On The Money Grain Commentary 9-19-13

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Corn Outlook:

While weather was touch and go in August for much of the corn crop in the upper Midwest, traders are currently bracing for a bumper crop.  Harvest has begun and is 4 percent complete compared to the average of 10 percent.  Reports of 200-240 bpa yields in the southern Corn Belt are common.  However, as harvest progresses north yields will be more variable.  Export inspections were better than expected at 20.1 MB, but have a long way to go in reaching USDA’s projection of 1.225 BB.  The trend following funds are more bearish as they added 25 MB to their short futures position last week increasing it to 700 MB.  The Fed announcement of their continued pumping of $85 billion into the economy each month may offer short-term support.  However, with the potential for a record crop, gains will likely be limited until harvest is complete.

December corn has been on a downhill swing since peaking last month at 508.25.  Prices bottomed at 452 on Wednesday which is likely a short-term low.  Resistance is expected on a bounce to 468-473.  The recovery could last until September 25th.  Longer-term, the trend is down with the potential for a sell-off to 430 or 412.  A more bearish pattern points to a decline to 380.  If we follow the seasonal norm, the market should work lower until the first week of October.  While a bottom could occur as soon as September 30th, the cycles lean more to October 21st.  Next week, the odds are 60 percent that December futures will be lower.

Bean Outlook:

     Soybeans have taken a drubbing since the crop report, as a yield loss has been factored in because of dry conditions during August.  Scattered showers are in the forecast this week which may help some of the late planted crop.  However, the crop is rapidly maturing and traders question any potential benefit.  This has created a surge in market volatility.  Meanwhile, the crop ratings fell 2 points last week to 50 percent in good-to-excellent condition.  Shortly, planting will commence in South America.  Expectations are for a 5 percent increase in Brazil’s planted acres this fall.  Exports are off to a slow start this season with inspections last week at 2.9 MB.  China was nowhere around.  The trend following funds unloaded 70 MB of their long futures position last week reducing it to 530 MB.  For now, bullish issues are priced into the market, and a spark is needed to push it higher.

      November soybeans have traded erratically since topping last month at 1409.5. Daily price swings of 40-50 cents almost seem to be the norm.  This is common for markets trading on emotion.  Prices fell to 1332 on Tuesday followed by a rebound to 1361.25 Thursday.  From here, the market did an about face and slid to 1331.25 filling a gap at 1331.5.  This created a reversal, but not a key reversal.  Additional resistance is expected at 1370-1380 while there could be a setback to 1315 or even 1285.  Look for volatility to continue until harvest commences and traders can better assess yield potential.  The cycles indicate that we may trade in an erratic manner until September 25th or October 7th.  In order to spark a rally to a new high, additional bullish input is needed.  Next week, the odds are 60 percent that November futures will be lower.

 Wheat Outlook:

Export demand is improving for wheat, but the market cannot shake the weakness in corn.  Export inspections last week were a marketing year high at 46.0 MB.  At the current pace, shipments are on track for 1.580 BB.  While exports have been robust this season, they tend to peak by mid September or early October.  In other developments, spring wheat harvest is winding down at 90 percent complete.  The trend following funds are more bearish as they added 40 MB to their short futures position last week increasing it to 415 MB.  This is the largest short position they have held since May of 2012 and suggests the bears are crowding the boat.

December wheat has risen past resistance at 655, but must to climb beyond 676.5 to break the downtrend extending back to the contract high made in November at 913.  This would set a higher high.  The longer-term wave pattern shows that we are in the later stage of the sell-off, but unless 676.5 is exceeded, could work downward to 623 or 610.  Watch for a bottom around October 1st-4th if prices are lower.  Next week, the odds are 60 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.