Tim Hannagan's Grain Report for Jauary 23, 2014
Jan 23, 2014
Tim Hannagan’s Weekly Grain Report
This is Tim Hannagan Thursday January 23rd. Tuesday’s weekly export inspection report showed 29.8 million bushels of corn was inspected and shipped last week. This was up from the week prior at 20.9 and the four week average of 21. Most went to Latin America, Mexico and Japan but key world player China was in for only 1 million bushel. Clearly the Chinese are backing away as U.S. cargo ships continue to be rejected due to unauthorized biogenetic grain upon inspections at Chinese ports. Without China in buying we can’t get inspection numbers high enough to be bullish for prices from a demand perspective. Best case scenario for a rally would come from trend following funds still holding a short position of 153 thousand contracts, and with month end next week, they may take profits. Additionally index funds added 60 thousand longs to their big long position last week, suggesting corn breaks are limited and will be bought by them. If weak demand wins out we will take out our 4.20 support and push to 4.06, our old low basis March futures. If 4.20 holds, trend funds covering shorts and index funds buying could have us test resistance at 4.40 before month end.
On soybeans, though the inspections report came in high at 56 million bushels shipped showing demand therefore is still running good; soybeans are more focused on weather now as the majority of crops are in key yield development time through mid February in South America. As I noted on my weekly report last Friday, traders will go home ahead of the three day holiday short beans as Argentina and Brazil looked to get ample rain Sunday through Tuesday. They were right and got a bonus because we started Tuesday with a look at the 1 to 5 and 6 to 10 day weather outlook and saw more rain for Argentina where they recently had been dry. This pushed beans down over 30¢. Short covering Wednesday brought March beans back up to 12.96 just shy of chart resistance at 13.00. Then new selling entered as traders see next week’s South American weather as bearish. We should expect a test of March bean support at 12.60 early next week off favorable South American weather and talk of China turning to Brazil’s ports for future delivery, slowing U.S. exports. Support under 12.60 is 12.30. Brazil’s beans currently sell $30 per ton under U.S. prices. For beans to take out 13.00 it would take a change in the weather to hot and dry. So trade one weather report at a time as weather in South America determines U.S. demand through February. For wheat, last Friday on my report I said when we return Tuesday wheat funds with profits would have nine trading days in the month left to take them and pay bonuses on profits taken before month’s end. Friday’s 5.62 low on March, was 60 cents off the month’s high. I suggested profit taking would occur off our previous 5.60 low area or major chart support at 5.50. With a 5.60.5 low Tuesday and Wednesday we saw short covering to 5.78, 2¢ from our 5.80 chart resistance. It will take a close over 5.80 to trigger more short covering with 5.94 as next resistance. It’s possible with more sub zero freezing temperatures to start the week and talk of winter kill on wheat. But demand remains weak with the U.S. getting the smallest export totals of recent big world buys. A close under 5.60 now sets up 5.46 as next support.
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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