The Grain Report by Tim Hannagan for August 30, 2013
Aug 30, 2013
By Tim Hannagan, Grain Specialist at Walsh Trading, Inc. Tim has more than 37 years of experience in commodity markets and is a nationally recognized expert on the grain markets.
On Thursday our weekly export sales report came out showing wheat exports last week at 551,000 metric tons up 12% from the week prior but down 4% from the four week average. We need 850,000 thousand metric tons to be bullish each week and take prices higher. Mexico was in as their drought has them filling needs buying a lot of wheat and corn and Brazil was in for the ninth consecutive week after bad weather in Argentina's wheat growing regions has them unable to fulfill needs from Brazil. Missing was number one world wheat buyer Egypt. As I noted prior we don't expect them any time soon as our political differences have them buying elsewhere. Egypt the this week purchased five cargoes of wheat from Romania, Ukraine and Russia at a price of $22.00 per ton less than U.S. posted prices. Were about 30 days from the European Union being sold out and the U.S. moving into a primary port position to move wheat to the world. New crop corn sales for delivery after September 1 the beginning of the new marketing year was 673,000 metric tons. Mexico was in for 317,000 and regular U.S. wheat corn buyer Japan in for 138,000 metric tons of the total. We need 850,000 sold weekly to hold prices steady in the futures market and 1.1 million metric tons or more to push prices higher. Missing from the list was China, as they were more active buying beans and sitting back waiting for hopefully harvest low prices before purchasing corn from the U.S.
Soybean exports for delivery after September 1 were 868,000 metric tons with 404,000 to an unknown destination. Unknown is spelled CHINA. Additionally China purchased 229,000 metric tons for a 635,000 metric ton total. Bean yearly exports are at 50% of the USDA forecast vs. the five year average of 31%. It is clear the USDA is underestimating export sales that currently are running at a record pace. The sales are lower than the the two prior weeks but there still very good and show a strong demand base. Note, we just rallied 2.50 per bushel the last three weeks and demand barely blinked. Traders are being cautious heading into the weekend as talk of some rain may fall in the grain belt. Between now and Tuesday the upper plains will see 0.25 inches over 40% of the area and the western and eastern grain belt with . 25 to.75 inches with 50% coverage, but many believe that it could get larger as we get closer to the weekend. This past week laid out just as we projected on last Friday's report. We said to expect a measurable corn and bean rally Sunday night into Monday off the perception this would be a very hot and dry week cutting down on yield projections again. I noted the high for the week would occur during that period and of course that's exactly what happened on three fronts that we brought to your attention. One, funds would take profits after pricing in the weather as its end of the month and funds can pay handsome bonuses on profits taken if taken before the month ends. Two, large traders will not leave large profit positions sitting on the table with a three day holiday. Three, there was talk of rain late in the forecast that might prevent them from wanting to be long going into the weekend and of course we just talked about that. We said funds would sell any daily rally and so far they have. So as this week we said sell the rallies, next week is setting up to buy the breaks. Next week looks to finish higher for the week on several issues. We look to be generally cooler but drier across the Midwest grain belt will no significant rains. There will also be talk of a frost on the Canadian border and possibly in Northern Wisconsin and Minnesota on September 5 and 6th. This is a reminder to the trade that the crops planted late are still in jeopardy of being hurt by a frost as we head into September. We will also save private forecasters releasing their pre report estimates of the September 12 USDA monthly crop report. With August setting up to be one of the driest on record we have to expect those reports to come out with projections of lower corn and bean productions, lower yields and lower ending stocks being projected. These three issues all looks to have trend following and index funds buying breaks in the market and giving us a higher close for the week. Technicals read like this. December wheat support is 6.48 then 640. Resistance is 6.80 then 6.86. A close over 6.86 and trend following funds holding a net short position of 77,000 contracts will begin buying back those contracts giving us a sharp rally to 7.10 then 7.25. November soybean support is 13.50 then 13.35. Resistance is a 13.85, 14.10 then 14.50. Don't hold long beans on a close under 13.30. December corn support is 4.78 then 4.64 with resistance 5.00.
You can contact Tim at 312-957-8108 or 888.391.7894 or email him at email@example.com. Please visit our website at www.walshtrading.com for daily audio and market insights as well as special reports and live webinars.
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.