Corn Outlook:
Corn futures are being supported by the Fed’s proposed quantitative easing program that is weighing on the dollar. In addition, traders are bullish expecting the USDA to lower their yield estimate in the crop report next week from the current forecast of 155.8 bpa. In other developments, export inspections were disappointing at 25.5 MB and below the average needed to reach USDA’s projection of 2.0 BB. Shipments are currently running 30 percent below the pace needed to meet their target. Prices could be reaching a point that rations demand. Meanwhile, the funds have been inactive lately with the combined long position of the trend following and index funds standing at 4.105 BB. This is 32 percent of expected production for the 2010-11 crop.
December corn peaked at 590.75 on Monday followed by a pullback to 568.75 on Wednesday. From here, the market recovered and has risen to 595.75. Unless there is a sell-off and close below this week’s low, a rally to the long-term target at 610 or possibly 655 should occur. Cycle analysis points to a top developing later this month that has the potential of being a multi-month or a multi-year high. Right now, all we can do is to wait and see how the pattern unfolds. Keep in mind that a friendly crop report is currently being priced into the market. If it occurs, additional bullish news will be needed to fuel the advance.
Next week, the odds are 60 percent that December futures will be lower.
Bean Outlook:
Strong demand from China continues to support the soybean market. Inspections last week were robust at 60.2 MB with China taking 45.3 MB or 75 percent of the shipments. Generally, our exports do not peak until mid November or early December. In the meantime, higher prices will keep the planters rolling in South America. Weather there has been dry, but conditions are improving from recent scattered showers, which may entice additional planting. Their crop will be the hot topic of discussion among traders for the next few months, especially if a problem arises. Right now, my greatest concern for soybeans is that the combined long position of the trend following and index funds has reached a record 1.790 BB. This is 52 percent of expected production for the 2010-11 crop and clearly shows that large speculators are the controlling factor in the market.
After bottoming on Wednesday at 1229, March soybeans have marched past their previous high at 1255. Prices have risen to the initial target at 1285 mentioned in previous comments and could climb to the second target at 1295 followed by 1310. Cycle analysis shows that an important top may occur near mid month, which has the potential of being a multi-month or a multi-year high. As that time approaches, we will take a closer look at the pattern to see how it is unfolding. For now, a close below 1240 is needed for evidence that we are topping.
Next week, the odds are 66 percent that March futures will be higher.
Wheat Outlook:
Traders are becoming increasingly concerned about the wheat crop because of dryness in the Plains and Midwest. Last week, the ratings were unchanged at 47 percent in good-to-excellent condition compared to 64 percent a year ago. Meanwhile, the ratings for Kansas, Oklahoma and Texas stand at 38 percent, 31 percent and 35 percent respectively. In other developments, planting is winding down at 92 percent complete. Export inspections were sluggish at 16.1 MB and below the average needed to reach USDA’s projection of 1.250 BB. The pace of shipments has slowed recently and running 14 percent below the level needed to meet their target. Other than dry conditions, the factor supporting the market is the trend following funds are holding a short position of 165 MB.
December wheat fell to 680.5 on Wednesday, which ended the decline from last week’s high of 728. Since then, prices have risen sharply, but must close past this level to verify that an upside breakout break out is getting underway for the correction from the August high at 868. If it happens, short covering by the funds could propel the market to 880 with a peak near mid month.
Next week, the odds are 60 percent that December futures will be lower.
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