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I recall an old trade adage that says low prices cures low prices. However, have we fallen enough to make the bears squirm? With the crop currently rated 76 percent in good-to-excellent condition, up one point from a week ago, one cannot ask for a much better rating for this time of the year. Many traders are tossing out yield expectations of 168-173 bpa compared to USDA’s current estimate of 165.3 bpa. Ag Watch’s yield model, puts yields closer to 166.5 bpa. Export inspections last week were in line with estimates at 36.4 MB, but below the average needed to reach USDA’s projection of 1.9 BB. A bit of a surprise developed last week when the trend following funds bumped their long futures position 50 MB higher to 180 MB. Maybe they think that we are near a bottom. Time will tell.
December corn fell to 378.25 on Tuesday setting a short-term low in the decline from last month’s high at 457.25 and the high made in April at 517. This was followed by a rebound to 395.75 Thursday. Additional resistance is at 398, although prices could recover to 408. Look for a top around July 22nd-24th if we are higher. From here, a sell-off to 367, 353 or possibly 337 could unfold with a bottom developing around July 31st or August 6th-8th that ends the sell-off from 517. However, it may be closer to September 10th. The timing depends upon the price level in which a bottom materializes. Meanwhile, if we are trading above 378.25 past July 24th, a broader based recovery may develop. Next week, the odds are 60 percent that December corn will be lower.
Soybeans appear to have struck a bottom, but do not count on it being rock solid. It is likely just a temporary pause in a longer-term decline as prices are severely oversold. Currently, 72 percent of the crop is rated in good-to-excellent condition, unchanged from a week ago, with 41 percent in the bloom stage. Weather is forecast to be benign for the rest of the month, which should promote growth. However, August is the critical month for soybean development. Export inspections were better than expected at 4.2 MB, but nothing to become enthused about. China was a no show again, and have only received one shipment in the past ten weeks. Meanwhile, the trend following funds are becoming more bearish as they increased their short position 75 MB to 215 MB. This is their largest short position since October 2006.
November soybeans bottomed late last week at 1065 ending the decline from last month’s high at 1246.25. The market has since rebounded rising to 1118.75 on Thursday. Prices posted a reversal lower from this level, but there is a chance of reaching 1134. Short-term support is at 1085. The recovery could be complete as soon as July 23rd, but it may not end until July 30th. Once it is done, a sell-off to a longer-term target at 1035 or 985 is expected. The cycles point to this happening around August 22nd-25th, while it may be closer to September 10th or September 25th. Next week, the odds are 60 percent that November futures will be higher.
The decline in wheat has slowed with prices mostly taking their cue from corn and soybeans. However, prices jumped on Thursday from news of a Malaysian airliner being shot down in Ukraine. Rumors are flying as to who is responsible. In other developments, harvest is progressing at 69 percent complete suggesting that hedge pressure should slow but is still present. Seventy percent of the spring wheat crop is rated in good-to-excellent condition, unchanged from a week ago as well as last year. Export inspections were nothing to brag about at 13.8 MB and below the average needed to reach USDA’s projection of 900 MB. The trend following funds increased their short position 20 MB to 330 MB last week, the largest since February. The market needs a stimulus to break the downward cycle, but none is present for the moment.
December wheat bottomed at 546.5 on Monday which is, at least, a short-term low. This was followed by a rebound to 584.5 Thursday. Right now, a close beyond 590 is needed for greater confidence that the sell-off from the high beginning in May at 765 is complete. Otherwise, a new low cannot be ruled out. In the event that 546.5 fails, look for the sell-off continuing to 532, 523, and possibly 506. At the moment, the wave pattern is somewhat vague, but should clear up within the next couple of days. Next week, the odds are 60 percent that December 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.