On The Money Grain Commentary 2-28-13

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Corn Outlook:

It is tough to be bullish corn when the funds are liquidating long positions, exports reek, and there are expectations for a bumper crop to be harvested next fall.  Last week, the trend following funds sold 160 MB reducing their longs to 35 MB.  This is the smallest position they have held since last April.  In addition, the index funds are shying away from corn as they sold 70 MB reducing their longs to 1.920 BB.  Prices cannot strengthen without the funds participation.  Meanwhile, exports are pathetic.  Inspections last week were 11.5 MB.  At this rate, shipments will be closer to 770 MB rather than USDA’s projection of 990 MB.  In the Ag Outlook Forum, USDA expects 96.5 million acres of corn to be planted this spring, and if their yield estimate of 163.6 bpa is realized, ending stocks this fall will be 2.177 BB.  The bulls have their work cut out!

July corn fell to 667.5 on Monday and has since recovered.  Corn futures generally strengthen from late February until early to mid March.  However, they may not go far this season because of poor exports, expectations for a large crop and lack of interest by large traders.  During the next few days, the market may work upward to 695, but probably no more than 703.  Longer-term, the trend is down with the potential for a sell-off to 640-630 or 615. Historically, corn futures are higher 63 percent of the time in March.  Next week, the odds are even as to whether July corn will be higher or lower.

Bean Outlook:

Showers in Argentina over the weekend have trumped concerns of shipping delays out of Brazil.  Keep in mind that the logistical problems and labor disputes in Brazil are temporary and have a history of occurring every year right at harvest.  Export inspections were less than expected at 27.2 MB but are well above the level needed to reach USDA’s projection of 1.345 BB.  In the Ag Outlook Forum, the USDA forecasts soybean acres this spring at 77.5 million.  If realized and their yield estimate of 44.5 bpa is achieved, ending stocks next fall will rise to 250 MB.  Last week, the trend following funds increased their long soybean position 25 MB to 505 MB while the longs of the index funds fell 40 MB to 475 MB.

      July soybeans fell to 1405.5 on Tuesday, which is likely a short-term low.  Seasonally, soybean futures tend to rise from late February until early to mid March.  However, the recovery began a couple of weeks sooner than normal and probably peaked last week with the reversal at 1483.5.  Resistance is expected at 1453-1463.  Once the current rebound is over, a decline to 1367 or trend line support at 1345 could unfold.  Longer-term, the market is at risk of breaking the low made last November at 1331.75.  In this event, a sell-off to 1238 or 1210 could occur.  Historically, soybean futures are higher 63 percent of the time during March.  However, there is a chance of deviating from the norm this season.  Next week, the odds are 80 percent that July soybeans will be higher.

 Wheat Outlook:

Heavy snowfall in the Plains and improving conditions in the Midwest caused weakness in wheat early this week.  Meanwhile, exports are sluggish with inspections last week at 21.1 MB.  Currently, we are on track to ship 1.0 BB compared to USDA’s projection of 1.050 BB.  In the Ag Outlook Forum, The USDA forecasts wheat acres at 56.5 million and if their yield estimate of 45.3 bpa is realized, ending stocks of 639 MB are expected.  In other developments, the trend following funds sold 30 MB last week increasing their short position to 365 MB.  This is a sizeable position, but the market acts like much of the bearish news has been discounted.  The longs of the index funds fell 10 MB to 725 MB.

July wheat fell to 702.5 on Tuesday, February 26^th, which was near a target mentioned in last week’s comments at 701-697.  The cycles pointed to a low occurring on February 28^th.  As it stands now, the wave pattern shows that the sell-off from the contract high made last November at 900 may be over.  A rally beyond 726 is needed for confirmation.  In this event, a recovery to 752 or 758 is expected.  Historically, March is not a good month for wheat futures as they are down 53 percent of the time.  However, this year may the exception.  Next week, the odds are even as to whether July wheat will be higher or lower.