Tim Hannagan's All American Grain Report November 14, 2013
Nov 14, 2013
This is Tim Hannagan it is Thursday, November 14th. Let's take a look at last week's crop report and see if we can uncover some hidden clues to eventual market directions. For corn the USDA estimated production at 13.989 billion bushels, which was 146 million bushels over the September USDA report. Yield came in at 160.4 bushels per acre, up 5 bushels per acre from September's report. The production number was closer to the low end of pre-report trade estimates. Traders initially feared that the report could come in over the high-end of estimates. This had the ending stocks, to be left over come the end of the marketing year September 1, 2014 at 1.883 b.b. only 32 m.b. over what was reported in September. The trade had feared stocks coming in well over 2 billion bushels. Now, should our next report further increase production, we could see 2 billion bushels ending stocks or more. What is not being discussed is the fact that Chinese production and imports numbers were left unchanged. Yet, the last 60 days have shown production problems in China's corn regions. China's last corn production estimate was 215 million metric tons, with the USDA projecting 211, and field surveys at 190 million metric tons due to weather problems. Their projected usage is 220 million metric tons. If China imports half the difference between low-end production and usage, we will export an additional 450 million bushels, putting our ending stocks at 1.350 or lower. The eventual Chinese business will more than offset any further production increases in the United States.
Soybean production was estimated at 3.258 b.b. up 108 m.b. over September and 43 m.b. over pre-report trade estimates. The yield was 43.2 versus 41.2. It looked bearish until the carryover or ending stocks came out at 170 m.b. only 20 m.b. over September. Current export sales are at 87% of the USDA forecast for the 2013/14 marketing year versus the five-year average of 58%. We only need to sell 114 thousand metric tons weekly to meet the USDA forecast. The four week average is 1.417 m.m.t. Clearly the USDA has underestimated demand. The trade sees 170 million bushels stocks as the USDA high-end estimate as they never come in low. This means it's more probable than not that soybean ending stocks will decline.
Entering Friday technical's read like this. January beans support is 13.10 then 12.85. Resistance at 13.30 then 13.65. December corn support is 4.25 then 4.20 with resistance at 4.36 then 4.50. December wheat support lies at 6.44 then 6.38 with resistance at 6.60 and 6.72. Just a note I will be holding a grain webinar at 3 PM central time Friday. You can attend live by going to the Walsh website at
www.walshtrading.com or listen to the recorded version at your convenience.
By Tim Hannagan
Senior Grain Analyst, Walsh Trading, Inc.
312-957-8108 or 888.391.7894
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.