While traders eye developments in Libya and the Middle East, the calendar has turned to March and their focus is on planting intentions and weather. Stocks of corn are tight, and a planting delay or adverse growing conditions could draw them down further. In the meantime, we must not lose sight of the fact that the direction of the market rests in the hands of the commodity funds. Last week, the trend following funds trimmed their long position 35 MB reducing it to 1.625 BB. This is their third consecutive week of liquidation. Meanwhile, the index funds added 90 MB increasing their longs to 1.975 BB. In other developments, export inspections of corn were 24.0 MB and below the average needed to reach USDA’s projection of 1.950 BB. Currently, shipments are running 21 percent behind the level required to meet their target.
Last week’s comments mentioned that the pattern on the weekly chart showed that July corn could be topping while the daily chart still pointed to a new high. As it turned out, the market traded to 743.5 on Wednesday setting a new contract high. We are now in a position for a rally to 755 or 765 with a top likely near mid month. Meanwhile, there is a more bullish pattern showing the potential for climbing to 780 or 795. If the later pattern is the one unfolding, we will not peak until the third week of this month. Keep in mind that the market is in the mature stage of its long-term advance, and when the cycles run their course, we are staring at a multi-year high. Next week, the odds are even as to whether July futures will be higher or lower.
Improving conditions in Argentina and the outlook for a record soybean crop in Brazil stole some of the market’s thunder a couple of weeks ago. However, prices recovered this week as tight stocks in the U.S. continue to provide underlying support. As we move into March, greater emphasis will be placed on planting intentions and weather. While China’s interests may be turning to the South American crop, export inspections were robust last week at 48.6 MB. China took 35.2 MB or 72 percent of the shipments. In other developments, the trend following funds scaled back their long position 120 MB reducing it 520 MB. This is their third consecutive week of liquidation. Meanwhile, the longs of the index funds fell 45 MB to 825 MB. Open interest has fallen which reflects fund liquidation and a loss of momentum.
The pullback in July soybeans from the contract high made in February at 1474.5 resembles a correction at this point. Prices bottomed last week at 1305 and have since recovered. Look for short-term resistance at 1435. The market is rising in an impulsive fashion, which increases the chance for a new high. If this unfolds, we could climb to 1540 with a peak developing mid or late March. This assumption is contingent upon not closing below 1319. Keep in mind that the market is in the late stage of its long-term advance in which a major top is forthcoming. Next week, the odds are 80 percent that July futures will be higher.
Traders continue to monitor the unrest in the Middle East for signs of disruptions to the wheat trade. So far, none has developed, but it could become an issue. Dryness continues in the Plains, and the crop will break dormancy later this month, which means moisture will be needed. Export inspections were less than expected at 19.5 MB and below the average needed to reach USDA’s projection of 1.3 BB. In other developments, the trend following funds are short 40 MB of wheat. If they add to their position, it could weigh on values. Meanwhile, the index funds added 10 MB to their longs increasing them to 1.035 BB.
July wheat is recovering from its low made last month at 790. Prices have risen to 859.5 and could continue higher to 870 or possibly 890. Look for the recovery to end by mid month. Right now, the chances for climbing past the contract high at 950.75 look slim as there is a strong seasonal tendency for trading lower until the end of April. Next week, the odds are even as to whether July futures will be higher or lower.
Want the kind of intel that helps serious producers succeed? Sign up for a FREE! trial subscription to our daily newsletters.
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.