BEANS: Trend following funds liked the tenor of things and increased their long positions, trading with the commercials. Both remain long against the small speculators who carry the burden of short. If we experience any sort of major growing season problems, beans will move to $15 rather quickly. I doubt they will stay there more than a few days, perhaps only one or two, as commercials and, I hope, every soy farmer in this country, get short. Wednesday’s report was not thought to be friendly to bean oil, but bean meal saw voting for increasing prices from both specs and funds. For now, July beans should be expected to hang out between 920 and 980. 890 remains the buyer of last resort and technical selling should show up big time around 1070, a price we will worry about downstream from now.
CORN: Small specs got a little shorter after the report, while funds nearly halved their longs, trading them to commercials. Thursday’s activity was not friendly to the long side, either. 330 should provide major buying; if not, prices will drop considerably, according to standard theory. I can’t see why corn would be heavily sold during the growing season, so I’ll not be in a rush to get short, should we see 325 to 320 during the next few months. On the other side, a trip to 425 would be technically easy. From 440 to 485 should be a seesaw battle and above $5 becomes “Katy, Bar the Door!” It will take some ugly weather indeed to get above $5 from here.
WHEAT: Oh, Dear! Wednesday was either not friendly at all or entirely too friendly to wheat. Prices below 458, as they are, is not at all good for wheat bulls, something acknowledged by the funds who added 86,000 contracts to their short position. The commercials decided they knew a bargain when they saw one and added 85,000 contracts to their long positions. The other 1,000 contracts were donated by small specs. The thing to keep in mind here is the trend following funds are often shortest at the bottom and the commercials almost always have maximum exposure then. Technically, this could well be a test of lows leading to a useful rally. It would not be unreasonable to speculate from the long side in wheat once we see a little motion up. I prefer long beans to other positions, however.
The coming two weeks will provide useful technical evidence about the direction of prices for the following three months, particularly in corn and wheat. A breakdown in beans, which I think unlikely, would be a watershed event. More likely, we will see if wheat has made its low for the year, and whether corn is expected to rally substantially this year. My guesses (underlined and italicize “guesses”) are that wheat’s bottom is in the making and that corn won’t experience a major bull market this year.