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Corn futures have run into a strong headwind as weather is becoming less of a factor. Although the crop lags in development with 4 percent in the mature stage versus 17 percent for the average, threat from frost is not on the horizon. Crop conditions fell 3 points last week to 56 percent in the good-to-excellent category. This compares to the five-year average of 55 percent. Harvest has begun in the southern Corn Belt with yield reports of 200-230 bpa being common. The worst yield I have heard is 150 bpa. As harvest progresses north, yields will likely be more variable. Recently, the trend following funds trimmed 160 MB from their short position reducing it 630 MB. Export inspections were more than expected at 17.4 MB but are certainly not on fire.
December corn traded to 493.75 on Tuesday following Labor Day and was met with a swift downside reversal. Resistance is expected on a bounce to 466-470 followed by 476. As it stands now, the recovery from 445.75 ended at 508.25 with prices likely headed lower. Seasonally, corn futures generally trend downward from early September until the first week of October. The longer-term wave pattern shows that unless 508.25 is exceeded, we are on track for a decline to 430 or 412. A more bearish pattern points to a sell-off to 380. Next week, the odds are 89 percent that December corn will be down.
Soybeans act weary after rising 21 percent in less than a month. However, concerns of dryness in northern Iowa, southern Minnesota and western Illinois persist. Normal to slightly above normal temperatures are forecast for the next two weeks which means that frost is not an issue. Keep in mind that while traders are betting that the crop will come up short, any deficiency will be made up from South America’s production and the expectation for a 5 percent increase in Brazilian acreage this fall. Currently, 54 percent of the crop is in good-to-excellent condition compared to the five-year average of 55 percent. Export inspections were lackluster with China taking only a token shipment. Meanwhile, the trend following funds are bullish as they tacked on 185 MB to their longs last week increasing them to 100 MB. This is the largest position they have held since June.
November soybeans gapped higher to 1408.5 on Tuesday and slid to 1335 Thursday. This formed a triple top with the August high at 1409.5 and the high set last September at 1409.75. Frequently, prices rise past a double top, but getting past a triple top is a more difficult task. Resistance is expected on a bounce to 1375-1390. Unless a new high is made, the market is at risk for a decline to 1315, 1285 or 1255. From a seasonal perspective, soybean futures generally trade lower until the first week of October. Next week, the odds are 70 percent that November soybeans will be lower.
Export demand has improved in wheat, but the market cannot shake the bearish effects caused by weakness in corn. Inspections last week were robust at 36.4 MB and above the average needed to reach USDA’s projection of 1.1 BB. At the current pace, shipments are on track for 1.375 BB. Spring wheat harvest is progressing at 64 percent complete and compares to the five-year average of 69 percent. The trend following funds are less bearish as they covered 50 MB of their short position last week reducing it to 340 MB.
For the past couple of weeks, December wheat has acted as if the sell-off from the contract high at 913 was over. However, a rally beyond 676.5 was needed for verification. That has not occurred. Generally, wheat futures work higher until the first week of October. That may not be the case this year if the break to 636.75 on Thursday is an indicator. Unless we get past the high made on Tuesday at 664, the market is at risk of falling below the contract low at 635.5 to 623 or possibly 610. Watch for a low on September 12th or September 24th if it happens. Next week, the odds are 70 percent that December 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.