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Corn Outlook:
Corn planting has hit a speed bump because of soggy conditions with planters mostly idle until the weekend. This gave the market a boost early this week but it has since cooled off as better weather is ahead. As of last week, 19 percent of the crop was in the ground compared to 5 percent a year ago and 28 percent for the average. The major producing states were 18-28 percent behind their average with the exception of Illinois, which was on par for the course. However, it is a bit soon to push the panic button as last year attests to the planting progress that can be made given a few days of decent weather. In other developments, export inspections were 45.5 MB and above the average needed to reach USDA’s projection of 1.750 BB. The long position of the trend following funds fell 75 MB last week to 860 MB.
July corn traded to 522 on Tuesday and turned down forming a double top with the high made on April 9th at 524.25. From here, there was a break to 504.5 Thursday. Additional support is at 500 followed by last month’s low at 490.75. So far, the pullback resembles a correction but that could change as there are not five-waves down from 522. From a seasonal standpoint, corn futures generally do not peak until the first or second week of May. Unless key support at 490.75 is taken out setting a lower low and a lower high, a rally beyond 524.25 can not be ruled out. In the event, look for a move upward to 537 with a top likely by May 8th or May 15th. During May, corn futures are up 53 percent of the time. Next week, the odds are 50 percent that the market will be lower.
Bean Outlook:
Since the beginning of the year, soybeans have been supported by tightness in old crop stocks with new crop riding on their coattail. However, this is becoming old news as evidenced by Thursday’s sharp break. In addition, let’s not forget that we are sitting on a record global supply. Speculative buying was the factor driving the market higher early this week, but prices have since fallen as fresh bullish input is lacking. With the recent strength in new crop, the chances are that USDA’s projection of 81.5 planted acres for 2014 is too low. If this is confirmed in the June Acreage Report, ending stocks this fall could top 400 MB provided we have an average yield. In other developments, export inspections last week were 9.3 MB with China taking only 10,000 bushels. Shipments to them have fallen off the chart as cargoes of soybeans originally destined to China are being cancelled or diverted to the East coast. I understand that there are 13-15 MB headed this way, and possibly more later. This will help alleviate the tightness of stocks in the weeks ahead. Planting in the Midwest has begun and is 3 percent complete compared to the average of 4 percent. Last week, the trend following funds lightened their long position by 140 MB reducing it to 585 MB.
July soybeans rose to 1520.5 on Tuesday but could not get past last month’s high at 1521 forming a double top. This was followed by a washout to 1460 on Thursday. So far, a five-wave pattern is not yet visible in the decline from 1520.25 that would confirm the beginning of a downtrend. However, critical support at 1460.5 has failed setting a lower low and a lower high from 1521. This has not happened since the advance began in January from 1234. Follow through weakness on Friday will break the up trend and douse the chance for a new high. In the event, look for a setback to 1430 and, maybe, a sell-off to the March low at 1350.25. During May, soybean futures are down 53 percent of the time. Next week, the odds are 60 percent that they will be higher.
Wheat Outlook:
Wheat conditions slipped one notch last week to 33 percent of the crop rated in good-to-excellent condition. Dryness in the southern Plains continues to be an issue which has been supportive. Meanwhile, traders are keeping tabs on the conflict between Russia/Ukraine. Tensions have escalated but, so far, no disruption of grain shipments have occurred. The U.S. and Europe have placed sanctions against Russia, but they could backfire. Russia is the dominant supplier of natural gas and energy to Europe, and it will be interesting to see what develops if they demand payment in rubles rather than the dollar. Export inspections last week were 23.1 MB and below the average needed to reach USDA’s projection of 1.175 BB. The trend following funds increased their short position 50 MB last week to 60 MB.
July wheat traded through an area of resistance at 718.25 to 724.75 this week, but could not overcome the March high at 725.25. This was followed by a decline to 701.25 on Thursday. Additional support is at 697 and, if it gives way, look for setback to the lower end of the trading that began in March at 663.75. Meanwhile, exceeding 724.75 sets the stage for a leg higher to 763 with a top around May 7th, 9th or the 12th. Seasonally, wheat futures tend to peak during the first or the second week of May. During May, wheat futures are down 58 percent of the time. Next week, the odds are even as to whether the market will be higher or lower.
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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.