On The Money Grain Commentary 5-29-14

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Corn Outlook:

Given a window of perfect weather before Memorial Day, corn planting ran at full throttle and is 88 percent done, which is par for the average.  The upper Midwest has dodged raindrops most of the spring, but made good progress last week.  However, they are still behind their average and facing their preventative planting date for crop insurance.  There are currently 2.5 million acres that remain unplanted that could be switched to soybeans or another crop.  During the next several weeks, the focus will be on weather.  For now, we are seeing greenhouse conditions, but that could change.  Exports continue to be a bright spot with inspections last week at 45.6 MB.  For the past few weeks, the market has been declining as the trend following funds are unwinding their long futures position that currently stands at 730 MB.

July corn fell to 466.5 on Wednesday where a five-wave pattern appears almost complete in the sell-off from the high made earlier this month at 522.75.  A close beyond 475 is needed for confirmation of a low, and in that event, a recovery to 488 or 494 is expected.  Otherwise, support is expected at 462 if 466.5 cannot hold.  Seasonally, corn futures tend to bottom in late May and work higher into the first or second week of June.  If we follow the norm, a top is likely around June 9th followed by June 16th.  Once the market reaches its seasonal peak, there is generally a decline into early August unless a crop issue arises.  Historically, June is usually not a good month for corn futures as they trend downward  68 percent of the time from their peak.  Next week, the odds are even as to whether July corn will be higher or lower.

Bean Outlook:

      Soybean futures have had a good run since January, but cracks are showing in their armor as the market has run out of fresh news to attract new bulls.  Exports peaked in January and have been in a steady decline since.  Inspections last week were only 3.2 MB with China being a no show for the third consecutive week.  While some traders are enthusiastic that they will focus on new crop sales, it must be remembered that China’s economy has been in contraction for five months.  In addition, as of last week, there were 2.5 million acres of corn and 1.1 million acres of spring wheat that could be switched to soybeans or another crop. Meanwhile, soybean planting is sailing along and 59 percent complete compared to the average of 56 percent.  The upper Midwest is lagging their average but that is not considered a problem.  Currently, the trend following funds are long 495 MB, which seems heavy considering the fundamentals.

After peaking last week at 1536.75, July soybeans fell to 1482.75 on Wednesday where a bottom developed.  This was followed by a rebound to 1508.75 on Thursday.  The trend indicators are mostly flat and, until they turn down, a rally to a new high cannot be ruled out.  If it happens, look for a top around 1547.  Otherwise, a break below 1482.75 warrants a decline to the low made earlier this month at 1441.75.  Historically, soybean futures are down 63 percent of the time during June.  Next week, the odds are even as to whether the market will be higher or lower.

 Wheat Outlook:

If Fred Rogers of the children’s TV program, Mister Roger’s Neighborhood, were living today, he would ask, will you be wheat’s friend?  Wheat futures have sunk over 14 percent since early May even though crop conditions are deteriorating.  It has become old news and is overshadowed by larger global stocks.  The crop ratings rose one point last week to 30 percent in good to excellent condition.  However, with 70 percent of the crop heading, harvest is only a few weeks off and will offer resistance.  Meanwhile, spring wheat planting is 74 percent done compared to 82 percent for the average.  Export inspections last week were 18.6 MB, and it will be a photo finish as to whether USDA’s projection of 1.185 BB will be reached.  In light of the poor conditions in the southern Plains, the short position of the trend following funds has risen to 70 MB.

July wheat has been in a long drawn out decline since peaking earlier this month at 744.  The market  has lost nearly 15 percent since it topped, but the wave pattern shows that we should be approaching a bottom.  A close into the gap left on Tuesday at 648.5 is needed to confirm that the sell-off is done.  Otherwise, we could work downward to 625, and possibly challenge the gap left in late February at 616.  Right now, the cycles point to a bottom around June 4th.  Seasonally, the market tends to bounce from late May and top around mid June.  Meanwhile, the month of June is historically a poor month for wheat futures as they are down 73 percent of the time.  Next week, the odds are 80 percent that July wheat 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.