Despite last week's apparent break out from a bullish flag chart pattern on new-crop December corn, we could see the market retrace and retest the breakout area. There was nothing bearish about last week's April WASDE report, which once again reinforced the ongoing pattern of tightening corn stocks, both here and in the world. The 150-million-bushel (mb) fall in U.S. ending stocks likely only set the stage for a further rise in exports and fall in ending stocks in future reports.
U.S. corn is again competitive in the world corn market, with the primary competition coming from Argentina. However, with a full five months left in the crop year, and with the current export sales of 2.617 billion bushels (bb) already nearly 98% of the newly revised 2.675 bb export projection, it is likely we will see U.S. ending stocks ultimately move closer to the 1.2 bb level. That, along with the expanding drought situation in Brazil's safrinha crop area, makes U.S. new-crop corn production all the more important.
The bull flag chart pattern breakout suggests further strong gains in December corn. However, we could easily see December correct and test the support below at $4.84 to $4.85, and even the open chart gap at $4.77 1/2, before resuming the uptrend.
JULY BEAN OIL FUTURES:
Following the meteoric rise in not only world vegetable oil markets but also U.S. bean oil futures that began in late October and seemed to peak in late March, July bean oil appears to also be acting a little toppy. July bean oil looks to be trading within a 48- to 52-cent range, with a close under 48 cents likely to lead to another leg down to the 43- to 44-cent level. On the other hand, a rally and close above the 52-cent mark could lead to a challenge of the highs.
World veg oil markets continue to be tight, but palm oil plunged 3.2% to start the week as the end of March inventory in Malaysia figured nearly 11% higher than at the end of February. Brazil's decision over the weekend to temporarily reduce the biodiesel mandate to 10% from 13% for May and June to hold prices down no doubt exacerbated the weakness in oils early this week.
MINNEAPOLIS NEW-CROP SEPTEMBER FUTURES:
It is rare we see triple-top chart formations and, when we do, rarely do those triple tops or bottoms hold. Minneapolis new-crop September wheat futures seem to have a triple-top right now. Last week, September futures rallied 56 cents from the recent low as expanding drought conditions suggest bullish yield and production ideas and even lower planting intentions. However, with some minor rains moving across the Northern Plains and with crop conditions in both the European Union and Russia improving, we could see more bearish pressure on U.S. wheat futures markets in the short run. On a further set back, look for solid support to emerge at the $6.30 level on Minneapolis September. On the flip side, a rally and close over $6.71 to $6.72 on Minneapolis September is likely to lead to a new leg higher.
Comments above are for educational purposes and are not meant to be specific trade recommendations. The buying and selling of grain and soybean futures involves substantial risk and are not suitable for everyone.
Dana Mantini can be reached at: firstname.lastname@example.org
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