On The Money Grain Commentary–6-13-13

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Corn Outlook:

It has been an uphill struggle for grain producers this spring, but corn planting is essentially done.  Because of excessive moisture in the Midwest, as many as 2.5 million acres may go unplanted and switched to soybeans or go into preventative planting.  Currently, 63 percent of the crop is rated in good-to-excellent condition.  Meanwhile, no shortage of corn is forecast as the USDA projects 2013-14 ending stocks at 1.949 BB, down slightly from last month’s estimate of 2.004 BB.  They lowered their yield projection to 156.5 bpa from 158.0 bpa.  Exports remain sluggish with inspections last week at 6.3 MB.  The trend following funds are less enthusiastic as they have reduced their long futures position to 90 MB.  The next  mover and shaker for grains will be the prospective plantings report on June 28th.

December corn fell sharply on Wednesday after the USDA report bottoming Thursday at 529.  The next level of support is at 525. Meanwhile, a rally beyond 540 projects a recovery to 552-557.  For the intermediate-term, a trading range is likely until the planting report on June 28th.  Longer-term, the seasonal tendency is for corn futures to trend lower from mid June until the first week of July or early August unless a crop issue arises.  Unless there is a rally past this month’s high at 573.5, the potential exists for a sell-off to 475-467 or 445.  A more bearish pattern points to a decline to 422.  If the market follows the seasonal norm downward, a bottom is not likely until July 2nd or July 8th, while it may be closer to August 6th.  Next week, the odds are 60 percent that December corn will be lower.

Bean Outlook:

     Because of the wet spring, soybean planting is lagging at 71 percent complete compared to the average of 84 percent.  Iowa is behind the most at 35 percent below their average.  However, there is still time to get the crop planted.  Currently, the USDA projects 2013-14 ending stocks at 265 MB, which is unchanged from May.  While exports have been robust this year, inspections last week were meager at 3.0 MB.  China was a no show for the third consecutive week.  The trend following funds are more bullish and have increased their long futures position 95 MB to 515 MB.  This is the largest position they have held since March.

      November soybeans slid to 1288 on Thursday but held the low made earlier this month at 1285.25.  The seasonal tendency is for soybean futures to trend lower until early July or August. However, the market has deviated from the norm since May because of late planting.  A break below 1285.25 is needed to violate the uptrend.  Otherwise, I cannot rule out rising past 1333 to 1348 before wrapping up the advance beginning in April at 1186.5.  Be alert for a top on June 19th if we are higher.  Meanwhile, a decline below 1285.25 infers that the recovery is done and projects a move downward to 1242.  Longer-term, the potential exists for a sell-off below 1186.5.  Next week, the odds are 60 percent that November soybeans will be higher.

 Wheat Outlook:

Wheat is mostly a follower of the other grains but will likely encounter pressure within the next couple of weeks when harvest commences.  Currently, 31 percent of the crop is rated in good-to-excellent condition, down one point from a week ago.  Exports have improved the past few weeks with inspections last week at 23.4 MB.  USDA presently projects 2013-14 ending stocks of wheat at 659 MB, down from last month’s estimate of 670 MB.  The trend following funds are less bearish and have reduced their short futures position 65 MB to 245 MB.

July wheat fell to 675 on Thursday slipping slightly below trend line support.  If you will notice on the chart, a wedge pattern is unfolding from the April low at 664.75.  These tend to be bearish patterns with the breakout generally in the direction of the existing trend, which, in this case, is down.  Resistance is expected on a bounce to 700.  Unless there is a rally beyond 736.75, the market is at risk for a sell-off to 630-620.  Seasonally, wheat futures tend to work lower until the first week of July although it can be early August before they bottom.  Right now, the cycles point to a low developing around July 8th.  Next week, the odds are 60 percent that July wheat will be higher.

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