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Old crop corn futures leaped the 40-cent limit on Monday as planting last week was at a standstill because of cool, wet conditions throughout the Midwest. However, profit taking set in Tuesday and Wednesday on progress reported in some areas this week. As of last week, planting was only 5 percent done, which matches the record low in 1985 and compares to 31 percent for the average. Illinois, Iowa and Minnesota are 35 percent, 34 percent and 33 percent behind their average, respectively. While the eastern Corn Belt could get a reprieve early next week, the west may be still dodging raindrops. This means some areas could be pushing the optimal period of planting by mid May. In other news, export inspections were 11.5 MB with shipments on track for 700-715 MB versus USDA’s target of 800 MB. Last week, the trend following funds increased their short position 180 MB to 240 MB. Short covering by them supported the market this week.
It has been a volatile week as July corn rallied the 40-cent limit on Monday, peaked at 669 Tuesday and fell to 639.5 Wednesday. Right now, the short-term wave pattern shows that prices will likely make a run to 671 or possibly fill the gap at 676. Rising to 687 would probably be the extreme. For this to occur, the market needs a firm close for the week. In that event, we could reach the targets mentioned and peak Monday-Thursday of next week. Keep in mind that corn futures generally top in early to mid May followed by a decline until the end of the month. In order to turn the longer-term trend higher, a rally beyond the March high at 718.75 must occur. Otherwise, the potential remains for a sell-off below 610 to 595, 583 or 577. Next week, the odds are even as to whether July futures will be higher or lower.
Soybeans rallied with corn on Monday but backed off Tuesday and Wednesday as data out of China shows their economy is slowing. Right now, there is the tale of two crops. Old crop is supported by a strong cash basis and tight stocks, while new crop will meet resistance from a potential shift of corn acres to soybeans. Export inspections were 8.9 MB with China taking 2.4 MB or 27 percent of shipments. Shipments to them have fallen considerably the past few weeks because of the outbreak of bird flu. Last week, the long position of the trend following funds fell 20 MB to 190 MB. In the days ahead, the market will likely follow corn for a direction.
Last week’s comments mentioned that July soybeans could rally past resistance at 1400.5 and that occurred with the rise to 1423.75 on Tuesday. As it stands now, it is uncertain as to whether we will trade beyond this week’s high. If you will notice on the chart, a head and shoulders pattern is evolving from last November’s low at 1331.75. These are bearish formations, and a rally past 1483.5 must occur for it to be violated. Otherwise, the potential exists for a break below support at 1341 with a sell-off to 1237 or 1210 likely and, maybe, 1185. Be advised that the seasonal tendency for soybean futures is to peak early to mid May followed by a decline through the end of the month. If we follow the norm, the market could work lower until May 23rd or June 3rd. Next week, the odds are 60 percent that July soybeans will be higher.
Wheat rallied Monday and Tuesday underpinned by potential freeze damage to the crop in the southern Plains. Last week, the crop ratings fell two-points to 33 percent in good-to-excellent condition. This compares to 64 percent of the crop in the good-to-excellent category a year ago. Planting of the spring wheat crop is well behind schedule at 12 percent done compared to the average of 37 percent. Export inspections last week were 11.5 MB. With five weeks left in the marketing year, we should reach USDA’s projection of 1.025 BB. The trend following funds are less bearish as they covered 25 MB of their short position last week reducing it to 245 MB.
July wheat rose to 736.25 on Tuesday followed by a break to 713.25 Wednesday. The short-term wave pattern shows the chance of rising to 743-750 before the recovery from 664.75 is done. For this to occur, a strong close is needed at the end of the week. Be alert for a top Monday-Thursday of next week if prices are higher. Seasonally, wheat futures peak early to mid May followed by a decline through the end of the month. Longer-term, a sell-off below 664.75 to 630 cannot be ruled out. Next week, the odds are 70 percent that July wheat will be higher.
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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.