Tim's All American Grain Report
Oct 04, 2013
Weekly Grain Report Posted on Website
This is Tim Hannagan its Friday, October 4, 2013. We are in a difficult time now with the government shut down and not being able to get the new reports that affect the pricing movement of the market. It’s the weekly export sales report that tells us how much of each of the grains were sold for future shipment and becomes a gauge of demand. On Monday October 7th we will not receive the export inspection report which is another gauge of demand followed by the crop condition report telling us if yields are rising or falling. The crop progress report released on Monday as well, tells us how far along a harvest is and how far behind or ahead we have progressed. Lastly of course is the October 11 USDA monthly crop report, which will not be released unless the government reopens. This leaves the grain markets subject to movement from two issues. One, the weather, which is ever present, and chart parameters. We did get one report this past Monday before the government shutdown and that was the quarterly stocks report. The gov’t projected all corn stocks on hand as of September 1 at 824 million bushels which was 130 million bushels over pre report trade guesses. Old crop beans on hand were 141 million bushels and 14 million bushels over pre-report trade estimates. Clearly there were no big surprises such as the government announcing they had found 300 or 400 million bushels or lost the same amount. Traders discounted the report as a yawner. The fact that the increases came as the gov’t raised production from the year prior. Of course the traders priced that in already. I did find something important in the report for future trading and that was the off farm stocks numbers. They showed stocks of corn being held off a farm in private hands down 19% from a year ago, soybeans down 23% and wheat down 15% from a year ago. This is important as harvest comes to a close and we become a demand driven market. End users will be in dire need of inventories that they are short of. I’m looking for a strong post harvest rally this year in November and first half of December.
Weather this weekend looks to have talked of harvest delays due to heavy rains. The western grain belt looks to get as much as 2 to 4 inches of rain while the eastern grain belt gets 1 to 2 inches. Next week’s weather has different opinions. The European model shows drying up Monday through Saturday of next week possibly opening up the planting window by Tuesday, while the GFS model is adding rain in the forecast and that could be a problem as the 11 to 15 day forecast for the week following next week is setting up to be very wet. Should next week’s weather turn up wet we would have to expect some more short covering in corn and beans on harvest delays. The bears rely on harvest progress to continuing to show better than expected yields of corn and beans. If the planting window opens up we could have a hard sell off with beans the leader. It’s does appear that we haven’t seen our harvest lows yet. Last week we spent lot of time talking about how bullish wheat is. Exports to Brazil look to increase measurably as their main supplier Argentina suffers from drought and of course their recent frost has cut into harvest hopes. Traders are concerned that adverse weather again may trigger the second Argentine wheat export embargo in two years. Wheat prices in China are at record high levels suggesting they look to continue to be an aggressive U.S. wheat buyer at cheaper value. The Ukraine grain lobby indicates that relentless rains may reduce winter wheat plantings by about 30%. Additionally, Australia’s sweats out the weekend’s weather forecasts for significant frost in the New South Wales wheat grain belt with temperatures below zero on Friday and Saturday. There is no major or single event that’s fueling the wheat rally but a series of bullish news events around the world from lower protein levels from post harvest results. Current planting problems of this year’s winter wheat crop in the European Union and black sea region, to frost, freeze and drought of one level or another. This looks to continue to have trend following funds, once holding a near record short position to continue to buy out of the short positions that could take prices higher. Technicals read like this. November soybean resistance sits at 13.05 then 13.30. Support is 12.60 then 12.15. December wheat support is 6.80 with resistance 7.04 then 7.30. December corn support remains 4.15 with resistance at 4.46.
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.