This is Tim Hannagan it is Friday, November 22nd. So where is the corn demand? It appears to be simmering under the shadow of a historic soybean export pace. Corn can wait as corn can be bought on many foreign ports year round. Beans have only one port of origin in the world to buy from, and that is the United States. That is at least until South America's crops come in February.
Mondays weekly export inspection report showed 30.2 million bushels of corn was shipped the last week versus 17 million the week prior. China was in for 20.5 of the total versus 5.3, 7.2 and 3.2 million bushels the three prior weeks. It shows China sees value and need but it is far from the 76 million bushels China bought of soybeans. Thursday's weekly export sales report showed 945 thousand metric tons of corn was sold for future shipments down from 1.2 million metric tons the week prior. China was in for 321 total metric tons of the total, versus 115 the week prior. China bought 1.152 m.m.t. of beans. Again, demand is simmering but not surging. News for future demand is heating up. The International Grain Council estimated China's corn imports in 2013/14 marketing year will be more than double the year prior. World demand is to rise 6% while the US usage increases 30%. Chinese prices in many areas are double of those in the US making it is reasonable for them to enter the US market to buy reserves as needed. Demand is coming in a big way for Corn but not until China's soybean binge is over.
Wheat strength comes from two fronts. The first is technical. December wheat has declined $.70 the last five weeks yet, it's holding a range of 6.40 to 6.58 the last 15 days. The second, demand has been soft during that period but that will change soon. While U.S. prices have declined, prices have risen in the export countries of Australia, France, Russia, Ukraine and Argentina. The Argentine grain exchange estimated production this year at 9.1 million tons versus the U.S. estimate of 11 million tons. This is only fractionally higher than last year's crop that forced them to suspend exports. The International Grain Council estimates Chinese will import 7.2 million tons of wheat the most in 23 years as their crop goes dormant with 40% of their wheat area in severe drought. The U. S. is China's closest wheat port for imports.
The story for Soybeans is when will China slow or stop their ravenous bean appetite. Total bean sales for future shipment are at 90% of the USDA 2013/14 export projection. The export season began September 1st. There are only three ports worldwide to buy beans and that's the U.S., Brazil, and Argentina. Brazil is sold out; Argentina has stopped sales leaving only the U.S. soybeans until South America comes online next spring. China is overbooking to some degree as protection against higher prices should Brazil have crop problems in January and February, which are their key production months. If China is going to cancel previous U.S. purchases, it shouldn't happen until after January 15th. The reason is over half the crop is being planted late with early harvest normally in late January now coming mid February. Assurance of good weather to produce record production will not be realized until mid-January. This should keep exports strong until then. Next week we have month-end and a shortened holiday week with normal grain hours Wednesday, closed Thursday, and with shortened hours Friday with a 12 central time close. Technical's read like this. December corn support is 4.18 resistance 4.36 then 4.50. Soybeans support is 13.10 then 12.85 with resistance at 13.30 then 13.65. December wheat support is 6.44 then 6.38. Resistance is 6.60 then 6.72. The common thinking in the market is wheat and corn held by trend following funds will cover more of their near record short positions by buying them back next week balancing risk in the short holiday week and month end closing.
Please visit www.walshtrading.com to hear my daily audio commentaries and view my most recent webinar recordings. If you were unable to join us yesterday, or would like to View a Recording of my 11/212013 Weekly Grain Webinar, it is available now.
By Tim Hannagan
Senior Grain Analyst, Walsh Trading, Inc.
312-957-8108 or 888.391.7894
RISK DISCLOSURE: THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES AND OPTIONS TRADING. THIS REPORT IS A SOLICITATION FOR ENTERING A DERIVATIVES TRANSACTION AND ALL TRANSACTIONS INCLUDE A SUBSTANTIAL RISK OF LOSS. THE USE OF A STOP-LOSS ORDER MAY NOT NECESSARILY LIMIT YOUR LOSS TO THE INTENDED AMOUNT. WHILE CURRENT EVENTS, MARKET ANNOUNCEMENTS AND SEASONAL FACTORS ARE TYPICALLY BUILT INTO FUTURES PRICES, A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES AND OPTIONS CONTRACTS.