Thursday AM Grain Update
Dec 06, 2012
The January soybean contract traded its highest level since November 9th overnight. Some resistance should come into play near the $15.00 area, which marks a psychological number that coincides with the 50-day moving average. The January bean chart is now "overbought" from a technical standpoint. Corn and wheat played along yesterday but could not find follow-through buyers overnight. The beans have been the only contract in the grain complex that has seen any real volatility during the past couple of months. Despite excessive rains in Argentina, the country will see a 5-7 day drying period beginning on Friday. Some are pinning the current rally in the beans on South American weather, which is not perfect but is "good enough" in our opinion. Many traders are looking for this morning’s Export Sales report to indicate big sales to China for the current marketing year, which could require further demand rationing in the eyes of some analysts and traders.
The USDA will release their Export Sales report this morning at 7:30am CST. Pre-report estimates as follows:
· Corn 300,000 – 500,000mt
· Soybeans 450,000 – 750,000mt
· Wheat 300,000 – 450,000mt
Brazilian government sources estimated 12/13 soybean production at 82.6mmt vs. last month’s estimate of 80.1 – 81.3mmt and 66.5mmt last year. Corn production was estimated at 71.9mmt vs. last month’s range of 71.6 – 72.9mmt and 73.0mmt last year. The soybean number in particular is quite a bit higher than estimates provided by private crop scouts and agronomists during the past few weeks. Most sources in Brazil believe that the potential for a huge crop remains intact despite some weather issues.
EIA reported weekly ethanol production at 835,000bpd, up 31,000 from last week. Stocks were reported at 19.3mil/bar, up 1.0mil on the week.
Outside markets are mostly mixed this morning. Equity futures are marginally lower along with metals and the Euro currency. US initial and continuing jobless claims data will be released this morning at 7:30am CST. Analysts expect initial claims to fall by 18,000 to around 375,000. More importantly, November unemployment data will be released tomorrow at 7:30am CST. The consensus unemployment rate is 8.0% vs. 7.9% last month. Non-farm payrolls are expected to rise by 80,000 vs. 171,000 last month and 148,000 in September. The European Central Bank held their benchmark interest rate at .75% this morning. The current rate is a record low but was widely expected by analysts. ECB Preside Draghi will brief reporters this afternoon regarding the decision.
The bean market has certainly gained some upside momentum during the past several sessions. The old-crop rally has opened the doors to opportunities in new crop 2013 contract this week. December ’13 corn and November ’13 soybeans are trading their highest levels in weeks. Although we understand the fear of pricing grain under a potentially higher crop insurance level, we recall last spring’s scenario in which new crop contract leaked lower until a weather problem was imminent. Corn acreage in the US will likely be record high in 2013. One good production year will push prices to sharply lower levels in our opinion. We have no opinion on the Dec ’13 corn market at this point; however risk and margins must be identified.
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