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Could we be staring at a bin buster corn crop this fall? Since mid June, crop conditions have been on the upswing. Last week, the ratings improved one point to 68 percent of the crop in good-to-excellent condition. This compares to the five-year average of 64 percent. If Mother Nature cooperates, a bin buster crop could be in the cards. USDA projects a bigger crop and has raised their 2013-14 ending stocks forecast slightly to 1.959 BB. Meanwhile, exports are lethargic with inspections last week at 8.2 MB. In other developments, the trend following funds increased their shorts to 460 MB, their largest position since 2005. This ignited a short covering rally on Monday when the forecast emerged for hot temperatures in the western Corn Belt next week. However, if the prediction falls short of the bulls expectations, look out!
Since bottoming on Monday at 490, December corn has surged 7.8 percent to 528.25 over concerns of hot weather during pollination. This turned the short-term trend up and is counter seasonal to prices working lower until the first week of August. Additional resistance is expected at 532 followed by 542-546. The recovery may not end before July 16th. In the meantime, a decline below 510 suggests that the rally is done. Longer-term, the trend is down unless we trade beyond 571. Unless this happens, the long-term potential exists for a sell-off to 475-467 or 445. While it is possible this could occur as soon as August 6th, it may be closer to September 4th. Next week, the odds are 60 percent that December corn will be lower.
Recent gains in new crop soybeans have mostly been on the coattail of strength in old crop. However, prices are also being underpinned from the forecast for above normal temperatures in the western Corn Belt next week. Overall, the crop is off to a good start with a rating of 67 percent in good-to-excellent condition. This compares to the five-year average of 60 percent. USDA projects a larger crop and has raised their 2013-14 ending stocks estimate to 295 MB. Meanwhile, exports have slowed significantly with inspections last week a marketing year low of 2.4 MB. China was a no show for the seventh consecutive week. In other developments, the trend following funds have trimmed their long position 60 MB reducing it to 345 MB.
November soybeans have risen from the reversal made on Monday at 1225 to 1295 for a gain of 5.7 percent. If you will notice on the chart, prices bounced off trend line support. Additional resistance is expected at 1305. The recovery should end by July 18th. For the intermediate-term, the market may trade in a range through August 6th until traders are more comfortable with production prospects. Longer-term, the trend is down unless 1333 is exceeded. Unless this happens, the potential exists for a sell-off below the April low at 1186.5 to 1100 or 1040. A more bearish pattern points to a decline to 950. Next week, the odds are 60 percent that November futures will be higher.
Exports have picked up in wheat which is supportive. Recently, an 840,000 ton sale of soft red wheat was announced to China. Inspections last week were above estimates at 25.5 MB. Better exports are reflected by the USDA as they raised their export projection 100 MB and lowered ending stocks for the 2013-14 crop to 576 MB. This should underpin prices. Meanwhile, harvest is lagging at 57 percent complete compared to the average of 64 percent. The trend following funds remain bearish and have increased their short position 105 MB to 360 MB.
December wheat posted a double bottom last week at 666.25 which may have ended the sell-off from the contract high set in November at 913. The momentum and trend indicators are showing price divergence on the daily, as well as the weekly chart, suggesting that this could be the case. Prices traded to 705.75 on Thursday and are at a level where resistance is likely. Right now, a rally beyond 715 and, preferably 730.75, is needed to verify that an important low has occurred. Otherwise, the trend is still down. Next week, the odds are 60 percent that December futures 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.