Grain and Livestock Outlook
Walsh Trading Commercial Hedging Service is dedicated to providing timely, relevant and quality information. Tim Hannagan, our Senior Grain Analyst provides a weekly Grain Report. Tim has been ranked the #1 grain analyst in the United States per Reuters and Bloomberg for his most accurate price predictions for soybeans and corn in the years 2011 and 2012. Additionally, Mike Bauer, our Senior Livestock Analyst and Ben DiCostanzo, our Senior Technical Analyst provide frequent insights into the Livestock market. Finally, Sean Lusk and John Weyer, Co-Directors of Walsh Commercial Hedging Services provide a variety of insights into the Grain markets.
The Grain Report August 2 2013
Aug 02, 2013
By Tim Hannagan, Grain Specialist for Walsh Trading, Inc.
Our first report of the week was the weekly export inspection report. It tells us how much of each grain was inspected by the USDA for near-term shipment. This grain generally is shipped within 30 days. Corn inspected for near-term export came in at 11 million bushels. Up from 9.9 the week prior and 9.7 on the four week average. We need 28 million bushels weekly to be bullish and push futures up. Big world corn buyer China was in for 0.189 of the total, not even 1 million bushels. They await new crop delivery dates after the harvest for better value. Corn demand remains bearish near-term and we look for this bearish pattern to exist thru August. Bean inspections were 1.3 million bushels. vs. 3.9 on the week prior and four week of 3.1. China the world’s biggest bean importer was in for .052 of the total. Like corn, China too awaits new crop delivery and beans at better value. Wheat inspections were 25.3 million bushels. up from 24.1 the week prior and four week average of 21.7. The wheat marketing year began June 1 and currently showed the shipment pace at 17.3% of the USDA estimates for the year vs. the five year average of 15%. The increased demand suggest the USDA may be low on its export forecast and traders will look for an increase in exports projections on the August 25 USDA monthly crop report. Our next demand based report was Thursday at 7:30 AM central time with our weekly export sales report showing exports for old crop shipment and new crop shipment year. Wheat exports were 596 thousand metric tonnes, down 10% from the previous week and 36% under the four week average. Egypt the world’s largest weekly and monthly importer of wheat in the world was absent from the buying list. Earlier this week Egypt’s grain authority announced its fourth purchase of the month in July at 240 total metric tonnes. Romania and the Ukraine brought the monthly total to 960 total metric tonnes. The problem was not a teaspoon of U.S. wheat was purchased. Even with this bearish weekly report that pushed wheat down 11¢ on the day in early trading, we remain over last year’s pace on demand. Old crop corn exports were 134 total metric tonnes. And below the four week average of 187. Five countries canceled previous shipments offsetting any new crop shipments that arose. Importing countries are awaiting new crop delivery early this fall with the possibility of a record corn crop and possibly a doubling or tripling of our ending stocks. New crop corn exports for shipment after September 1 came in at 1.091 million metric tons. Mexico’s drought had them in for 393 metric tonnes of the total with China purchasing 208 and an n unknown destination 302. Unknown is considered to be China. The problem with the better new crop sales they become lost in the translation. The shipment dates are spread out over 12 months and come with expectations of a record crop and larger ending stocks inventories. Funds trade what is current and the old crop sales are bearish. Soybean old crop sales were 78 metric tonnes down 39% from the previous week while new crop sales were 1.030 million metric tons with China in for 558 metric tonnes of the total. We had an unknown destination with302 and that means China as well. In conclusion the weekly export inspection and export sales report suggests a bearish pricing situation for corn and beans and more neutral to slightly friendly for wheat. Monday’s 3:00 PM crop condition report came in as a small surprise to the trade. Corn’s crop rating was 63% in good to excellent condition unchanged from the week prior as traders had expected a 2 or 3% increase due to cooler wetter conditions the week prior. Corn’s initial reaction was 5¢ higher on the overnight followed by a 10 to 12¢ declining as we headed into mid-session Tuesday. Reasons, this year’s good to excellent crop rating is 39 percentage points higher than last year’s drought stricken crop and two percentage points above the 10 year average as well as the 13th highest in the past 27 years for this date. The eastern grain belt average came in at 73% good-excellent and western grain belt 55%. But the trade sees the 2% better average than the 10 year as reason to believe were still on track for trend line yields. Unless the crop condition number declines under the 10 year average, we have to expect the USDA to continue to beef up its estimates for this year’s yield and production on its crop progress reports. Soybean conditions came in at 63% in good to excellent condition down 1% from the week prior and 4% over the 10 year average. Good-excellent crop rating was 34% above last year’s drought stricken crop, 4 percentage points above the 10 year average and the 10th highest in the last 27 years for this date After opening 5¢ higher on the overnight Monday they were trading 12 to 15 lower by mid-session Tuesday. Like corn, we can’t expect the governmental to lower yields or production on its monthly reports unless condition numbers begin to come in under the 10 year average. WXRISK.com the grain weather site sees the 6 to 10 day forecast as normal to above normal rainfall and cooler conditions across the Midwest grain belt. If this weather forecast holds true over the weekend it might suggest that we’re going to have lower prices Sunday night into Monday. Thursdays lower grain closes meant the sixth consecutive month in which we started the month lower but note that five of the last six months we ended up trending higher into the monthly USDA crop report. Than next report is Monday August 12. This could mean that a lower trade to price in the weather Sunday and Monday could hold as bottom support going into the crop report, followed by short covering as the shorts will have the profit therefore the risk to protect on report day uncertainty.
You can contact Tim Hannagan at 312-957-8108 or 888-391-7894 or email him at firstname.lastname@example.org. Please visit our website at www.walshtrading.com for additional market insights and special reports.
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.