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November 2013 Archive for The Grain Report

RSS By: Sean Lusk, AgWeb.com

Market updates from Walsh Trading.

Tim Hannagan's All American Grain Report November 22, 2013

Nov 22, 2013

 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
email: thannagan@walshtrading.com 

 

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.

Tim Hannagan's All American Grain Report November 14, 2013

Nov 14, 2013

 This is Tim Hannagan it is Thursday, November 14th. Let's take a look at last week's crop report and see if we can uncover some hidden clues to eventual market directions. For corn the USDA estimated production at 13.989 billion bushels, which was 146 million bushels over the September USDA report. Yield came in at 160.4 bushels per acre, up 5 bushels per acre from September's report. The production number was closer to the low end of pre-report trade estimates. Traders initially feared that the report could come in over the high-end of estimates. This had the ending stocks, to be left over come the end of the marketing year September 1, 2014 at 1.883 b.b. only 32 m.b. over what was reported in September. The trade had feared stocks coming in well over 2 billion bushels. Now, should our next report further increase production, we could see 2 billion bushels ending stocks or more. What is not being discussed is the fact that Chinese production and imports numbers were left unchanged. Yet, the last 60 days have shown production problems in China's corn regions. China's last corn production estimate was 215 million metric tons, with the USDA projecting 211, and field surveys at 190 million metric tons due to weather problems. Their projected usage is 220 million metric tons. If China imports half the difference between low-end production and usage, we will export an additional 450 million bushels, putting our ending stocks at 1.350 or lower. The eventual Chinese business will more than offset any further production increases in the United States.

 

Soybean production was estimated at 3.258 b.b. up 108 m.b. over September and 43 m.b. over pre-report trade estimates. The yield was 43.2 versus 41.2. It looked bearish until the carryover or ending stocks came out at 170 m.b. only 20 m.b. over September. Current export sales are at 87% of the USDA forecast for the 2013/14 marketing year versus the five-year average of 58%. We only need to sell 114 thousand metric tons weekly to meet the USDA forecast. The four week average is 1.417 m.m.t. Clearly the USDA has underestimated demand. The trade sees 170 million bushels stocks as the USDA high-end estimate as they never come in low. This means it's more probable than not that soybean ending stocks will decline.

 

Entering Friday technical's read like this. January beans support is 13.10 then 12.85. Resistance at 13.30 then 13.65. December corn support is 4.25 then 4.20 with resistance at 4.36 then 4.50. December wheat support lies at 6.44 then 6.38 with resistance at 6.60 and 6.72. Just a note I will be holding a grain webinar at 3 PM central time Friday. You can attend live by going to the Walsh website at

www.walshtrading.com or listen to the recorded version at your convenience.

 

By Tim Hannagan

Senior Grain Analyst, Walsh Trading, Inc.
312-957-8108 or 888.391.7894
email: thannagan@walshtrading.com 

 

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.

Tim Hannagan's All American Grain Report November 7, 2013

Nov 07, 2013

This is Tim Hannagan its Thursday, November 7.  On Friday, November 8, the USDA will release its monthly crop report.  This report shouldn’t be viewed as the normal monthly report because it will combine two months of data instead of the usual one month amount from The USDA. This report includes crop data from September and October.  If it was for February and March when grains were locked up on the farm for a long winter’s nap, we would expect only marginal adjustments.  But with crops planted late, September and October were instead growing months, lending thought that the market may be in for a large adjustment from the last report September 9th.  In July and August there was much talk of lower yields due to late planting dates, fewer growing degree days, lack of sunlight  due an excess cloud coverage, and a hotter and drier than normal August.  Then the worm turned.  A crop tour noted much higher than expected yields, bigger ears of corn and more fuller, as well as many more pods on each bean plant than the year prior.  The talk was bio-genetic seeds won over the uneven growing weather.  As the September and October harvest rolled along, the talk in almost every Midwest state was yields looked better than earlier road side observations.  This has led to bearish pre-report trade estimates.  Corn’s average production estimate was 14.029 billion bushels vs. the last report in September of 13.043.  The ranges of estimates are 13.734 – 14.330. Yield was put at 159.2 vs. 155.3.  Additionally, harvested acres are estimated to drop off one million acres to 88.0.


Soybean production estimates are 3.215 billion bushels vs. 3.149 with a range of 3.123 – 3.298.  Yield is at 42.3 vs. 41.2 with harvested acres down one million acres at 75.8.  The ending stocks look to increase with production.  Corn stocks come the end of the 2013/14 marketing year September 1st are put at 2.044 billion bushels vs. 1.855 in September and 719 million bushels the year prior.  The range is wide at 1.799 - 2.344.  Beans are pegged at 177 million bushels vs. 150 in September and 125 last year.  The range is  145 - 240.  Wheat looks friendly at 529 million bushels vs. 561 and a range of 380 - 580.  Based on production estimates the corn ending stocks look right as corn demand has not yet ignited.  Bean stocks look tight as analysts see higher export numbers offsetting much of the higher production.  The big surprise in the report would be that production numbers for corn and beans come in lower than expected.  This is possible if the prior closing of the USDA has them not yet caught up.  Then the December report will give a more final production estimate.

