On The Money Grain Commentary 9-6-12

Corn Outlook:

     Corn futures have been in the doldrums since mid August as we are making a transition from a supply to a demand driven market.  There are still lingering questions about production, which will be addressed by the USDA in the crop report on September 12th.  Until then, fresh news is lacking.  Harvest is getting underway and 10 percent complete compared to the average of 3 percent.  Export inspections were horrible last week at 6.3 MB, a poor way to wrap up the marketing year.  This shows that high prices are curbing demand.  In other developments, the trend following funds sold 110 MB last week reducing their long position to 1.295 BB.  This was mostly from end of the month profit taking.  The longs of the index funds rose 10 MB to 1.805 BB.    

     December corn is in day 18 of the correction from 849.  When prices peaked in May at 549.5, it took 18 days to complete the setback to 506.  The market fell to 788 on Thursday and recovered to 802.  A rebound past 818 is needed for confidence that the pullback from 849 is done.  Otherwise, a decline to 777, 770 or 763 cannot be ruled out.  Once the correction is over, a rally to 868-873 or 888-895 is expected which should end the advance from 499.  In addition, the longer-term continuation chart alludes to the chance of wrapping up the rally from 2008 and 2000.  Cycle analysis points to a top occurring on September 19th although it could be as late as October 8th.  Next week, the odds are 89 percent that December futures will be lower.

Bean Outlook:

      Soybean futures rose to an historic high following the Labor Day weekend on dwindling crop expectations and continued strong demand.  Export inspections were 15.1 MB, which were enough to push them past USDA’s projection of 1.350 BB.  China took 8.2 MB or 58 percent of shipments.  In other developments, nineteen percent of the soybean crop is dropping leaves compared to the average of 9 percent.  Remnants of Hurricane Isaac will likely give late-planted soybeans a limited boost in yield.  Last week, the trend following funds trimmed their long position by 90 MB to 990 MB because of month end profit taking.  The longs of the index funds fell 15 MB to 580 MB.    

     November soybeans traded to 1789 on Tuesday meeting a target mentioned in previous comments at 1787.  As it stands now, we have completed the rally from 1587 in which support is expected on a pullback to 1712.  Prices fell to 1725.5 on Thursday from where they recovered.  The setback will likely be over by the end of the week.  Once it is complete, a move upward to 1815, 1825 or 1835 is expected which has the potential of ending the advance from 1244.75 and possibly the low made last December at 1115.75.  In addition, the longer-term continuation chart shows that we are in the late stage of the rally from 2008 and 1999.  Currently, the cycles point to a top occurring as soon as September 14th, while it may be closer to September 19th or September 26th.  Next week, the odds are 70 percent that November futures will be lower.

 Wheat Outlook:

     While the drought in Russia may dampen their exports, improved conditions for planting wheat in the Midwest, caused from remnants of Hurricane Isaac, is limiting upside price potential.  Meanwhile, producers in the southern Plains mostly missed out from the rain event caused by Isaac.  Export inspections last week were 25.4 MB and above the average needed to reach USDA’s projection of 1.2 MB.  Last week, the trend following funds reduced their long futures position to 45 MB.  The longs of the index funds rose 20 MB to 950 MB.    

     December wheat fell to 865.25 on Wednesday and rebounded Thursday.  Additional support is at 857-850.  Meanwhile, the market remains in a correction from 953.25 that should end by September 10th.  Once it is over, a rally to 973 is expected and possibly 1010.  This could occur as soon as September 19th, while it may be closer to September 27th or October 8th.  Be advised that this will likely conclude the advance from 629.5.  Next week, the odds are 70 percent that December will be lower.

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