On The Money Grain Commentary–7-21-11

Corn Outlook:

      The past few weeks have been exasperating for grain producers and traders.  The question regarding planted corn acres is still being debated.  Excessive heat in the Midwest is a factor.  The U.S is at risk of having its debt rating downgraded.  In addition, the debt ceiling drama among lawmakers continues, while the debt crisis in Europe deepens.  The days of basing a decision solely on supply-demand factors are long gone.  In other developments, the crop rating for corn slipped three notches to 66 percent in good-to-excellent condition, which is below the five-year average.  An additional decline is likely next week.  Export inspections were disappointing at 28.9 MB and less than the average needed to reach USDA’s projection of 1.875 BB.  Meanwhile, the trend following funds are turning more bullish as they increased their long position 95 MB to 805 MB.  This is the first increase in four weeks.  The index funds are long 1.865 BB.      

     December corn traded to 703.75 on Tuesday and has since fallen to 663.25, which is likely a short-term low.  Additional support is at 653 with resistance at 683-688.  The short-term trend is down and to turn it higher, a rally past 695 is needed.  This will improve the odds for advancing past 703.75 and the contract high at 722.75.  As it stands now, the chances for a new high are only 43 percent.  Meanwhile, the rebound from the low made earlier this month at 575.5 appears to be an overextended correction in which there could be a pullback to 640 or 625 during the last week of July.  At that time, there may be another shot at a new high as the seasonal tendency is for a move upward until mid August.  Next week, the odds are even as to whether December futures will be higher or lower. 

 Bean Outlook:

            Soybean futures are monitoring the debt drama in Washington and Europe, but weather is the key supporting prices, as there is little room for error in production.  Because of hot temperatures recently, the crop rating has fallen two points to 64 percent in good-to excellent condition.  The crop in Kansas last week fell nine percent.  Meanwhile, exports are slipping with inspections disappointing at 3.7 MB and below the average needed to reach USDA’s projection of 1.520 BB.  China was a no show for the third consecutive week.  In other developments, the trend following funds are turning more bullish as they added 100 MB to their long position, increasing it to 205 MB.  The longs of the index funds stand at 840 MB.  Look for prices to be supported the next few weeks as the critical pod filling stage is still ahead.

      November soybeans traded to 1409.5 on Tuesday, but did not have enough momentum to exceed the contract high that occurred in April at 1411.25.  Short-term, the market is overbought and unless prices rebound past this level, prices are vulnerable to a setback to 1350 or 1335 with a bottom likely during the last week of July.  Meanwhile, if you will notice on the chart, a rising wedge pattern has been unfolding from the March low at 1238.  These tend to be bullish patterns that generally result in an upside breakout.  Currently, the odds of trading to a new high are 76 percent.  Unless there is a sell-off below 1286, the wave pattern shows the potential of rising past 1411.25 to 1465 or possibly 1505.  In this event, an important top could occur during the last week of August.  Next week, the odds are 80 percent that November futures will be lower. 

 Wheat Outlook:

       Wheat futures are following corn and the fluctuation in the dollar.  U.S. wheat faces stronger competition from Russia and the Ukraine, as they are increasing exports after restricting sales for nearly a year because of drought.  Inspections last week were less than expected at 18.7 MB and below the average needed to reach USDA’s projection of 1.150 BB.  Harvest is slowly progressing at 68 percent complete compared to the five-year average of 72 percent.  The rating for spring wheat stayed unchanged at 73 percent in good-to-excellent condition.  In other developments, the trend following funds reduced their short position 10 MB to 245 MB.  The longs of the index funds fell 15 MB to 1.065 BB.   

     December wheat traded to 751.75 on Tuesday where resistance was encountered.  A close past this high is needed to confirm that the seasonal low occurred earlier this month at 639.  Otherwise, failure of 706 warrants prices working lower until the first week of August with support developing at 682 followed by 667.  Meanwhile, a test of 639 cannot be ruled out.  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.