An overly bearish soybean report could see soybeans extend its correction beyond report day as prices are still too high. However corn has been dropping since February and by most opinions is oversold.  Should the Friday crop report come out with overly bearish numbers, we should expect a sharp break that day.  The report is the last bearish supply side report of the year, and then demand becomes our pricing source.  With trend following funds holding a record short position to buy back, we are set up to put in a harvest low price report day and a great trade opportunity.  Note, corn has a 40 cent limit that seems to be hit on report day.  Option traders looking for a potential low risk trade on report day may consider this.  For corn, buy December 4.00 puts and buy December 4.50 calls for 4.4 cents or $225.0 in cash value plus commissions and fees.  This is a volatility trade to take off one side should a surprise move arise. For beans, buy the December 12.10 puts and buy the 13.40 calls for 10¢ or $500 plus commissions and fees.  Beans have a 70¢ limit daily.  Note, I am holding grain webinars every Thursday at 3:00 central time, just go to www.walshtrading.com to get the link for free admission.

Tim Hannagan

Grain Analyst, Walsh Trading

thannagan@walshtrading.com

888 - 391 - 7894

312 - 957 - 8108

 

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Tim Hannagan's All American Grain Report

Nov 05, 2013

This is Tim Hannagan its Friday, November 1.  Our first report of the week was our weekly export inspection report that came out Monday 10:00 AM central time.  The highlight was that 83 million bushels of soybeans were inspected and loaded on ships heading to importers.  China was in for 61 of the total . This was over last week's 59.8 million bushels with China in for 45.  China continues to buy with both hands.  There are only three ports of origin to buy beans from in the world and that is the United States, Brazil, and Argentina.  With South America planting and the U.S. harvesting, the U.S. is the only port for delivery of large quantities right now.  Our next demand side report came out Thursday at 7:30 AM central time with our weekly export sales report.  The government was playing catch up and gave export sales numbers for the week of October 10th, October 17th, and October 24th.  The three week total for wheat was 1.3 million metric tons with a three week average of 476 thousand metric tons.   Egypt and China were absent from the report and Brazil's average was 110 each week, far under expectations.  Wheat demand has been slowing for the last three weeks now, however cumulative wheat sales are 10% over the five year average.  If wheat is going to challenge its 7.04 resistance we need demand to return and that will come if Argentina for the second consecutive year suspends exports of wheat forcing Brazil to double up on U.S. purchases.  Additionally, Australia's crop appears to be far worse than thought, possibly lowering their production sharply sending importers to U.S. ports.

Corn export sales were 4.5 million metric tons for a 1.5 million metric ton average for the last three weeks.  Mexico, Japan and China were all big players in the market.  Corn sales are 10% over the five year average.  Pre-report trade estimates were only looking for 1.8 million metric tons, so the report day rally was sold as traders are focused on supply side fundamentals ahead of the November 8th USDA crop report.  But corn demand is simmering under the surface.  This week South Korea made its first corn purchase from the U.S. in 16 months as U.S. prices fell below competitors Brazil and the Ukraine.  Black sea corn values are now 5¢ a bushel over U.S. values.  This is vastly different than this past summer when Brazil and the Black Sea Corn was priced 50 to 60 cents a bushel cheaper than U.S. corn. Corn is becoming price competitive in the world and the next leg down on prices may come off the November 8th crop report putting in a harvest low price and trigger buying.  Soybean exports were 4.7 million metric tons with China in for 2.1 of the total and a three week average of 1.580 million metric tons.  China is making sizable purchases in soybeans and taking delivery, potentially leaving no room for future cancellations. Additionally Russia was in for 270 thousand metric tons of the 4.7 million metric ton total and this is the second week consecutively with Russia in buying beans after a 10 year absence.  Trading next week will be guided by the perception of what the November 8th USDA monthly crop report will say.  The October report was canceled so the government is adding up all the statistics from September and October.  Pre report thinking is that yields, production, and ending stocks will come in higher for corn and beans and that the report will be measurably bearish.  The wildcard is if the gov't is not caught up from being closed during much of October and ends up surprising the market by not being as bearish as anticipated.  Should the government actually be caught up and the report comes out bearish as the trade is anticipating, it should end up being the last bearish supply side report of the year.  We then become a demand driven market.  So we should expect a low next Friday that will hold going into the end of the year.  Technicals for next week read like this.  Support on December corn is 4.14, resistance 4.38 then 4.46.  November beans support is 12.60 with resistance at 13.05 then 13.30. A close under 12.60 and 12.15 is next.  December wheat has support at 6.58 then 6.50, resistance 6.74 then 6.80. Don't miss my regular Thursday grain webinars that start every Thursday afternoon at 3pm central. Please send me an email or call me to be sent a sign up link for the webinars. If you cannot attend live, we can send you a recording.

By Tim Hannagan
Senior Grain Analyst, Walsh Trading, Inc.
312-957-8108 or 888.391.7894
email: 
thannagan@walshtrading.com 

 

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.

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