A long growing season lies ahead in corn. Planting is winding down, but there are areas in the eastern Corn Belt that will not see a planter because of wet conditions this spring. This was reflected in the supply-demand report when the USDA lowered planted acres 1.5 million to 90.7. Ending stocks for 2011-12 were slashed 205 MB to 695 MB leaving stocks-to-usage at only 5.2 percent. Currently, 67 percent of the crop is rated in good-to-excellent condition compared to 76 percent a year ago. Only 31 percent of Ohio’s crop is rated good-to-excellent. In other developments, the trend following funds are becoming more bullish as they have increased their long position 105 MB to 1.4 BB. The longs of the index funds has risen to 1.9 BB.
December corn traded to 696.75 last week followed by a setback to 665 on Monday. From here, prices surged to 722.75 on Thursday because of the report. Look for support at 708, 700, and 694. Currently, the market is on track for a rally 795 as a likely target. Cycle analysis shows this occurring during the first or the second week of July. Meanwhile, a more bullish pattern points to an advance as high as 935. However, a few requirements must be met before this has a chance of unfolding. The first occurred when the USDA lowered planted acres 1.5 million. Second, the crop ratings must stay below a year ago accompanied with a weather scare. Third, we cannot afford a geopolitical or a macroeconomic event that shakes the bulls resolve. Next week, the odds are 60 percent that December futures will be lower.
Weather has improved for planting soybeans, but progress is still running behind schedule with 68 percent of the crop planted compared to the five-year average of 82 percent. Only 26 percent of Ohio’s crop is in the ground, which is 62 percent below their average. With stocks at a tight level and the growing season ahead, prices should be supported until we have a better handle on the crop size. In the meantime, the USDA raised their 2011-12 ending stocks estimate 30 MB to 190 MB. In other developments, the trend following funds have added 25 MB to their long position, increasing it to 325 MB. The longs of the index funds rose slightly to 840 MB.
November soybeans traded to 1405.25 on Wednesday, which is likely a short-term top. Support should be met on a pullback to 1370 followed by 1355. Unless there is a decline below last month’s low at 1287.25, the longer-term trend is higher with the potential for a rally to 1465 or 1505. Cycle analysis shows this occurring during the first or the third week of July. Currently, the long-term wave pattern indicates this having the potential of being a major top. Next week, the odds are 60 percent that November futures will be lower.
Rain recently developed in Europe, which has turned wheat prices lower. In addition, Russia plans to resume exports next month giving buyers another source other than the U.S. to acquire inventory. Harvest has begun in the southern Plains with 10 percent of the crop cut compared to 6 percent a year ago. Meanwhile, time is running out for planting spring wheat as only 79 percent of the crop is seeded versus the average of 98 percent. Ending stocks for the 2011-12 crop were trimmed 15 MB to 687 MB. In other developments, the trend following funds have reduced their short position to 15 MB. Meanwhile, the index funds are long 1.015 BB.
July wheat fell to 731.25 on Tuesday from where it rebounded to 777 on Thursday because of the strength in corn. However, the market could not hold onto its gains and backed off. Additional resistance is at 785-795. The chance of climbing past last month’s high at 834.5 is 47 percent. From a seasonal perspective, wheat futures usually trend lower until the first week of July or the first week of August, which increases the risk of falling below the March low at 691. Next week is generally not a good week for July wheat as the odds are 100 percent of it being lower.
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