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Corn futures are meeting a headwind from phenomenal yield reports and the forecast for cooperative harvest weather through early October. Harvest is getting into full swing and is 7 percent complete compared to the average of 16 percent. Reports of yields in the 200-240 bpa range are numerous in areas not affected by dry conditions this summer. This will put a premium on storage space. Export inspections last week were 17.9 MB and are off to a slow start this season with cumulative shipments running 26 percent below a year ago. In addition, the most recent Cattle On Feed Report shows fewer cattle being fed. These two issues infer that usage may not meet expectations. In other developments, the trend following funds are more bearish as they added 175 MB to their short futures position last week increasing it to 875 MB.
Trading has been lackluster in December corn this week with a short-term bottom developing on Tuesday at 448 followed by a rebound to 457.25 Thursday. This was due to the strength in wheat. If 463.25 is exceeded, look for a bounce to 471-478 that ends late next week. Longer-term, the market is entrenched in a downtrend and on track for a decline to 430 or 412. A more bearish pattern points to a sell-off to 380. While corn futures frequently bottom in early October, it will probably be later this season. Currently, the cycles are pointing to a low developing during the third week of October. In October, the odds are even as to whether the market will be higher or lower. Next week, the chances are 70 percent the market will be down.
Recent rainfall in the upper Midwest may boost yield potential for late maturing soybeans that were affected by dry weather during August. Meanwhile, harvest has begun in various locations and is 3 percent done compared to the average of 9 percent. So far, yield reports have been above expectations. Export inspections last week were better than expected at 16.7 MB with China taking 10.8 MB. This was the largest shipment taken by them in several weeks. So far, sales this season are off to a decent start, up 37 percent from a year ago. However, cumulative shipments are lagging, down 38 percent. In other developments, the trend following funds added 30 MB to their long futures position last week increasing it to 560 MB.
November soybeans bottomed at 1305.5 on Monday followed by a bounce to 1328 Wednesday. So far, this looks like a correction suggesting that lower prices may be forthcoming. Meanwhile, if 1328 is exceeded, look for the recovery continuing to 1345 or 1357 with a top occurring by the middle of next week. Otherwise, a break below 1305.5 projects the sell-off from 1409.5 continuing to a target mentioned in previous comments at 1285 with a bottom likely after the first week of October. Historically, October is normally a weak month for soybeans as they are down 58 percent of the time. Next week, the odds are 60 percent that the market will be lower.
Wheat futures have been underpinned recently from frigid conditions in Argentina and interest from China. In addition, exports are improving. Inspections last week were 42.3 MB and above the average needed to reach USDA’s projection of 1.1 BB. Cumulative shipments are 24 percent ahead of last year and, if the pace continues, are on track for 1.690 BB. However, be aware that the pace could diminish soon if shipments follow the norm of peaking between mid September and early October. Wheat seeding has begun and is 23 percent complete compared to the average of 24 percent. The trend following funds are more bearish and have added 25 MB to their short futures position increasing it to 440 MB. This is the largest short position they have held since May 2012. This suggests that the boat is overcrowded with bears and could ignite a short covering rally.
Previous comments have mentioned that December wheat was in the later stage of its decline from the contract high set last November at 913. This week, the market rose past the downtrend line extending back to the high at 758.75. This is a higher high exceeding resistance at 676.5 The trend indicators have turned up on the weekly chart inferring that a long-tem low may be in place at 635.5. If so, there is a chance we are in the beginning stage of an uptrend in which there could be a move upward to 705 and possibly 742 later. Be advised this is still a work in progress. Short-term support is at 668-662. In October, wheat futures are higher 60 percent of the time. Next week, the odds are 70 percent that the market 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.