Buy and hold, corn is the new yellow gold! Exuberance in corn is becoming high-pitched, similar to 2008. This is evident by the fund long position swelling to a record 4.2 BB. Although the market is over-bought, the bubble does not seem ready to burst yet. Prices are currently supported by disappointing yields in the Midwest, the chance of ending stocks falling to 1.0 BB, dryness in South America and a weaker dollar. Meanwhile, harvest is progressing rapidly at 18 percent compared to the five-year average of 10 percent. Export inspections were disappointing at 28.4 MB and below the average needed to reach USDA’s projection of 2.1 BB.
Last week’s comments mentioned that an intermediate-term top in December corn was due during the period of September 20th-23rd. As it turned out, prices peaked on Monday, September 20th at 523.75., which was slightly past a target at 520. For the next few days, the market is subject to a correction in which there could be a setback below 500. The pullback is due to end on September 28th, but if it becomes complex, it may be October 7th before it is over. Once it ends, look for a rally between 550 to near 6. A major top could occur as soon as mid-Oct, but I cannot rule out it being as late as mid-November.
Next week, the odds are 60 percent that December futures will be lower.
A weaker dollar and concerns of dryness in Brazil are supporting soybeans, although corn is the primary influence upholding the market. World ending stocks are 63.6 million tons and with stocks-to-usage at 25.1 percent, there is no supply shortage. However, the euphoria in corn has spilled into soybeans as the fund long position has grown to 1.510 BB. In other developments, harvest has begun and is 8 percent complete compared to the five-year average of 6 percent. Export inspections were in line with estimates at 12.0 MB with China taking 4.2 MB or 35 percent of the shipments.
November soybeans rallied to 1099.5 where a short-term top developed on Monday, September 20th. Last week’s comments said that prices could peak at 1095 during the period of September 22nd – 24th. Prices backed off to 1079.5 on Thursday and have additional support at 1070. Once the correction is complete and unless there is a decline below 1057, a rally above 1150 is expected. This is due to occur alongside corn in mid-October, but it could be as late as mid-November. Be advised that when prices peak, it will likely be a multi-month or a multi-year high.
Next week, the odds are 60 percent that November futures will be lower.
Persistent dryness in Russia and western Australia, along with the cold snap in Canada and China is supportive to wheat. However, the news seems priced in the market as evidenced by the sell-off this week. World stocks are declining, but there is no shortage. In other developments, eighty-seven percent of the spring wheat crop has been harvested, while 18 percent of the winter wheat is planted. Export inspections were 29.9 MB and above the average needed to reach USDA’s projection of 1.250 BB. The funds have been inactive the past couple of weeks as the trend following funds are flat, while the longs of the index funds has fallen slightly to 965 MB. Look for wheat to continue to be supported by the strength in corn.
December wheat rebounded to 757 on Monday, September 20th where it turned down. The recovery from 677.5 has been sloppy and appears to be a correction. This suggests that we are likely to stay range bound a while longer and could test this low again. Meanwhile, a decline below 677.5 cannot be ruled out. Longer-term, one wave pattern shows the potential of climbing past the August. However, we will have to see whether this unfolds.
Next week, the odds are 60 percent that December wheat will be higher.
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.