On The Money Grain Commentary 6-5-14

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Corn Outlook:

The late start in corn planting this season is coming to a close as it is 95 percent done.  Great strides were made in the upper Midwest last week but some switching to soybeans is likely.  The first crop rating of the season shows that 76 percent of the crop is in good-to-excellent condition compared to 63 percent a year ago.  According to Ag Watch’s yield model, this equates to 168.3 bpa versus USDA’s estimate of 165.3 bpa.  If realized, ending stocks this fall could total 1.978 BB.  However, it is a long time before harvest.  Export inspections last week were 38.4 MB and below the average needed to reach USDA’s projection of 1.9 BB.  While sales are on track to meet their target, the pace of shipments shows that it will be a toss up.  Meanwhile, the trend following funds continue to bail on their longs as they shed 135 MB last week reducing their position to 595 MB.

July corn is struggling to find a toe hold in the sell-off from last month’s high at 522.75.  There have been a few false starts in probing for a low that have proven unsuccessful.  The market needs a close beyond 460.5 for evidence of a bottom.  Otherwise, we may edge lower to 443.  Meanwhile, be aware that the momentum indicators are at their most oversold level since August 2013.  While corn usually musters a bounce through mid June, the bears do not seem to be nervous about getting caught in a turnaround, at least not yet.  In the meantime, be alert for a bottom that could develop around June 9th.  Next week, the odds are 60 percent that July corn will be lower.

Bean Outlook:

      Even though old crop soybeans stocks are tight, the market is showing signs of fatigue.  Planting is making great strides at 78 percent complete compared to 70 percent for the average.  The upper Midwest is lagging, but it is not of great concern.  According to the USDA, 81.5 million acres will be planted this season.  However, because of the surge in soybean futures a couple of weeks ago, and the struggle to get corn planted, we could see an additional million acres.  In other developments, export inspections last week were 5.7 MB with China taking 18,000 bushels.  This was there first appearance in four weeks.  Meanwhile, the trend following funds lightened their longs last week reducing them 70 MB to 425 MB.

      On Monday, July soybeans rebounded to 1511.75.  Since then, the market has fallen setting lower highs and lower lows on the short-term chart.  Look for support at 1455, although we could test the low made last month at 1441.75.  A decline below this level is needed to break the uptrend from January low at 1234.75.  In the event, look for the sell-off continuing to 1420 or 1385.  For now, a rebound beyond 1496 is needed to turn the short-term trend up.  Next week, the odds are 60 percent that July soybeans will be lower.

 Wheat Outlook:

Since early May, wheat has been beaten, mugged, whipped and flogged.  You choose the verb.  While the crop in the southern Plains has been stressed, traders are looking at adequate world stocks in addition to lackluster U.S. exports.  Last week, 30 percent of the crop was in good-to-excellent condition but, at this stage, the ratings are of little concern as harvest is just around the corner.  Spring wheat planting is winding down at 88 percent done, which is on par with the average.  Export inspections were 18.9 MB with cumulative shipments as of May 29th standing at 1.148 BB versus USDA’s projection of 1.185 BB.  In other developments, the trend following funds increased their short position 20 MB to 90 MB.

It has been a technical disaster for July wheat since topping last month at 744.  The market has fallen over 18 percent since the decline began, but may edge lower to 599-595.  The momentum indicators are at their lowest level since January, while the wave pattern shows that we are in the mature stage of the sell-off.  In addition, the spreads are beginning to turn positive.  However, for now, a rally beyond 625 is needed for evidence of a bottom.  Next week, the odds are 80 percent that July wheat will be down.

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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.