Tim's All American Grain Report
Sep 27, 2013
This is Tim Hannagan its Friday, September 26. Thursday’s weekly export sales report unveiled a few surprises. Corn sales last week were 640,000 metric tons, well under the 850,000 or more needed to be bullish. China was in for 130,000 metric tons vs. last week 64. Talk of early harvest in the southern delta of higher than expected yields has importers sitting on their hands waiting for harvest to begin in the Midwest with harvest low prices yet to come. Soybean exports were 2.816 million metric tons with big world player China in for 2.293 of the total. New crop year sales are 61% of the USDA forecast vs. the five year average of 44%. China appears to be overbooking for future needs as a hedge against bad weather in Brazil and Argentina. While here in the U.S. were harvesting our corn and bean crops, South America is just beginning to plant their season’s crops. Brazil’s corn crop is about 41% complete but bean growers are waiting for rain before beginning planting their soybeans. The next 10 days looks to bring good rain to southwestern Brazil leaving central regions still very dry. The 11 to 15 day forecast through to October 9th sees that same region equally as wet with Argentina dry. Argentina was dry in July, August, and September and some forecasts are predicting continued dryness right through the month of October. Argentina is the third largest producer exporter of beans in the world and the number one exporter of soymeal and soyoil. Weather down there needs to be watched very closely now as China looks to continue to overbook beans just in case things don’t go well in South America. Should the crops get rain needed over the entire growing season, look for China who has been known to cancel previous sales and re- buy on the Brazilian Port at cheaper value. It’s often said exports this time of year are made in pencil which can be easily erased.
Wheat exports were 620,000 metric tons up 1% over the four week average. Sales are running eight percent over the five year average. There’s a lot of issues supporting wheat prices now. Argentina has slashed its forecast for this year’s wheat production. Most traders expect a 10 million ton production at best in Argentina compared to 12 ton posted on the last USDA report. Brazil gets all their wheat from Argentina and was forced to turn to U.S. ports this year as last year’s crop was cut by bad weather. Another poor crop in Argentina could reignite demand from Brazil for U.S. wheat. China upped their import projections of wheat to 7.5 million tons from last month 6.5 million ton due to bad weather. Wheat in China is expensive so it’s an easy decision to go into the world market buying cheaper wheat especially from the United States. December wheat broke thru its major chart resistance at 6.66 this week and breaking the bearish chart trend that began last Jauary. There’s almost a perfect wheat comparison to the year ago bull market and this year. Last June 18, December wheat was trading at 6.50. This week Monday December wheat was trading at 6.50. Last year June 18, trend following funds were short 87,000 contracts. Entering this week they were short 87,000 contracts. Last year Monday, June 18 saw weeks end post a 60¢ rally breaking major resistance followed by a rally of $3.00 the next five weeks. So far this week we rallied 36¢ and broke major chart resistance. We cannot assume another $3.00 rally like last year but funds entering the week short 87,000 contracts, 10,000 short of the all time record and holding that 6.40 support for five consecutive weeks not allowing their short positions to make any profits, certainly seems to be a good incentive to start to cover or buy back some short positions. Entering Friday December wheat finds support at 6.64 and resistance at 6.80 then 7.04. November beans find supported at 13.05 then 12.80 with resistance 13.35 then 13.60. December corn support still lies at 4.46 with resistance at 4.70 then 4.80. A close under 4.46 sets up 4.22. Monday at 11:00 AM central time USDA will release its quarterly stocks numbers. Because the numbers are taken over a four month period, the government has room to offer the market huge surprises either bullish or bearish.
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.