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For months, traders have questioned USDA’s high feed usage numbers because of the PED virus in hogs, and the cattle herd at a 60 year low. That was rectified this week when the USDA projected stockpiles as of June 1st at 3.854 BB, 39 percent above last year. Meanwhile, they forecast planted acres at 91.6 million, down slightly from March. Corn futures reacted harshly on Monday because of the collapse in soybeans. This seems to be an overreaction as the chances are harvested acres will decline because of excessive rain in the upper Midwest causing flooding and ponding. In other developments, 75 percent of the corn crop is rated in good-to-excellent condition, up one point from a week ago. Export inspections were down from the previous week at 34.6 MB with shipments running slightly below the pace needed to reach USDA’s target of 1.9 BB. The trend following funds continue to bail from their longs reducing their position to 250 MB.
December corn has seen a few flashing moments in which it appeared that the sell-off from the May high at 514.75 was ending. However, attempts to gain traction have failed. On Monday, the day of the stocks and acreage report, support at 436.25 was violated with prices sliding to 414.5 on Thursday. The momentum indicators are showing some divergences suggesting that a bottom may be close at hand. However, for evidence of a low, a close beyond 425 is needed. Otherwise, we are on a path heading for 408-403. Longer-term, we may see 384. Meanwhile, be alert for at least an intermediate-term bottom during the period of July 7th-10th. Next week, the odds are 60 percent that December corn will be higher.
The bawling that you hear are the bulls being dehorned, maybe, even worse! This week, the USDA lowered the boom on the bulls on two fronts. First, they increased stockpiles above trade guesses to 405 MB. Second, planted acres are projected at a record 84.4 million acres. This stunned traders causing prices to crater on Monday. Any way that you slice it, we are facing ending stocks for 2014-15 in excess of 400 MB. For now, the bulls have seen their day with the bears now occupying the territory. In other developments, the crop ratings were unchanged at 72 percent in good-to-excellent condition. Export inspections were meager at 2.6 MB with China being a no show for the fourth consecutive week. The trend following funds have liquidated their longs and are short a modest 5 MB. This is their first short position since August 2013.
On Monday, November soybeans handedly cracked support at 1201.25 tumbling to 1132 Tuesday where a short-term low occurred. Right now, the wave pattern shows prices headed to 1120 where an intermediate-term bottom could unfold. The cycles point to this happening around July 9th. Meanwhile, resistance is expected on a rebound to 1175. Longer-term, the trend is down with the potential for a sell-off to 1042-1035 or possibly 985. The longer-term cycles point to a low developing around August 22nd-25th, September 10th or September 25th. Next week, the odds are 70 percent that November soybeans will be lower.
Selling in wheat has slowed with the USDA reports this week getting a mixed reaction. The stocks report at 590 MB was less than expected; however, all wheat acres planted at 56.5 million exceeded the March estimate of 55.8 million. In other developments, export inspections were sluggish last week at 12.3 MB and below the average needed to reach USDA’s projection of 925 MB. Harvest is progressing at 43 percent complete, but lagging the average of 48 percent. Meanwhile, the rating of the spring wheat crop fell one point to 70 percent in good-to-excellent condition. The trend following funds have increased their short position 45 MB to 310 MB, the largest since February. Right now, the bearish news in wheat has largely been discounted, but the market will probably follow the direction of corn and soybeans.
December wheat fell to 589 on Monday and recovered. While the action off of this low is encouraging for a bottom, in order to turn the trend up, a rally beyond 616.25 is needed which would set a higher high. Unless it happens, I cannot rule out falling to 575. Right now, the cycles point to a bottom around July 7th, although it may be closer to July 16th. Next week, the odds are 80 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.