On The Money Grain Commentary 7-10-14

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Corn Outlook:

Expectations for a record corn crop has emboldened the bears and forced the bulls into hiding.  As a result, prices have fallen to a four year low.  With the crop rated 75 percent in good-to-excellent condition in early July, it is difficult to argue against producing a 14.0 BB crop with ending stocks near 2.0 BB this fall.  However, because of excessive rainfall in the upper Midwest, one cannot overlook the possibility of harvested acres being less than expected.  This will be addressed later by the USDA.  Although the bears are firmly in control now, the boat is becoming overloaded.  In other developments, export inspections were 42.5 MB and below the average needed to reach USDA’s target of 1.9 BB.  The trend following funds continue to exit their long position selling 120 MB prior to the July 4th holiday.  This leaves them long 130 MB.

On Wednesday, December corn broke psychological support at 400 falling to 391.5 Thursday.  Currently, we are at the most oversold level since November 2013, and a major report is staring at us tomorrow, the July Supply-Demand Report.  However, the bears do not seem intimidated even though prices have fallen 14 percent since June.  Right now, a rally past 401 is needed to turn the short-term trend up.  Otherwise, there is not much standing in the way of falling to a longer-term target mentioned in previous comments at 384.  After today, the next cycle low is on July 16th.  Next week, the odds are 80 percent that December corn will be higher.

Bean Outlook:

      There is not a lot of fresh news in soybeans other than the bulls have lost their appetite.  Since late June, the market has fallen slightly over 12 percent.  Last week, the trend following funds sold 135 MB putting them short 140 MB.  In April, when the bulls were looking for prices rising to the heavens, they were long 765 MB, which is a sizeable swing in sentiment.  Currently, we appear to be staring at a record crop that is being followed by record production in South America.  As of last week, 72 percent of the crop was rated in good-to-excellent condition with 24 percent in the bloom stage.  Meanwhile, weather for the next couple of weeks is forecast to be favorable for development supporting the case for a record crop.  In other developments, export inspections are nothing to be excited about with inspections last week at 2.2 MB.  China has made only one appearance in nine weeks.

November soybeans continue to slide from last month’s high at 1246.25.  We are in a period for a bottom to develop, but a rally past 1115 is needed to turn the short-term trend up,  Unless it happens, we are on track for working lower to 1081-1075.  After today, the next cycle low is slated during the period of July 15th-17th.  Longer-term, the wave pattern points to a sell-off to 1035 or possibly 985 with a bottom developing during the period of August 22nd-25th, September 10th or September 25th.  Next week, the odds are 60 percent that November futures will be higher.

 Wheat Outlook:

Wheat continues to struggle from the perception that larger global supplies will offset poor production in the U.S.  Meanwhile, harvest is progressing at 57 percent complete, slightly below the average of 60 percent.  Seventy percent of the spring wheat crop is rated in good-to-excellent condition, unchanged from last week and down 2 percent from a year ago.  Exports for the season are off to a slow start with inspections last week at 15.5 MB.  This is below the pace needed to reach USDA’s projection of 925 MB.  The trend following funds maintain a bearish stance with a short position of 310 MB, unchanged from a week ago.  Right now, the market needs a bullish stimulus to change the prevailing bearish sentiment.

December wheat continues to slide and has fallen below a target mentioned previously at 575.  To turn the trend up, a rally, preferably a close, beyond 589 is needed.  Until then, we are likely staring at 557 or 549 as the next bottom.  After today, the next cycle low is during the period of July 15th-17th.  Next week, the odds are even as to whether December futures will be higher or 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.