Corn futures are winded. No wonder; they have risen 54 percent since June, while the long position of the funds has grown to a record 4.255 BB. The funds could be their own worst enemy as was the case when prices collapsed in 2008.
In other developments, USDA projects corn stocks as of September 1st at 1.707 BB. This is a whopping 300 MB higher than traders had expected. However, the USDA probably counted some new crop in their estimate. Harvest is progressing rapidly at 27 percent complete compared to 6 percent in 2009 and 15 percent for the five-year average. Traders are anticipating yields at 160 bpa, down from 164.7 bpa a year ago. Export inspections were 34.0 MB and below the average needed to reach USDA’s projection of 2.1 BB.
December corn traded to 528.75 on Monday and fell 9.5 percent to 478.5 where it bottomed Thursday. This is probably the extent of the pullback. Meanwhile, prices are due to consolidate through the first week of October.
Once the correction from 528.75 is over, look for a rally to the mid 5’s as the next high in mid-October. Longer term, the market is on track for a rally to within a dime or two on either side of 6-even, with a peak likely to come in mid-November. Be advised that the longer-term pattern favors this being a multi-month or a multi-year high.
During October, corn futures are higher 55 percent of the time. Next week, the odds are 70 percent that December futures will be lower.
Soybeans are meeting pressure from harvest in the U.S. and recent rainfall in the dryer areas of South America. Harvest is 17 percent complete compared to 5 percent a year ago and 13 percent for the five-year average. Strong yields are expected. Export inspections were 18.6 MB with China taking 8.3 MB or 45 percent of the shipments. USDA projects soybean stocks as of September 1st at 151 MB, which was in line with trade estimates.
In other developments, the long position of the funds has risen to a record 1.580 BB, which could eventually lead to a sharp sell-off when their buying ceases.
November soybeans rallied to 1144 on Monday followed by a pullback to 1082.25 on Thursday. The market should consolidate a few more days, possibly through the first week of October. At that time, a rally to mid-11’s is expected with an intermediate-term top likely just prior to the middle of the month. Longer term, the market could be headed near 1200, which should be a multi-month or a multi-year high. Right now, the trend is up unless there is a close below support at 1057.
During October, soybean futures are down 57 percent of the time. Next week, the odds are 60 percent that the November contract will be lower.
The saying goes “Buy the rumor, sell the fact” and wheat futures is struggling as the Russian drought is old news. Rain is in the forecast, which will enhance winter seeding in some areas. Meanwhile, planting in the U.S. is progressing slowly at 33 percent; below the five-year average of 38 percent. Export inspections were 24.2 MB and below the average needed to reach USDA’s projection of 1.250 BB. Wheat stocks as of September 1st are projected at 2.458 BB, while all wheat production is forecast at 2.223BB. This is slightly below trade estimates. In other developments, the trend following funds are short 50 MB, while the long position of the index funds has fallen to 930 MB.
December wheat has fallen sharply from its high made earlier this month at 757. Last week’s comments mentioned that a decline below 677.5 could occur. Prices fell to 651 on Thursday, which may have ended the sell-off. However, unless there is a close above 693, there is a chance of working lower into the lower range of 6 dollars. Meanwhile, there is a longer-term bullish pattern continuing to develop which shows the potential of climbing into the upper range of 6 dollars. However, more time is needed to see whether it unfolds.
During October, wheat futures are higher 63 percent of the time. Next week, the odds are 70 percent that December wheat will be lower.
Corn above 6? Soybeans above 12? And wheat breaking through the doldrums and getting out if its trading pattern? Want to know exactly when I expect that to happen and what the chances are. Find out what other producers already know, sign up for a FREE! trial subscription to our daily newsletters.