On The Money Grain Commentary 7-18-13

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Corn Outlook:

Weather scares can quickly line the bulls pockets but also pick them clean when it is over.  This was the case in corn recently when the forecast for a high pressure ridge drove prices sharply higher  but deflated them later once temperatures moderated.  During the next two weeks, weather looks favorable in the eastern Corn Belt while the west could use a shower.  Last week, the ratings fell two points to 66 percent of the crop in good-to-excellent condition and compares to the five-year average of 61 percent.  According to Ag Watch’s yield model, the national corn yield is 157.9 bpa, which is above USDA’s projection of 156.5 bpa.  The export pace has improved the past three weeks, with inspections last week at 16.2 MB.  Meanwhile, the trend following funds remain bearish as the increased their short position 145 MB last week to 605 MB.

After peaking last week at 528.25, December corn slid to 498.25 followed by a rebound to 518.5 on Tuesday.  Prices turned down and gapped lower on Thursday to 494.  Unless there is a recovery past 506 and, especially 515, the short-term wave pattern shows that we are likely headed below 490 to 470.  This would meet a target mentioned in previous comments at 475-467.  Longer-term, the potential exists for a sell-off to 445 or lower.  Seasonally, the trend is lower until the first week of August.  Cycle analysis points to a bottom occurring during the period of August 6th-9th, although it may be closer to September 4th.  Next week, the odds are even as to whether December futures will be higher or lower.

Bean Outlook:

     Volatility has increased in soybeans for the same reasons as corn.  However, the critical stage of development for soybeans lies ahead in August meaning prices will react to every twist and turn in each short-term forecast.  Last week, the ratings fell two points to 65 percent of the crop in good-to-excellent condition but is above the five-year average of 59 percent.  Traders will especially glean the long range forecast for any hint of an early frost as only 26 percent of the crop is in the bloom stage, which is below the average of 40 percent.  Only 13 percent of Iowa’s crop has bloomed—39 percent less than their average.  Right now, exports are the sore spot for soybeans as inspections last week were a modest 3.6 MB.  China was a no show again and have been absent for eight consecutive weeks.  If the pace of shipments continues to decline, we may fall slightly short of USDA’s projection of 1.330 BB.  Meanwhile, the trend following funds remain bullish as the increased their longs 25 MB last week to 370 MB.

      November soybeans peaked last week at 1297 followed by a break to 1250.25.  From here, there was a rebound to 1297 on Tuesday where a double top developed.  On Thursday, a setback to 1266.25 occurred.  For the moment, the market is not showing a clear direction and may reside in a trading range for the intermediate-term, at least until traders are more comfortable with yield prospects.  If 1297 is exceeded, resistance is expected at 1305 while there could be a run up to 1322.  A decline below 1250.25 is needed to turn the trend down.  Longer-term, the trend is lower with the potential 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 80 percent that November futures will be lower.

 Wheat Outlook:

Wheat exports are improving which is supportive.  Inspections last week were 24.4 MB and, if the pace continues, are on track to exceed USDA’s projection of 1.075 BB.  Harvest is moving along and is 67 percent complete compared to the average of 71 percent.  The southern Plains are essentially done while the Midwest is lagging.  Ohio is struggling as their harvest is running 54 percent below the average.  Meanwhile, the trend following funds remain bearish as they increased their short position 15 MB last week to 375 MB.

Last week’s comments mentioned that the sell-off in December wheat from the contract high at 913 flashed signs that it may have ended at 666.25.  However, this may not be the case as the market has struggled since peaking at 705.75.  For confidence of a bottom, a rally past 694 is needed.  Otherwise, the short-term wave pattern shows the chance of working lower to 642 or 630 with a bottom developing around July 30th or August 6th..  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.