Everyone was stunned when the USDA threw a curve ball that projects planted acres of corn at 92.2 million. This is essentially unchanged from the March Intentions Report and above the estimate in the supply-demand report earlier this month at 90.7 million. If realized, it will be the second highest planted acreage since 1944. In addition, stocks of corn on June 1st were higher than expected at 3.6 BB. While stocks still remain tight, usage is slipping. Both reports are bearish. In the meantime, traders are shaking their heads in disbelief, as the numbers do not add up considering corn not planted or lost to flooding in the upper Midwest. USDA will revise their acreage survey in July. As Ricky Ricardo would say, they have some “splaining” to do! In other developments, the trend following funds slashed 305 MB from their long position last week reducing it to 1.075 BB.
December corn bottomed last week at 620 and recovered to 671.75 on Wednesday. However, prices fell the 30-cent limit to 620.5 on Thursday because of the bearish acreage and stocks report. Failure of 620, preferably a close, breaks the long-term up trend from 382.5 and mostly wipes out the chance for trading beyond the contract high at 722.75. In this event, a decline to 570, 550 or 535 can be expected with a bottom developing during mid July. During July, the historical odds are 63 percent that December futures will be lower. Next week, there is a 60 percent chance the market will be higher.
Soybean futures have sunk because of fund selling in the grains. The trend following funds unloaded 100 MB last week reducing their long position to 180 MB. In other developments, the USDA reduced planted acres of soybeans to 75.2 million compared to their estimate of 76.1 million in March. Traders were expecting acres at 76.5 million. The report was friendly but prices were lower Thursday because of the limit down trade in corn. Stocks of soybeans as of June 1st are forecast at 619 MB compared to 571 MB a year ago. The report reflects that usage is waning. Moving forward weather will be the driving factor for soybeans during the rest of the growing season.
November soybeans rebounded to 1338.5 on Wednesday, but fell to 1286 on Thursday breaking support at 1292.25. Previous comments have mentioned that a rising wedge pattern has been unfolding from the low made in March at 1238. Right now, the pattern is fading but remains intact. A close below 1238 violates the pattern, as it constitutes a lower low and a lower high turning the long-term trend down. However, unless this happens, the chance still exists for a rally beyond the contract high at 1411.25. Right now, a close past 1338.5 is needed for confidence this will happen. During July, the historical odds are 63 percent the market will be down. Next week, the odds are 70 percent that November futures will be lower.
Fund selling took its toll on wheat this month as the trend following funds increased their short position to 200 MB. Harvest pressure and sell-off in corn are the factors responsible for the decline. Meanwhile, USDA projects all wheat acres at 56.4 million, down from the March estimate of 58.0 million. Spring wheat acres are forecast at 13.6 million compared to 14.4 million projected in March. Stocks of wheat on June 1st are neutral to bearish at 860 MB. While they are below a year ago, they were above trade expectations.
December wheat rebounded to 739.5 on Monday followed by a sell-off to 657.5 on Thursday, which was down the 60-cent limit. This exceeded the downside target mentioned in last week’s commentary at 675. Look for prices to work lower to 645 in which they will be due for a sizeable recovery. From a seasonal perspective, prices tend to bottom during the first week of July followed by a rebound into mid month. At the end of July, the historical odds are 58 percent that we will be lower. Next week, the chances are 80 percent that prices will be down.
Want the kind of intel that helps serious producers succeed? Sign up for a FREE! trial subscription to our daily newsletters.
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.