at 634.75 before the recovery from 572.25 is complete.  Be alert for a top early next week if the market is higher.  At that time, we will likely have reached an overbought level.  Longer-term, the market remains at risk for setting a new low.  Next week, the odds are even as to whether July futures will be higher or lower. 

Bean Outlook:

      Soybean stocks are tight and the fundamentals are positive, but traders are also keeping an eye on macro market influences.  Trouble is brewing again in Greece as they have failed to form a coalition government.  There are reports of their citizens withdrawing funds from the banks and speculation that Greece may leave the Euro zone.  This could strengthen the dollar further and cool export demand.  In other developments, soybean planting is progressing quickly and 46 percent complete compared to 17 percent a year ago and 24 percent for the average.  Export inspections were 20.3 MB with China taking 7.8 MB or 38 percent of shipments.  Last week, the funds dumped 120 MB of their long soybean position reducing it to 1.005 BB.  Right now, the question is whether there will be additional liquidation.       

     July soybeans set a low on Monday at 1376 that ended the decline from the contract high at 1512.5.  If you will notice on the chart, the uptrend line extending back to the December low at 1125.5 has held.  Prices recovered to 1449.75 on Thursday and are expected to meet additional resistance at 1460.  Be mindful of a top that could occur early next week.  Meanwhile, last week’s comments mentioned that there was a 50 percent probability of trading to a new high.  Seasonally, soybean futures tend to move upward from the third week of May into June.  For now, a close beyond 1480 is needed for greater confidence in reaching a new high.  Next week, the odds are 78 percent that July soybeans will be lower. 

 Wheat Outlook:

      Crop conditions are generally favorable for wheat with the market keeping an eye on macroeconomic influences and the direction of corn.  Meanwhile, there are some concerns of dryness in portions of the Plains, Australia and Europe.  Last week, the ratings fell three points to 60 percent in good to excellent condition.  However, this is well above the rating of 32 percent a year ago.  Seventy-two percent of the crop has headed which is well above the average of 46 percent and suggests that harvest will be early this season.  Export inspections were better than expected at 28.0 MB and in line with the pace needed to reach USDA’s target of 1.025 BB.  The trend following funds are becoming more bearish as they increased their short position 90 MB last week to 435 MB.  The longs of the index funds are 1.080 BB.   

     July wheat bottomed late last week at 592.25 and has since recovered.  Frequently, wheat futures tend to bounce into mid May.  The short-term pattern shows the market working higher to 667.  Look for a top early next week.  Meanwhile, from a seasonal perspective, wheat futures generally trend downward until the first week of July suggesting prices are at risk for setting a new low, possibly a decline to 555.  Next week, the odds are even as to whether July wheat will be higher or lower.

Want the kind of intel that helps serious producers succeed? Sign up for a FREE! trial subscription to our daily newsletters.

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.