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Grain Market Analysis
test localhost Jul 25, 2012

Jim Wyckoff

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December Corn closed down 7 1/4-cents at 7.78 1/4. December corn closed lower on Tuesday but well off session lows that touched limit down in early session trading. Early downside pressure was triggered by overnight and morning rains, which moved across upper portions of the Midwest and moved through Chicago, which led to a limit down move in December corn this morning. However, prices began to rebound following a Reuters' News survey of trade analysts, which estimated this year's corn yield at 130.8 bushels per acre leading to a corn crop of 11.4 billion bushels. That would assume harvested acres of just over 87 million, or 90% of planted acres. Harvested acres during the 1988 drought fell to 85.5%. If harvest acres fall by a similar amount this year, harvested acres would be down another 5 million near 82 million acres. Monday's crop conditions report showed that 45% of the nation's corn crop is rated Poor to Very Poor as of this week. The high-range close sets the stage for a steady to higher opening when Wednesday's night session begins trading. Stochastics and the RSI are overbought but remain neutral to bullish signaling that sideways to higher prices are possible near-term. Closes above the previous all-time high of $7.99-3/4 would likely trigger additional buying as the door would be open for additional gains ahead of the August supply-demand report. Initial support is the 10-day moving average crossing at 7.64 1/4. Closes below the 20-day moving average crossing at 7.17 1/4 would confirm that a top has been posted. First resistance is Monday's high crossing at 8.00. First support is the 10-day moving average crossing at 7.64 1/4. Second support is the 20-day moving average crossing at 7.17 1/4.

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December wheat closed down 30 3/4-cents at 8.88 1/4. December wheat closed sharply lower on Tuesday confirming yesterday's key reversal down as it consolidated some of this summer's rally. Today's decline led to a close below the 10-day moving average crossing at 8.95 3/4 thereby signaling that a short-term top is in or is near. A short covering rally tempered early session losses and the mid-range close sets the stage for a steady opening when Wednesday's night session begins trading. Stochastics and the RSI are overbought and are turning neutral to bearish signaling that a pause or setback to consolidate some of this summer's rally appears likely near-term. Closes below the 20-day moving average crossing at 8.49 1/2 would confirm that a short-term top has been posted while opening additional weakness possible into the August supply-demand report. If December renews the rally off June's low, the May-2011 high crossing at 9.77 1/2 is the next upside target. First resistance is Monday's high crossing at 9.53 1/4. Second resistance is the May-2011 high crossing at 9.77 1/2. First support is the 20-day moving average crossing at 8.49 1/2. Second support is the reaction low crossing at 8.16 1/4.

December Kansas City Wheat closed down 31 1/2-cents at 8.98. December Kansas City wheat gapped down and closed below initial support marked by the 10-day moving average crossing at 9.05 3/4 on Tuesday as it consolidated some of this summer's rally. Early session losses saw December fill the July 16th gap crossing at 8.78 before a short covering rally tempered some of today's losses. The high-range close sets the stage for a steady to higher opening on Wednesday. Stochastics and the RSI are overbought and are turning bearish hinting that sideways to lower prices are possible near-term. Closes below the 20-day moving average crossing at 8.59 would confirm that a short-term top has been posted. If December renews this summer's rally, the May-2011 high crossing at 9.78 1/2 is the next upside target. First resistance is last Friday's high crossing at 9.54. Second resistance is the May-2011 high crossing at 9.78 1/2. First support is today's low crossing at 8.75 3/4. Second support is the 20-day moving average crossing at 8.59.

December Minneapolis wheat closed down 36 1/2-cents at 9.68 1/2. December Minneapolis wheat closed sharply lower confirming yesterday's key reversal down on Tuesday as it consolidated some of this summer's rally. Today's close below initial support marked by the 10-day moving average crossing at 9.77 1/2 signals that a short-term top is in or near. The mid-range close sets the stage for a steady to lower opening when Wednesday's night session begins to trade. Stochastics and the RSI are overbought and are turning neutral to bearish signaling that sideways to lower prices are possible near-term. Closes below the 20-day moving average crossing at 9.29 1/4 are needed to confirm that a top has been posted. If December extends this summer's rally, weekly resistance crossing at 10.70 3/4 is the next upside target. First resistance is Monday's high crossing at 10.34. Second resistance is weekly resistance crossing at 10 70 3/4. First support is the 20-day moving average crossing at 9.29 1/4. Second support is the reaction low crossing at 8.99 1/4.

SOYBEAN COMPLEX

November soybeans closed down 52 3/4-cents at 15.69 1/2. November soybeans closed sharply lower for the second day in a row on Tuesday as rains moved across portions of the upper Midwest overnight and persisted throughout much of today. A Reuters' news survey of traders estimated this year's soybean crop at 38.6 bushels per acre, for a total soybean crop of 2.9 billion bushels. That is based upon the assumption that harvested acres will be around 75.1 million acres, which is down slightly from USDA's estimate of 75.3 million. This harvested acreage number appears to be optimistic considering that 35% of the nation's crop is rated Poor to Very Poor and many double-crop acres were never planted. If harvested acres come in a more realistic 73 to 74 million acreage, the USDA would have to cut another 50 to 75 million off the size of this year's soybean crop. Demand continues to remain strong despite this summer's run up in prices, which suggests that the market has not rationed enough demand given the projected supply of new-crop soybeans. Today's low-range close sets the stage for a steady to lower opening when Wednesday's night session begins trading. Stochastics and the RSI have turned bearish signaling that sideways to lower prices are possible near-term. Closes below the 20-day moving average crossing at 15.31 would confirm that a short-term top has been posted while opening the door for a possible decline to this summer's uptrend line crossing near 14.88 1/4 before the market can find solid footing to halt this week's decline. If November renews this summer's rally, psychological resistance crossing at 17.00 is the next upside target. First resistance is Monday's high crossing at 16.91 1/2. Second resistance is psychological resistance crossing at 17.00. First support is the 20-day moving average crossing at 15.31. Second support is this summer's uptrend line crossing near 14.88 1/4.

December soybean meal closed down $14.50 at $469.80. December soybean meal closed sharply lower for the second day in a row due to long liquidation by funds on Tuesday. Rains across portions of the upper Midwest along with a wetter extended weather forecast for the region extended Monday's losses. Early weakness saw December spike below initial support marked by the 10-day moving average before a short covering rally ahead of the close tempered early session losses. The mid-range close sets the stage for a steady opening when Wednesday's night session begins trading. Stochastics and the RSI are overbought and are turning neutral to bearish warning bulls that a pause or setback is possible near-term. Closes below the 20-day moving average crossing at 448.90 would confirm that a short-term top has been posted. If December extends this year's rally into uncharted territory, upside targets will be hard to project. First resistance is Monday's high crossing at 509.80. First support is the 20-day moving average crossing at 448.90. Second support is the reaction low crossing at 433.00.

December soybean oil closed down 225-pts. at 52.33. December soybean closed sharply lower due to spillover weakness from soybeans, soybean meal on Tuesday and below key support marked by the 20-day moving average crossing at 54.07. Today's close below the 20-day moving average crossing at 54.07 confirms that a short-term top has been posted while opening the door for a larger-degree decline into early-August. The low-range close sets the stage for a steady to lower opening when Wednesday's night session begins trading. Stochastics and the RSI are bearish signaling that additional weakness is possible near-term. Closes above the 10-day moving average crossing at 54.60 are needed to temper the near-term bearish outlook. First resistance is the 10-day moving average crossing at 54.60. Second resistance is the reaction high crossing at 56.00. First support is today's low crossing at 52.12. Second support is the reaction low crossing at 51.36.