On The Money Grain Commentary 5-22-14

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Corn Outlook:

Corn planting is in the home stretch and 73 percent done as compared to 65 percent a year ago and 76 percent for the average.  While most states have caught up, Michigan, Minnesota, North Dakota and Wisconsin are still behind.  Minnesota made the most progress of the laggards last week while Michigan saw the least.  However, weather this week should allow them to make some headway.  Export inspections last week were 41.7 MB and below the average needed to reach USDA’s projection of 1.9 BB.  While sales have been robust the past several weeks, the pace of shipments has not kept up suggesting the USDA may be a bit optimistic.  The trend following funds recently shed 35 MB from their long position reducing it to 1.005 BB.  However, this is still large and could limit the market’s ability for a recovery.

July corn fell to 472.5 this week posting a double bottom.  This was followed by a rebound to 482.5 on Thursday.  A close beyond this level is needed to turn the trend up.  In the event, the sell-off from the April high at 524.25 is over, and additional gains to 492, 497 or 503 are expected.  As I mentioned last week, the cycles pointed to a low developing during the period of May 20th-23rd.  However, the corrective nature of the bounce to 482.5 implies that it may only be a short-term low.  If 472.5 cannot hold, look for the market easing downward to 465 with the next bottom due May 28th.  This coincides more closely with the time frame for a seasonal low.  Longer-term, a trading range is likely for the next few weeks, or until the July contract expires.  Next week, the odds are even as to whether July corn will be higher or lower.

Bean Outlook:

      Soybean futures have been resilient on news that China bought 2.52 million tons during April, up 53 percent from the same period a year ago.   Meanwhile, soybean planting is moving along at 33 percent complete compared to 21 percent a year ago and 38 percent for the average.  Weather the rest of the week should allow those areas that are lagging a chance to catch up.  In the meantime, the price relationship between corn and soybeans has risen to 2.7:1 in favor of soybeans.  This suggests that producers in the upper Midwest, who are struggling to get corn planted, could make a last minute decision and switch to soybeans.  In other developments, export inspections were 6.1 MB.  China was a no show again for the second consecutive week.  Although the pace of shipments has slowed in recent weeks, we are on track to ship 1.620 BB compared to USDA’s projection of 1.6 BB.  Last week, the trend following funds lightened their longs reducing them to 15 MB to 430 MB.

      When July soybeans traded past resistance at 1496, it did not take long to challenge the contract high at 1521.  It was exceeded on Thursday with prices rising to 1536.75.  The short-term wave pattern shows that we may climb to 1546-1552.  A top could occur at any time, but the cycles point to one developing around May 28th or June 4th.  Meanwhile, the momentum indicators are showing considerable divergence as they are not keeping up with the advance in prices.  This forewarns that a top may not be far away.  For now, the bulls are in control, but the situation has gotten frothy.  When you have this type of herd mentality, it generally ends in a blow off.  Next week, the odds are 78 percent that July soybeans will be lower.

 Wheat Outlook:

Wheat futures have been pummeled since early May falling nearly 12 percent in value.  This comes in light of the crop suffering from extreme dry conditions in the southern Plains.  Part of the reason we have failed to find support is that foreign buyers have turned to other sources for wheat.  In addition, global stocks are higher than a year ago.  Meanwhile, the ratings fell another notch last week to 29 percent of the crop in good-to-excellent condition.  Spring wheat planting has picked up at 49 percent done, but still lags the average of 68 percent.  After this week, unplanted spring wheat acres may find a home in soybeans.  In other developments, the long position of the trend following funds has risen 15 MB to 20 MB.

July wheat bottomed at 662.75 on Monday followed by a one day bounce to 686.  Prices turned down from here falling to 654 on Thursday.  Right now, the wave pattern points to the market headed lower to 641 with a bottom developing around May 29th or June 4th.  This coincides with the period for a seasonal low.  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.