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Corn futures are tanking. Surprised? Weather is favorable for development, and a cooling trend over the next ten days should provide additional benefit. Much of the crop will have pollinated during this period which could solidify the potential for a record crop. Prospects in the eastern Corn Belt are good while portions of the west could use a shower. The ratings fell three points last week to 63 percent of the crop in good-to-excellent condition, but are above the five-year average of 59 percent. Export inspections have improved recently but were less than expected last week at 8.8 MB. Right now, it is a toss up as to whether USDA’s projection of 700 MB will be met. The trend following funds have lightened their short position 50 MB to 555 MB but remain bearish. Currently, the market needs a bullish stimulus, but one is lacking.
December corn has fallen 9.9 percent since peaking two weeks ago at 528.25 and are near a long-term target mentioned in previous comments at 475-467. Resistance is expected on a bounce to 482-488. Right now, the wave pattern shows there is additional downside potential to 445. A more bearish outlook points to a sell-off to 412 or 393. Seasonally, corn futures generally trend lower until the first week of August. Meanwhile, one pattern shows that we may not bottom until early September. In August, corn futures close higher 63 percent of the time. Next week, the odds are 70 percent that the December contract will be lower.
Weather may be a concern for new crop soybeans until August, but a cooling trend forecast during the next ten days has taken away the bulls’ edge. This is evident from this week’s sell-off. Last week, the ratings fell one point to 64 percent in good-to-excellent condition but are above the five-year average of 58 percent. Forty-six percent of the crop is blooming, which is below the average of 59 percent. Iowa is 34 percent below their average suggesting that the threat of an early frost will linger in the back of traders minds. Export inspections were disappointing at 2.8 MB with China being out of the picture for the past nine weeks. Right now, it is nip and tuck as to whether shipments reach USDA’s projection of 1.330 BB. The trend following funds remain bullish as they added 45 MB to their longs increasing them to 415 MB. However, positive input is needed to support their position.
On Tuesday, November soybeans attempted to break through the double top at 1297 but stalled at 1296. The market did a 180-degree turn and fell to 1215.5 on Thursday breaking the low made earlier this month at 1225. If you will notice on the chart, the upward sloping trend line from 1186.5 has failed. Resistance is expected on a bounce to 1237-1245. Longer-term, prices are on track for a sell-off below 1186.5 to 1100 or 1040. A more bearish outlook points to a decline to 950. From a seasonal perspective, soybean futures generally trend lower until the first week of August. Historically, in August, soybeans close higher 58 percent of the time. Next week, the odds are 60 percent that the November contract will be higher.
A potential record corn crop is pressuring wheat, but the fundamentals are improving. Harvest is 75 percent complete and winding down for the hard red and soft red winter crops. Exports are picking up with purchases from China earlier this month sparking optimism for an improvement in demand. Stories are circulating that their crop is in poor condition. Meanwhile, competition from the Black Sea region will remain strong. Inspections last week were 23.1 MB and have been on the upswing since the beginning of the marketing year. Currently, shipments are on track for 1.280 BB compared to USDA’s projection of 1.075 BB. The trend following funds are less bearish as they have reduced their short position 40 MB to 335 MB.
December wheat fell below support at 666.25 on Thursday which projects a decline to 642 or 630. A bottom could develop around the first week of August. There is a seasonal tendency for wheat futures to set a low during this period. Meanwhile, a more bearish pattern shows the potential for a sell-off to 602. This will be determined by the extent of the decline in corn. For now, a rally beyond 680 is needed for evidence of a bottom. In August, wheat futures are higher 68 percent of the time. Next week, the odds are even as to whether December wheat 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.