On The Money Grain Commentary 5-23-13

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Corn Outlook:

Never underestimate the ability of the American farmer to get the job done when there is a window of opportunity.  Grain producers have been dodging rain drops all spring to get the corn crop planted.  However, there were some open days last week and progress leaped to 71 percent done compared 28 percent the previous week and the average of 79 percent.  Ohio is now 16 percent ahead of their average, but Iowa still lags by 21 percent.  All of this suggests that acres switched to soybeans are not likely to be as great as previously thought.  Meanwhile, exports are an albatross around the neck of corn.  Inspections last week were better than expected at 14.5 MB but below the average needed to reach USDA’s projection of 750 MB.  At the current pace, shipments are on track for 685 MB.  Last week, the trend following funds added 60 MB to their longs increasing them to 70 MB.

For weeks, July corn traded in a range bound by the high at 669 and the low made in April at 610.  However, that may be changing. On Tuesday, the market turned up from 632.5 and rose past 669 on Thursday to 669.75.  This suggests that an upside breakout may be getting underway.  However, additional follow through strength is needed headed into Memorial Day weekend.  Otherwise, a double top could be developing.  If strength occurs, we could work upward to 677 or 684.  Be alert for a top around May 29th if prices are near the levels mentioned.   Next week, the odds are even as to whether July futures will be higher or lower.

Bean Outlook:

     Old crop soybeans are supported by tight stocks while new crop is drawing resistance from expectations of increased acres and a larger carryout this fall.  Planting has been slow this spring with 24 percent of the crop planted compared to only 6 percent the previous week.  The average for planting this time of the year is 42 percent.  Although old crop stocks of soybeans are tight, the export pace has fallen sharply the past couple of weeks.  Inspections last week, set a marketing year low at 3.3 MB for the second consecutive week.  The prior week China was a no show, but they took 14,000 bushels this week.  This is a far cry from the weeks past and reflects that demand from them is backing off.    In other developments, the trend following funds increased their soybean longs last week 55 MB to 225 MB.

      July soybeans usually peak by mid May, but have deviated from the norm and shown remarkable strength this month.  The rally beyond the February high at 1483.5 violated the head and shoulders pattern unfolding from last November’s low at 1331.75 mentioned in previous comments.  On Thursday, prices surged to 1546.75 exceeding the boundary of the upper trend line extending back to the high made last December at 1462.25.  This usually happens near an important top.  Short-term, we are due for a 1-2 day pullback.  Once this occurs, the market should trade to its final high wrapping up the recovery from the low made earlier this month at 1366.25 and, possibly, the April low at 1336.5.  This could take place around May 29th.  Once the recovery is complete, a swift sell-off could unfold.  Next week, the odds are even as to whether July futures will be higher or lower.

 Wheat Outlook:

Wheat futures are mostly following corn with the upside limited from ample world stocks and production increases expected in the Black Sea region.  Conditions in the southern Plains continue to deteriorate with the ratings falling one point to 31 percent in the good-to-excellent category.  This compares to a rating of 58 percent a year ago.  Spring wheat planting continues to lag but jumped 21 percent last week to 67 percent seeded.  This compares to the average of 76 percent planted for this time of the year.  Export inspections were slightly better than expected at 14.5 MB.  The trend following funds are more bearish as they sold 25 MB last week increasing their short position to 250 MB.

July wheat fell to 674 on Tuesday followed by a rebound.  Resistance is expected at 713.  Once the recovery is done, and unless there is a rally beyond 736.75, the trend is down with the potential for a sell-off to 630-620.  Unless there is a deviation from the seasonal norm, wheat futures should work lower until the end of the month followed by a recovery into June.  However, it is not uncommon for the market to be on the defensive until the first week of July.  Currently, the cycles point prices trending lower until May 29th and, maybe, closer to June 17th.  Next week, the odds are 80 percent that July futures 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.