On The Money Grain Commentary 9-13-12

Corn Outlook:

     USDA left a few stones unturned in the supply-demand report, mainly harvested acres.  They were unchanged at 84.4 million.  Because of the drought, abandonment was expected.  We must remember the USDA tends to be conservative in their revisions; otherwise, the x’s and o’s do not match.  Harvested acres will be updated in October.  Meanwhile, their yield estimate fell 0.6 bpa to 122.8 bpa resulting in 2012-13 ending stocks rising 83 MB to 733 MB.  This shocked traders as they were expecting a reduction.  In other developments, harvest is moving into full swing and 15 percent complete.  Export inspections for the first week of the marketing year were an abysmal 9.7 MB.  The trend following funds maintain a bullish stance as they added 65 MB to their long position increasing it to 1.360 BB.  The longs of the index funds were up slightly to 1.810 BB.    

     December corn tumbled to 759.25 on the coattail of the USDA report Wednesday.  Last week’s comments mentioned there could be a decline to 763.  We are in the 22nd day of the pullback from 849.  If you will recall, the correction from 549.5 to 506 took 18 days to complete. Wednesday’s low shows promise of a bottom ending the sell-off.  Technically, we are at a more oversold level than when prices bottomed in June at 506.  For confirmation of a low, a rally beyond 785 is needed.  In that event, a recovery to 805 or 815 is expected.  Meanwhile, if 759.25 cannot hold, 745 is the next level of support.  Longer-term, the wave pattern shows the market rising to a new high before the advance from 499 is complete.  Next week, the odds are 80 that December corn will be lower. 

Bean Outlook:

      Few changes were made by the USDA in the supply-demand report.  Harvested acres were untouched at 74.6 million, while yields fell 0.8 bpa to 35.5 bpa.  There will likely be adjustments to harvested acres in October.  Meanwhile, 2012-13 ending stocks were unchanged at 115 MB.  Harvest is getting underway in areas of the Midwest and is 4 percent complete.  Exports for the first week of the marketing year were less than expected at 12.9 MB with China taking 6.4 MB.  Planting is beginning in South America, but conditions are dry.  The trend following funds remain bullish as they added 50 MB to their longs increasing them to 1.040 BB.  This is 85 MB short of the record set in May.  The longs of the index funds were up slightly to 585 MB.       

     November soybeans fell to 1693.5 on Wednesday and made a reversal higher.  If you will notice on the chart, prices bounced from the up trend line.  As it looks now, the pullback from 1789 is over.  If so, the market is in a position for climbing to 1805, 1820 or 1850, which should end the advance from 1244.75 and possibly the low made last December at 1115.75.  The cycles currently point to a top occurring during the period of September 24th-27th.  Short-term support is at 1720.  The trend is up unless the low at 1693.5 fails.  Next week, the odds are 70 percent that November futures will be lower. 

 Wheat Outlook:

     Dry weather in Australia and Russia has been the supportive factor in wheat.  Exports from Russia are expected to slow by November because of lower production.  USDA revised the crops of both the Former Soviet Union and Russia downward by 4.0 million tons each in their most recent report.  U.S. ending stocks for the 2012-13 crop  were unchanged at 698 MB.  Traders were expecting a slight increase.  In other developments, winter wheat planting has begun and is 4 percent complete.  The trend following funds have increased their long position to 55 MB, while the index funds are long are long 945 MB.

     December wheat fell to 868.75 on Wednesday and recovered.  The market has been playing musical chairs since peaking in July at 953.25 as the correction has become complex.  The pullback may have ended this week, but a rally beyond 918 is needed for confirmation.  In that event, a move upward to 973 is expected which should end the advance from 629.5.  This could occur during the period of September 24th-27th or on October 8th.  Next week, the odds are 60 percent that December futures will be lower.

Want the kind of intel that helps serious producers succeed? Sign up for a FREE! trial subscription to our daily newsletters.

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.