On The Money Grain Commentary 6-6-13

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Corn Outlook:

Corn planting is winding down; however, producers in the upper Midwest are working frantically to get the crop in the ground before the clock runs out.  As of last week, 91 percent of the crop was planted compared to the average of 95 percent.  However, Iowa and Minnesota are running 11 and 9 percent below their average.  What is not completed this week will go into soybeans or preventative planting.  Possibly, as many as 3.5 million acres of corn may go unplanted.  The first crop rating of the season shows that 63 percent of the corn crop is in good-to-excellent condition, down from 72 percent at this time a year ago.  Meanwhile, exports remain the sore spot with inspections last week at 11.6 MB.  Shipments are currently on track for 700 MB opposed to USDA’s projection of 750 MB.  For the third time since April, the trend following funds have flip-flopped and are long 160 MB of corn.

December corn peaked at 573.5 on Monday ending the rally from 512.  Prices fell to 539.5 on Thursday and should find additional support at 535.  Resistance is expected on a bounce to 555-560.  Look for a period of consolidation until after the crop production and supply-demand report on June 12th.  Meanwhile, there is a chance that we will stay in a trading range until the grain stocks and planted acreage reports on June 28th.  Unless there is a rally beyond 573.5, the longer-term trend is down with the potential for a sell-off to 467 or 445.  A more bearish pattern points to a decline to 422.  Seasonally, corn futures tend to peak during the first or second week of June and trend lower until the first week of August.  Cycle analysis shows a downward trend until July 30th, August 6th or August 19th.  Next week, the odds are 60 percent that December corn will be lower.

Bean Outlook:

     Tight old crop inventory and late planting has underpinned soybeans since April.  Because of tight stocks, crushers are having to scramble to secure their needs until new crop becomes available.  The persistent rainfall in the upper Midwest is causing producers headaches in getting the crop planted.  As of last week, 57 percent of the soybean crop was in the ground compared to the average of 74 percent.  Iowa and Missouri only progressed 4 and 6 percent from a week ago.  While the crop is late, it is early to become overly concerned as acres are likely to increase because of switching from corn.  Unless yields are threatened, or there is a stark decline below USDA’s planted acreage estimate of 77.1 million, global stocks-to-usage will be a record 31.3 percent at the end of the season.  In other developments, exports have faded quickly from a few weeks ago.  Inspections last week were 4.4 MB with China a no show for the second consecutive week.  While sales are on track to reach USDA’s projection of 1.350 BB, shipments are falling short.  The trend following funds were more aggressive last week increasing their long futures position 115 MB to 420 MB.  This is their largest position since March.

      November soybeans peaked on Monday at 1331.25 which may have ended the advance from the April low at 1186.5.  The pullback to Thursday’s low at 1285.25 appears to be a five-wave decline suggesting this could be the case.  However, a close below 1282 is needed for verification.  Look for resistance on a bounce to 1313.  If 1320 is exceeded, the chances improve for a rally past 1331.25 to 1348.  In this event, a top is likely on June 13th, the day after the crop report.  From a seasonal perspective, soybean futures tend to peak around mid June and work lower until the first week of August.  However, bear in mind that we deviated from the norm in May.  If we return to the mean, cycle analysis shows prices trending downward until August 23rd with the potential for a sell-off to 1115-1100, 1045, or possibly 980.  Next week, the odds are 60 percent that November soybeans will be lower.

 Wheat Outlook:

Recently, wheat futures have encountered resistance from the detection of GMO white wheat found on the west coast.  This has caused Asian importers to back away and take a wait-and-see approach until the problem is resolved.  Meanwhile, the crop ratings improved one point to 32 percent in the good-to-excellent category.  Spring wheat planting continues to lag and is 80 percent done compared to the average of 92 percent.  Export inspections were less than expected at 16.7 MB.  In other developments, the trend following funds trimmed 35 MB from their short position reducing it to 310 MB.  Right now, wheat is mostly a follower of the other grains.

July wheat peaked at 714.5 on Monday and has been followed by a setback.  Support is at 692-687.  In the event that 714.5 is exceeded, resistance is expected at 720-723.  If you will notice on the chart, the market has been in a trading range since bottoming in April at 664.75 bound by the high at 736.75.  Unless there is a rally beyond this level, the longer-term trend is down with the potential for a sell-off to 630-620.  Seasonally, wheat futures tend to work lower until the first week of July.  Cycle analysis points to a bottom on July 8th.  Next week, the odds are 90 percent that July 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.