This is Tim Hannagan its Friday, November 1. Our first report of the week was our weekly export inspection report that came out Monday 10:00 AM central time. The highlight was that 83 million bushels of soybeans were inspected and loaded on ships heading to importers. China was in for 61 of the total . This was over last week's 59.8 million bushels with China in for 45. China continues to buy with both hands. There are only three ports of origin to buy beans from in the world and that is the United States, Brazil, and Argentina. With South America planting and the U.S. harvesting, the U.S. is the only port for delivery of large quantities right now. Our next demand side report came out Thursday at 7:30 AM central time with our weekly export sales report. The government was playing catch up and gave export sales numbers for the week of October 10th, October 17th, and October 24th. The three week total for wheat was 1.3 million metric tons with a three week average of 476 thousand metric tons. Egypt and China were absent from the report and Brazil's average was 110 each week, far under expectations. Wheat demand has been slowing for the last three weeks now, however cumulative wheat sales are 10% over the five year average. If wheat is going to challenge its 7.04 resistance we need demand to return and that will come if Argentina for the second consecutive year suspends exports of wheat forcing Brazil to double up on U.S. purchases. Additionally, Australia's crop appears to be far worse than thought, possibly lowering their production sharply sending importers to U.S. ports.
Corn export sales were 4.5 million metric tons for a 1.5 million metric ton average for the last three weeks. Mexico, Japan and China were all big players in the market. Corn sales are 10% over the five year average. Pre-report trade estimates were only looking for 1.8 million metric tons, so the report day rally was sold as traders are focused on supply side fundamentals ahead of the November 8th USDA crop report. But corn demand is simmering under the surface. This week South Korea made its first corn purchase from the U.S. in 16 months as U.S. prices fell below competitors Brazil and the Ukraine. Black sea corn values are now 5¢ a bushel over U.S. values. This is vastly different than this past summer when Brazil and the Black Sea Corn was priced 50 to 60 cents a bushel cheaper than U.S. corn. Corn is becoming price competitive in the world and the next leg down on prices may come off the November 8th crop report putting in a harvest low price and trigger buying. Soybean exports were 4.7 million metric tons with China in for 2.1 of the total and a three week average of 1.580 million metric tons. China is making sizable purchases in soybeans and taking delivery, potentially leaving no room for future cancellations. Additionally Russia was in for 270 thousand metric tons of the 4.7 million metric ton total and this is the second week consecutively with Russia in buying beans after a 10 year absence. Trading next week will be guided by the perception of what the November 8th USDA monthly crop report will say. The October report was canceled so the government is adding up all the statistics from September and October. Pre report thinking is that yields, production, and ending stocks will come in higher for corn and beans and that the report will be measurably bearish. The wildcard is if the gov't is not caught up from being closed during much of October and ends up surprising the market by not being as bearish as anticipated. Should the government actually be caught up and the report comes out bearish as the trade is anticipating, it should end up being the last bearish supply side report of the year. We then become a demand driven market. So we should expect a low next Friday that will hold going into the end of the year. Technicals for next week read like this. Support on December corn is 4.14, resistance 4.38 then 4.46. November beans support is 12.60 with resistance at 13.05 then 13.30. A close under 12.60 and 12.15 is next. December wheat has support at 6.58 then 6.50, resistance 6.74 then 6.80. Don't miss my regular Thursday grain webinars that start every Thursday afternoon at 3pm central. Please send me an email or call me to be sent a sign up link for the webinars. If you cannot attend live, we can send you a recording.
By Tim Hannagan
Senior Grain Analyst, Walsh Trading, Inc.
312-957-8108 or 888.391.7894
email: [email protected]
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.
Update on the Net Investment Income Post
Looking Forward to the Nov. 8 Crop Production Report