Corn futures are underpinned from concerns of dry weather in Argentina, whether sufficient acres will be planted in 2011, and the extension of the 45-cent per gallon ethanol blenders credit. While these factors are currently supporting the market, the debit crisis lurking in Europe is spreading. Moody’s rating service mentioned that France’s AAA rating might be downgraded. While weather and acres planted next spring is on everyone’s mind, right now, the debt contagion could be the card that eventually seals fate of the grains. Last week, export inspections were 27.0 MB and below the average needed to reach USDA’s projection of 1.950 BB. Shipments are running 23 percent behind the pace necessary to achieve their target. The trend following funds bought 80 MB last week increasing their longs to 1.525 BB. The index funds are long 2.210 BB.
March corn has crept slowly upward since bottoming in November at 520.25. Prices rose to 614.75 on Thursday and should be headed past 617.25 to 635. This could occur during the first week of January. Meanwhile, the current structure of the wave pattern from 520.25 indicates that we may peak closer to January 10th. This should be clearer next week. Be advised that the weekly and monthly charts show that the long-term advance from the June low of 356.75 is in its mature stage in which a major top, possibly a multi-year high, could develop. Next week, the odds are 70 percent that March futures will be higher.
Argentina benefited from scattered showers last weekend, but there were areas that missed the rain and more heat is in the forecast. Some analysts are cutting their soybean production forecast to 48-43 million tons compared to USDA’s recent estimate of 52 million. In other developments, export inspections were better than expected at 44.6 MB. China took 26.8 MB or 60 percent of the shipments. Last week, the trend following funds increased their long position 20 MB to 680 MB, while the longs of the index funds rose 15 MB to 975 MB. Their combined position comprises 49 percent of U.S. production. This clearly shows that the fate of soybeans rests with big money!
March soybeans rose to 1365.75 on Thursday, which exceeded the November high of 1354.5 and met a target mentioned in previous comments at 1365. However, the wave pattern points to prices advancing near the secondary targets at 1400 or possibly 1420. Be alert for a top that could occur during the period of December 28th-January 4th. Meanwhile, the current structure of the wave pattern from 1183 shows that we may not peak before the second week of January. This should be clearer next week. Be advised that the weekly and monthly charts show that the market is in the later stage of its long-term advance from the June low of 906.75 in which a major top, possibly a multi-year high, could occur. Next week, the odds are even as to whether March soybeans will be higher or lower.
Quality issues in Australia and persistent dryness in the Plains are factors underpinning wheat. Although stocks are ample, traders are concerned about them shrinking. Export inspections last week were 23.0 MB and below the average needed to reach USDA’s projection of 1.250 BB. Currently, we are running 12 percent behind the pace necessary to meet their target. In other developments, the trend following funds have whittled their short position to 40 MB, while the index funds are long 1.060 BB.
March wheat has been rising since it bottomed last week at 742, although there was a brief pullback to 756 on Wednesday. Unless 756 fails, we are on track for a move higher to 825 or 845. If there is a close past 864.25, prices could climb to 890. Be alert for a major top that could develop during the first or second week of January. Next week, the odds are 60 percent that March futures will be higher.
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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.