On The Money Grain Commentary 5-9-13

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Corn Outlook:

Producers in the Midwest have struggled getting the corn crop planted since pulling the planters from the shed.  The delay supported the market during April, but prices have backed off in May as a drier pattern is forecast.  This opening has increased optimism that the prospect for a large crop still exists.  Meanwhile, only 12 percent of the corn crop is in the ground compared to 69 percent planted a year ago and 42 percent for the average.  In Iowa, planting is 48 percent below its average.  While many traders view the lateness in planting as a bump in the road, it sets the stage for problems later if cool conditions persist.  In other developments, export inspections were anemic at 6.5 BB with shipments on track for 680 MB compared to USDA’s estimate of 800 MB.  Last week, the trend following funds reduced their short futures position 175 MB to 65 MB.

July corn peaked late last month at 669 and fell to 626.5 on Wednesday.  Prices rebounded to 652.5 Thursday and should meet resistance near last month’s high.  Seasonally, corn futures tend to trend downward from mid May until the end of the month followed by a recovery until mid June.  Right now, there are a couple of potential patterns at play.  One is a trading range will develop bound by the low at 610.  The other pattern points to a sell-off to 595, 583 or 577.  Which direction the market takes largely depends upon the outcome of tomorrow’s supply-demand report and next week’s planting progress report.  Some traders expect planting at 35 percent complete, but that may be stretching it.  Next week, the odds are 80 percent that July futures will be lower.

Bean Outlook:

     For nearly a month, trading in soybeans has been stagnant.  Stocks are tight, but late planting in corn means switching more acres to soybeans.  The logistical problems in Brazil are slowly being resolved, which means shipments from them will be on the rise.  In the meantime, demand from China is waning.  Last week, export inspections were 6.5 MB with China taking only 2.4 MB or 37 percent of shipments.  Soybean planting has begun, but is off to a slow start at 2 percent planted compared to 22 percent a year ago and 12 percent for the average.  The trend following funds have increased their long position 70 MB to 260 MB.  While this seems friendly on the surface, it may not be good longer-term if the market remains in a sideward pattern or prices turn lower.

      Since peaking in late April at 1423.75, July soybeans have been in a trading range bound by the low set last week at 1365.5.  Prices have risen from this level and may challenge 1423.75 again.  Meanwhile, if you will notice on the chart, a head and shoulders pattern is unfolding from last November’s low at 1331.75.  These tend to be bearish patterns with the breakout usually in the direction of the existing trend, which, in this case is down.  A rally beyond 1483.5 must occur to violate the pattern.  Otherwise, a decline below 1341 projects a sell-off to 1237, 1210 or possibly 1185.  Seasonally, soybean futures generally trend lower from mid May until the end of the month.  If we follow the norm, the market could stay on the defensive until May 23rd or June 3rd.  Next week, the odds are 70 percent that July futures will be lower.

 Wheat Outlook:

Wheat futures are meeting resistance from expectations that moisture in the southern Plains will benefit the crop, while a dryer forecast in the northern Plains will accelerate spring wheat planting.  Last week, the ratings fell one point to 32 percent in good-to-excellent condition.  A year ago, 63 percent of the crop was in the good-to-excellent category.  Planting of spring wheat is 23 percent done compared to 82 percent last year and 50 percent for the average.  Export inspections were disappointing at 16.6 MB and it will be close in reaching USDA’s projection of 1.025 BB.  The trend following funds are less bearish as they lightened their short position by 50 MB last week, reducing it to 195 MB.  Right now, the market lacks conviction and will look to corn for a direction.

July wheat peaked late last month at 736.75 and fell to 698.25 on Tuesday from where prices rebounded to 727.75 Thursday.  Additional resistance is expected at 736-742.  Seasonally, wheat futures generally peak by mid May and trend lower until the end of the month followed by a recovery into early to mid June.  Longer-term, unless there is a close above 740.5, the trend is down with the potential for a sell-off to 630.  This could occur by May 29th.  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.