Tim Hannagan's Weekly Grain Report for September 6th, 2013
Sep 09, 2013
This is Tim Hannagan and this is Friday, September 6, 2013
Beans garnered all the attention this week. Beans are the last crop in key yield development time. We started the short weak pricing in the weather by hitting Major chart resistance. Tuesday’s high was 14.08, the prior week's was 14.09 and the high in September last year was 14.08.
Funds with profits took them as they always do pricing in the weather to start the week and going to the bank and paying out those bonuses to their fund managers. Profit taking was predictable and Thursday’s low as well at 13.35 which was the bottom of the gap left from August 23.
Now that the technical cycle for beans is complete what’s next? Weather remains an important pricing factor to start next week, but next Thursday’s big USDA monthly crop report trumps weather. Even if beans start Sunday night off higher we can expect normal profit taking into turnaround Tuesday giving us a buying opportunity prior the big crop report. If rain is in the forecast and we start off lower that would be a buying opportunity as well. Large trading funds never carry a weather trade into a crop report. They always liquidate and re-position as each speculative event has a different risk objective. No one will want to be short going into that report and the majority of heavy speculators surely will buy as well.
The condition report for beans indicated the market always trades on fear before fact and there’s lots of fear in this report to lead a rally prior to its release. The first week of August bean crop condition was reported at 64% good to excellent. This week’s report indicated 54% good to excellent. That’s down 4% from the prior week, 2% below the 10 year average and 10% lower for the month. These lower condition ratings should have traders thinking that the government, using its own numbers should lower yields and production. The last USDA report estimated yield at 42.6 bushels per acre. The fourth driest August on record was 2003. Yield was 33.9 bushels per acre. The fifth driest August on record was 2008 which yielded 39.7 bushels per acre. The current crop condition number is 7% under the 2008 rating. This August looks to be the driest on record for the Midwest. The 10 driest Augusts saw yield decrease 6.4% during key development time. Fear is the USDA could report a yield below 41 bushels per acre, bringing ending stocks to below 100 million bushels. Last year’s 125 million bushel ending stocks saw beans rally to record high prices. The August 15 release of crop Insurance claims showed 1.691 million acres of beans were claimed for insurance. This should cause shorts to liquidate positions and draw in speculators. Will the USDA take it off the top of production or harvested acres? Perhaps it may not show up until the next report.
The demand side of the market might show up in this month’s report as well. Export sales for soybeans in July were 2.696 million metric tons and 4.704 in August. Clearly next week is set up to buy dips.
Just a note, don’t forget to go to the Walsh web site each day for my audio grain report generally up by 9:00 AM central time for updates on each and every issue we discuss in reports and issues most important as we enter the new marketing day.
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.