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Traders are gearing up for the grain stocks and prospective planting report on June 28th.. These two reports have a history of being a game changer. The acreage report will be of special interest because of delayed planting this spring. Most guesses are that planted acres will fall around 2.0 million. Meanwhile, the corn crop improved slightly last week, up one point to 64 percent in the good-to-excellent category. According to Ag Watch’s yield model, this translates to a yield of 158.0 bpa compared to USDA’s estimate of 156.5 bpa. Export inspections were better than expected at 14.4 MB with shipments on pace for 685 MB. The trend following funds have reduced their long futures position to 40 MB. Unwinding of bull spreads and the forecast for a heat dome to develop next week were the factors underpinning Wednesday’s strong rally.
December corn bottomed on Monday at 525.75 and spurted to 571 Wednesday from concerns of heat building in the Midwest next week. This was a gain of 8.6 percent. Corn futures generally trend lower through the end of the month but have risen instead indicating there could be a deviation from the norm. Currently, the wave pattern leans to a sideward trade from the May low at 512 and the high set early this month at 573.5 until the acreage report on June 28th. Support is at 547. In the event that 571 is exceeded, prices could edge upward to 578 or rise as high as 587. Be alert for a top during the period of June 25th-27th if this occurs. Longer-term, the potential remains for a sell-off below 512. During July, corn futures are lower 63 percent of the time. Next week, the odds are even as to whether December corn will be higher or lower.
The advance in new crop soybeans has hit a bump in the road as weather is improving for planting. In addition, more acres are expected in the prospective planting report late next week. As of last week, 85 percent of the crop was in the ground compared to 91 percent for the average. Iowa and Minnesota still have some catching up to do as they are 19 and 15 percent below their average. Meanwhile, exports are slowing down with inspections a marketing year low at 2.7 MB. China was a no show again and has dropped out of sight the past four weeks. The trend following funds remain bullish increasing their longs 70 MB last week to 585 MB. This is the largest their position has been since November 2012 and could have bearish ramifications if new crop production potential continues to grow.
November soybeans fell to 1277.5 on Monday followed by a rebound to 1319 Wednesday. So far, this appears to be a corrective bounce which favors additional weakness. However, violation of 1277.5 is needed to break the uptrend beginning in April at 1186.5. Unless this happens, I cannot rule out rising past 1333. In this event, look for a top around 1350 during the period of June 26th-27th. Longer-term, the potential remains for a sell-off below 1186.5 to 1100 or lower. During July, soybean futures are down 63 percent of the time. Next week, the odds are 60 percent that the November contract will be lower.
Harvest in the southern Plains and Midwest has begun with yields in the Plains reported as variable. As of last week, 11 percent of the crop had been cut which is below the average of 25 percent. Oklahoma is lagging at 34 percent below their average. Exports have slackened as the U.S. is not competitive with prices in the EU and the Black Sea region. This was reflected last week with inspections being at the low end of guesses at 21.5 MB. In other developments, the trend following funds lightened their short position 10 MB to 235 MB.
December wheat shot up to 730.75 Wednesday on the coattail of the rally in corn, but backed off Thursday. Additional resistance is at 738-743. If you will notice on the chart, a wedge type pattern has developed from 692.75 and 758.75. When a breakout of these formations occur, it usually is in the direction of the existing trend, which, in this case, is down. Unless there is a rally past 758.75, the longer-term trend is down with the potential for a sell-off to 655 or possibly 630. The seasonal tendency is for wheat futures to trend lower until the first week of July or early August. If we follow the norm, an important bottom may not occur on July 8th or August 6th. During July, wheat futures are down 58 percent of the time. Next week, the odds are 80 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.