On The Money Grain Commentary 7-3-13

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Corn Outlook:

The bullish legs of corn have been weakened after being blindsided last week with a bearish acreage report.  Expectations were for a 2.0 million acre decline in acres, but as it turned out, there was a 2.1 million acre increase instead.  Because planting was not complete at the time the survey was taken, USDA will make adjustments in the August Supply-Demand Report.  At any rate, we are staring at ending stocks of 2.0 BB this fall.  Meanwhile, the crop is improving with the ratings rising 2.0 percent to 67 percent of the crop in good-to-excellent condition.  This compares to the five-year average of 65 percent.  Export inspections were better than expected at 14.8 MB, but the pace of shipments are running at 675 MB, down from USDA’s projection of 700 MB.  The trend following funds were inactive last week as their short position was unchanged at 15 MB.

December corn fell to 496.5 on Tuesday breaking psychological support at 500.  Prices rebounded to 509.75 Wednesday but could not fill the gap at 510.  If it is exceeded, the market could rise to 516.  Otherwise, a break below 496.5 projects 488 as the next low.  Longer-term, the trend is down with the potential for a sell-off to 475-467 or 445.  If the market follows the seasonal norm of working lower until the first week of August, a bottom could occur on August 6th, but it may be as late as September 4th.  Meanwhile, one pattern points to a low as soon as July 19th.  Next week, the odds are 80 percent that December futures will be higher.

Bean Outlook:

     While old crop stocks of soybeans are tight, there will be no shortage of new crop as plantings are projected to rise 600,000 to 77.7 million acres.  If realized, ending stocks this fall could approach 265-275 MB.  This comes on the heel of a record crop in South America.  Meanwhile, crop conditions are improving as the ratings rose 2.0 points to 67 percent in good-to-excellent condition.  This compares to the five-year average of 62 percent.  There is nothing exciting in exports as inspections were a measly 4.5 MB with China a no show for the 6th consecutive week.  It seems like they have dropped off the face of the earth in soybean purchases.  In other developments, the trend following funds lightened their long position 75 MB last week reducing it to 405 MB.

      November soybeans fell to 1235 on Tuesday and recovered.  Resistance is likely at 1267 although there could be a rebound to 1287.  For the intermediate-term, a trading range may develop until traders are more comfortable with crop prospects.  Longer-term, however, unless there is a rally beyond 1333, the trend is down 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.  If prices follow the seasonal tendency of working lower until the first week of August, a bottom may not occur until July 25th and it could be as late as August 23rd.  Next week, the odds are 60 percent that November futures will be higher.

 Wheat Outlook:

Better than expected yields in central and eastern Kansas is keeping a lid on wheat.  As of last week, 43 percent of the crop was harvested compared to the average of 52 percent.  Prices bounced midweek on news of a 360,000 ton sale of soft red winter wheat to China.  Exports for the new marketing year are off to a solid start with inspections last week better than expected at 26.4 MB.  Right now, shipments are on track for 1.125 BB versus USDA’s projection of 975 MB.  In other developments, the trend following funds are less bearish as they covered 40 MB of their short position last week reducing it to 255 MB.

December wheat made a double bottom at 666.25 on Monday and Tuesday and recovered to 684.25 Wednesday.  Additional resistance is expected at 689.  Unless there is a rally past 706, the wave pattern points to a sell-off to 655 and, maybe, as low as 630.  Seasonally, wheat futures generally trend lower until the first week of August.  If we follow the norm, cycle analysis shows a bottom occurring around August 2nd, although it could be as soon as July 18th.  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.