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The prognosticators are out in force debating who will get the lions share of planted acres this spring, corn or soybeans. Many analysts project corn acres falling to 92.0 million, but some think the change will be nominal with only a marginal shift to soybeans. A survey by Informa Economics shows corn acres shrinking 2.0 million to 93.3 million. Conditions have been hot in Argentina recently which has offered modest price support to corn. Earlier this month, the USDA’s production forecast put their crop falling 1.0 million tons to 25.0 million. Export inspections were better than expected at 29.8 MB and above the average needed to reach USDA’s target of 1.450 BB. However, the pace of shipments indicates that we may fall short of their goal. Last week, the trend following funds lightened their long futures position reducing it to 760 MB.
During the month of January, March corn has traded in a sideward pattern from 406.25-435.5. On Tuesday, prices found support at 421 and rebounded to 431.25 Thursday. Additional support is at 417 while resistance is expected at this month’s high at 435.5. If exceeded, look for a move upward to 440 or 450 with a top around January 29th. At that time, the chances are that a test of 406.25 will occur again as corn futures generally trend downward from mid to late January until the end of February. From here, there is usually a recovery into March-April. In the event that 406.25 cannot hold, a decline to 387 is expected. Next week, the odds are 60 percent that March corn will be lower.
Hot, dry conditions in Argentina supported soybeans the past couple of weeks, but rainfall over the Martin Luther King holiday caused prices to tumble. Currently, the USDA projects Argentina’s crop at 25.5 million tons with a record crop of 89.0 million tons expected in Brazil. Some think that Brazil’s production will be higher. Exports continue to sizzle with inspections last week at 56.5 MB. Many analysts are questioning when China will cancel U.S. sales. So far, there have been few cancellations. My opinion is that they vividly recall the logistical snarl in Brazil at harvest last year, and we will not see any significant cancellations until soybeans have reached port. In a recent survey by Informa Economics, they foresee soybean acres this spring rising 4.7 million to 81.2 million. Last week, the trend following funds added 80 MB to their soybean longs increasing them to 525 MB.
March soybeans bottomed at 1272 on Wednesday and rebounded to 1296.75 Thursday where resistance was encountered. The market could not hold onto its gains and has fallen to challenge 1272 again. Short-term, we are due for a recovery to 1301, 1308 or possibly 1315. Look for a top around January 29th-31st if prices are higher. If you will notice on the chart, a wedge type formation has been unfolding from 1377.75, 1233.25, 1339.25 and 1262.5. Usually, the breakout of these patterns is in the direction of the existing trend, which, in this case, is down. Failure of 1262.5 constitutes a potential downside breakout and projects a sell-off to 1195, 1167 or 1140. Be advised that there is a strong seasonal tendency for soybeans to trend downward through the end of February if there are no crop issues in South America. Next week, the odds are 70 percent that March soybeans will be lower.
Wheat becoming more competitive in the world market, and concerns of freezing conditions in the Plains and Midwest sparked a rebound this week. Meanwhile, export inspections last week were disappointing at 15.5 MB and below the average needed to reach USDA’s projection of 1.125 BB. Currently, the trend following funds are short 450 MB, a reduction of 60 MB from the previous week. Right now, wheat is a follower of corn and soybeans.
March wheat set an intermediate-term low earlier this month at 560.5 that was challenged this week when prices fell to 560.75. From here, the market recovered to 578 on Thursday. Short-term, it is due for a rebound to 589 with 605 the extreme. The recovery may take until January 29th-31st to complete. Once it is done, the wave pattern points to a decline to 548-540 which should wrap up the long-term sell-off from the contract high at 912.75. This could occur around February 10th, February 19th or February 27th. Next week, the odds are 78 percent that March 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.