Tim Hannagan’s Weekly Grain Report 09/13/13
Sep 12, 2013
Tim Hannagan’s Weekly Grain Report 09/13/13
This is Tim Hannagan its Friday September 13. Lets address the demand side of the market first. Our weekly export sales report came out at 7:30 AM central time Thursday, telling us how much of each grain was sold for future shipment. Wheat sales were 543,000 metric tons down 19% from the previous week and 10% under the four week average. We need 800,000 metric tons are more to be bullish and move futures prices higher. Brazil was in for 210,000 metric tons and purchasing for the eighth consecutive week. The drought in Argentina hurt their wheat not allowing them to be the usual supplier to Brazil. All the other players were in for small lots of feed quality wheat at a 80 cent discount to high quality milling wheat. Absent from the list was Egypt, the world’s largest monthly buyer of wheat. Egypt has been in the world market buying the last three weeks for five large purchases of wheat all coming from the black sea region, Ukraine and Romania. We still believe it’s political as to their absence from the U.S. market. Wheat demand from the U.S. should not be expected to pick up to any measurable amount for another three or four weeks when foreign ports are out of their export commitments. Corn sales were 332,000 metric tons in the new marketing year which began September 1st. The drought in Mexico had them in for 181 of the total with one of our largest buyers Japan in for 44. They usually purchase 250 to 350. There were several decreases where countries cancelled previous orders and switched from our port to foreign port selling wheat cheaper. It’s clear that importers are waiting for new harvest low prices of corn before coming in to buy and this includes China which has been absent from the market three of the last four weeks. Soybean sales were 478,000 metric tons with China in for 205 of the total. This was the smallest Chinese purchase in the last month but its commonplace the week before a big crop report such as this week that importers like China back away and wait to see if there are any changes on the report before they re-enter.
All the excitement Thursday was about the USDA monthly crop production report. The corn report was largely bearish. Corn production was put at 13.843 b.b. up from the August report of 13.783. Corns ending stocks for the new marketing year grew to 1.855 b.b. 18 m.b. over the month prior. The production and ending stocks numbers with demand slow had corn lower on the day. Corn would have doubled its losses if not for the strength in beans. The excitement in the market came with soybeans. Soybean production was put at 3.149 , 106 m.b. lower than the month prior but it was ending stocks at dangerously low 150 million bushels vs. the two months prior of 220 million and 295 million that had beans up over 30¢ on the day. Note, it was last years 125 m.b. ending stocks that led to a move to record high prices for soybeans. 8% of the soybean crop is still in early pod development into months end and with cooler wetter conditions called for and lack of heating degree days, traders believes that part of the crop will not see improved yields, but lower yields. It’s sets up the October report to once again show lower production and possibly lower ending stocks. There are three issues into next week that are going to limit any gains in corn wheat and soybeans. One, weather through the end of the month is expected to be cooler and wetter taking away the Sunday- Monday rallies from high heat and dryness the market has seen up to this point. We also don’t have another crop report coming to be feared bullish for a month. And finally September seasonally is a down month as farmers clean out the bins of remaining old crop grain lowering cash prices and futures to make room for the new crop. But first things first, soybeans need to conclude the bullish bias of this report. Upside resistance for new crop November soybeans is 14.08. A close over sets up 14.25 as the next area of resistance and then 14.50, as a best case scenario off the report results. Failure to close over 14.08 the market looks to move to 13.35 then possibly 12.85 as harvest gets underway. December new crop corn has strong resistance 4.74. A close over and 4.94 is next. If 4.74 holds we should expect a move to 4.46 with worst case scenario 4.24. December wheat support remains 6.40 with a close under setting up 6.20. Minor resistance is 6.52 and major resistance 6.70. A close over 6.70 with end the bear trend we have been in since March. Don’t forget to go to the Walsh web page for my daily audio update on the days news for grains.
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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.