On The Money Grain Commentary 6-12-14

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Corn Outlook:

Corn has taken some hard knocks as values have fallen nearly 16 percent since early May.  A record crop appears to be in the making as USDA pegs production at 13.935 BB  with 2014-15 ending stocks at 1.726 BB.  With a rating of 75 percent in good-to-excellent condition, down one point from a week ago, the crop is considered a garden spot in much of the Midwest.  According to Ag Watch’s yield model, this equates to a yield of 168.3 bpa.  Another factor pressuring the market is China has stopped issuing permits to import DDG’s because they contain a banned genetically modified substance.  Long story short, encouraging news seems to be a rare commodity.  As a result, the trend following funds are in a liquidation mode as they have trimmed their long futures position to 580 MB, down from 1.035 BB in early May.  Meanwhile, exports are holding their own with inspections last week at 45.1 MB.

July corn continues to slip and slide from last month’s high at 522.75 falling to 439.25 on Wednesday.  There have been a few one day bounces along the way, but the market cannot seem to get any traction.  Right now, we are at our most oversold level since August 2013.  Usually there is a recovery in June but, so far, there is no sign of one developing.  The wave pattern shows that we are in the mature stage of the sell-off from last month’s high, but a rebound beyond 450 is needed for evidence of a low.  Unless that happens, prices may work lower to 430.  Meanwhile, be alert for a bottom around June 18th when the next cycle low is due.  Next week, the odds are 60 percent that July corn will be lower.

Bean Outlook:

       For months, soybeans have been resilient because of tight old crop stocks.  However, that appears to be changing as attention is beginning to focus on the potential for record new crop production.  USDA currently projects production at 3.365 BB with 2014-ending stocks of 325 MB.  Meanwhile, 87 percent of the crop is planted compared to 69 percent a year ago and 81 percent for the average.  The first crop rating of the season shows that 74 percent is in good-to-excellent condition.  This is the highest rating for this time of the season since 2010.  In other developments, export inspections were 4.5 MB with China being a no show.  The trend following funds are relinquishing their long futures position as it fell 120 MB last week to 305 MB.  This is down from 895 MB in late February.

      July soybeans rebounded to 1475 on Tuesday and turned down falling to break a key area of support Thursday, the May low at 1441.75.  This has opened to door for trading to 1385.  Meanwhile, be alert for a bottom around June 17th-19th when the next cycle low is due.  Resistance is expected to be met at 1443 followed by 1453.  For now, a rally beyond 1475 is needed to turn the short and intermediate-term trends higher.  Next week, the odds are 60 percent that July soybeans will be lower.

 Wheat Outlook:

Wheat has fallen out of grace over the past few weeks because of increased shower activity in the southern Plains.  However, overall crop conditions have seen no improvement as the ratings have not budged in three weeks from 30 percent in the good-to-excellent category.  Meanwhile, harvest has begun and is 9 percent complete compared to the average of 12 percent.  USDA currently projects 2014-15 ending stocks at 574 MB.  Export inspections for the first week of the marketing year stood at 19.0 MB.  In other developments, the trend following funds are more bearish as they have increased their short futures position 85 MB to 175 MB.  This is the largest short position they have held since March.

July wheat continues to gasp for air in the sell-off from last month’s high at 744.  The market fell to 584.75 on Thursday and may pick up support at 580-576 or 570.  Right now, we are at the most oversold level since January and the wave pattern shows that prices should be scrapping the bottom of the barrel.  Be alert for a low during the period of July 16-19th.  However, for evidence that the tide is turning in wheat, a rebound past 609 is needed.  Meanwhile, next week is generally not a good week for wheat futures as they are down 90 percent of the time.

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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.