On The Money Grain Commentary 5-8-14

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Corn Outlook:

Corn planting is running behind schedule, but that can be cured with a few days of decent weather.  Currently, 29 percent of the crop is in the ground compared to 11 percent a year ago and 42 percent for the five-year average.  Missouri made the most progress last week while Wisconsin saw the least.  The states lagging the most are Iowa, Minnesota, Ohio and Wisconsin.  In other developments, corn sales remain strong with inspections last week at 48.7 MB.  While sales have been robust the past several weeks, shipments needed to reach USDA’s export projection of 1.750 BB are lagging.  However, the gap has narrowed recently.  The trend following funds added 140 MB to their long position last week increasing it to 1.0 BB, the largest since November 2013.  Shortly after that occurred, corn values fell 9.0 percent.

July corn rebounded to 519 on Tuesday where it met resistance followed by a break to 508 Thursday.  If you will notice on the chart, the market has been locked in a trading range since it peaked in April at 524.25.  Seasonally, corn futures tend to set their high during the first or second week of May and trend downward through the end of the month.  Whether that happens this season largely depends upon the supply-demand report tomorrow.  If the report exceeds bullish expectations and prices climb beyond 524.25, we could rise to 535.  Otherwise, the market may be content to stay in its trading range and could fall to 490 on a neutral or disappointing report.  Next week, the odds are even as to whether July corn will be higher or lower.

Bean Outlook:

     Soybean futures have hit a stone wall as shipments being diverted from China to the U.S. are beginning to reach our shores.  This will help alleviate the tightness of old crop stocks.  During the past few weeks, exports have fallen off the cliff with inspections last week at 3.6 MB.  China took 32,000 bushels.  In other developments, soybean planting has just kicked off and is 5 percent done compared to 2 percent last year and 11 percent for the five-year average.  In my opinion, USDA’s planting intentions estimate of 81.5 million acres may be too low based upon conversations with producers throughout the Midwest.  Several have said that they intend to go with all soybeans because of the high costs of planting corn.  In addition, switching from spring wheat and corn in the upper Midwest to soybeans because of wet conditions is likely.  I would not be surprised if planted acres are one million more that USDA’s current projection.  Last week, the trend following funds added 35 MB to their long position increasing it 620 MB.  However, with the market’s recent decline, they may be forced to trim their recent longs.

      Since peaking last week at 1520.5 that formed a double top with the high made earlier last month at 1521, July soybeans have fallen to 1441.75, a decline of 5.1 percent.  The market rebounded on Thursday with resistance expected be met at 1482.  The recovery should be done during the period of May 12th-14th.  Longer-term, unless the supply-demand report tomorrow exceeds bullish expectations, the market is at risk for a decline to 1415 or lower.  Seasonally, soybean futures tend work downward from early May through the end of the month.  Cycle analysis shows that a bottom could develop on May 16th, May 28th or June 4th.  Next week, the odds are 60 percent that July soybeans will be higher.

 Wheat Outlook:

Wheat gathered support this week from above average temperatures in the southern Plains, the Kansas Wheat Tour pegging yields the lowest in seven years, and escalation of violence in the Black Sea port of Odessa in the Ukraine.  This has raised concerns that shipments from the region could be disrupted.  However, so far, it has not happened.  Meanwhile, the wheat crop continues to deteriorate falling two points last week to 31 percent in good-to-excellent condition.  Planting of the spring wheat crop is behind schedule at 26 percent done compared to the average of 41 percent.  Export inspections were a nonevent at 19.7 MB with only four weeks left in the marketing year.  The trend following funds bought 60 MB of wheat last week and are now flat.

This week, July wheat traded through the March high at 725.25 to 744 where a short-term top has occurred.  Support is at 727.  The wave pattern shows that additional gains are likely with the potential for climbing to 763 or possibly 787.  Wheat futures generally peak in early May, but this year may be an exception.  Currently, the cycles point to prices rising until May 21st, or possibly May 30th with June 4th probably the latest.  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.