On The Money Grain Commentary 8-1-13

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Corn Outlook:

The bulls were punished during July with corn futures falling 10.7 percent in value because of improving growing conditions.  Temperatures have turned cooler during pollination increasing the potential for a record crop.  This is causing end users to be more patient in bidding for old crop supplies.  While the prospects for a bumper crop are present, the ratings were unchanged last week with 63 percent of the crop reported in good-to-excellent condition.  However, this is above the five-year average of 58 percent.  Iowa and Minnesota are behind in pollination which may spark concerns of an early frost if cool temperatures persist.  Export inspections were 11.0 BB,  below the average needed to reach USDA’s projection of 700 MB.  The trend following funds are more bearish as they increased their short corn position 225 MB to 780 MB, the largest since 2005.

December corn fell to 471.25 on Monday followed by a bounce to 480.5 Wednesday.  The market turned down and set a new low Thursday at 464.  Look for support at 460 followed by 453.  Cycle analysis shows that the sell-off from the July high at 528.25 should end by August 7th-9th.  Longer-term, the market is at risk for a decline to 445, 428 or 412.  A more bearish pattern points to a sell-off to 393.  This level is doable if an early frost fails to materialize.  Currently, the cycles show that an important low most likely will not occur until August 29th or September 4th, and it could be as late September 23d or September 30th.  Next week, the odds are 60 percent that December futures will be higher.

Bean Outlook:

     While the critical stage of development for soybeans lies ahead in August, improving weather the past couple of weeks has tempered bullish enthusiasm.  Last week, the ratings slipped one point to 63 percent of the crop in good-to-excellent condition.  However, this is above the five-year average of 57 percent.  Meanwhile, the crop is lagging in development which may ignite concerns of an early frost if cool conditions continue.  The states most vulnerable to an early frost are Iowa, Missouri and Wisconsin.  Export inspections were anemic at 1.3 MB, a marketing year low.  For the tenth consecutive week, China was absent.  If the current pace of shipments persist, they will fall slightly short of USDA’s projection of 1.330 BB.  The trend following funds are less bullish as the lightened their long futures position 90 MB last week reducing it to 325 MB.

      November soybeans slid to 1189 on Thursday staying just above the April low at 1186.5.  Resistance is expected on rebound to 1210 followed by 1225-1230.  Be advised that the sell-off from last month’s high at 1297 is extending with prices likely headed below 1186.5 to 1170-1162 before a meaningful bottom develops.  Longer-term, the market is at risk for a move lower to 1100 or 1040 while a more bearish pattern shows the potential for a decline to 950.  Cycle analysis points to an important low developing as soon as August 23rd, but more than likely it will be closer to September 4th, or could be as late at September 26th.  Next week, the odds are even as to whether November soybeans will be higher or lower.

 Wheat Outlook:

Wheat futures would be trending higher if it were not for corn as exports have been improving.  Inspections last week were 25.3 MB, above the average needed to reach USDA’s projection of 1.075 BB.  If the current pace of shipments continue, exports could rise to 1.270 BB.  Harvest is slowly winding down at 81 percent complete.  Most of the soft red winter wheat has been cut with 94 percent of the spring crop heading.  The trend following funds are more bearish as they added 75 MB to their short futures position last week increasing it to 410 MB.  This is the largest position they have held since February.  Prices rebounded 6.8 percent shortly after that period.

December wheat bottomed at 658.25 last week and rebounded to 679.75 on Thursday where resistance was encountered.  The weekly chart and one wave pattern on the daily chart indicates that the sell-off from the contract high at 913 may be over.  Price divergence is showing on the momentum indicators which is supportive of this being the case.  In addition, wheat futures tend to establish a low in August followed by a recovery into September or October.  However, the nature of the recovery from 658.25 appears to be a correction putting it at odds as to whether an important low has occurred.  Right now, for stronger evidence of a bottom, a close beyond 680.5 is needed.  Next week, the odds are 70 percent that December wheat will be higher

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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.