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.
Tim Hannagan’s All American Grain Report
Oct 25, 2013
Tim Hannagan’s Weekly Grain Report
This is Tim Hannagan its Friday, October 25. The first report of the week was the Weekly Export Inspection Report Monday at 10:00 AM Central time. Corn inspected for near-term export was 32.2 million bushels vs. 22.2 the week prior, and four week average of 21. It’s normal for demand to pick up at harvest time but this was measurable. Traders are wondering if China is coming in to buy corn like they have been buying beans. Thinking has been with talk of better than expected yields, there’s one more new low price to come before China and other importers pile in. This 18 million bushels bought by China is a red flag and China’s buying needs to be watched closely now. It’s cheaper for Chinese corn users to buy U.S. corn than Chinese corn stocks. There are areas where corn is 6 to 8 dollars per bushel in China.
Bean inspections were 59.3 million bushels versus. 47 the week prior and four week average of 27. Of the 59.3 million bushels, China was in for 45.3 of the total. For September China’s average weekly inspection purchase was 4.6. China is piling up purchases on two fronts. One, it’s harvest time and the U.S. is the only world port selling beans until South American crops come in next February. Two, and maybe the most important reason, the drought conditions occurring in Argentina. Argentina is the world’s third largest bean producer exporter and number one exporter of soymeal and soyoil. WXRISK.com the weather site has Argentina dry all this past week thru into Sunday. Longer-term models suggest a very hot and dry Argentina the first two weeks of November.
Wheat inspections were 20.5 million bushels vs. 27.2 the week prior, and four week average of 32. China was in for 8 million bushels compared to their September average of 10 million bushels. Brazil was in for 4 million bushels vs. their September average of 6. Big buyers of large tonnage of wheat for human consumption stepped back. Buyers of feed quality wheat are disappearing as it’s too expensive to blend wheat into the feed ration now. December corn is 2.60 under December wheat. For it to be cost effective the wheat corn/ spread needs to be 1.05 or less wheat over corn. We look for demand to continue to pick up in November and December as Argentina shuts down their wheat export market, forcing Brazil to increase U.S. purchases. Additionally, China’s drought in its primary wheat regions still prevails. U.S. wheat is becoming more price competitive with the European Union wheat as well. The only problem is the number one world wheat buyer Egypt continues to boycott U.S. Wheat, as we’re still banning gun sales to them as their internal strife continues.
Monday’s 3:00 PM central time crop condition report was our first since September 30th. Bean condition improved to 57% good to excellent condition vs. 53% 21 days ago. Every key Midwest producer improved. Corn condition was 60% good to excellent condition vs. 55% on September 30. Like beans, corn also saw every key Midwest producer increase. Harvest was in line with expectations with corn 39% and beans 63%. The better condition number will further talk of bigger production increases on the November 8 USDA monthly crop report.
Corn and beans have dropped appreciably since the last report Sept. 11. If the November report comes in as bearish as expected, its low price results will be a harvest season low followed by a demand driven market. With corn demand not yet bullish enough to drive prices up on its own, corn may yet make another new low as the November 8 report gives cause. Beans are unlikely to take out the 11.65 low as harvest will be over before November 8. Without weekly harvest results to sell, traders will only have the strong export pace to trade. The report day break won’t last and should be a great buying opportunity.
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