The Grain Report August 9, 2013
Aug 12, 2013
Weekly export sales were released Thursday at 7:30 AM CDT. 726,000 metric tons of wheat was sold for the new marketing year which began June 1st. This was up 22% from the previous week, but 22% lower than the four week average. Asian markets account for 70% of our feed grain exports annually. Not one Asian country placed orders in excess of 100,000 metric tons. They are clearly buying feed quality wheat at cash price discounts. Missing was number one world wheat buyer Egypt who has been absent from the U.S. buying list for nine consecutive weeks. In part wheat from the black sea region is being sold at a discount to U.S. prices as the Ukraine and Russia attempt to re- assert their positions as major world wheat exporters. Egypt will turn to us as exportable wheat supplies dwindle in Europe. Old crop corn sales scheduled to be shipped before the new marketing year begins September 1st stood at 290,000 metric tons. 850,000 metric tonnes are needed on a weekly basis to be price friendly. New crop sales for post September 1st delivery ran 220,000 metric tons. Key world player China was absent from the buying list. Clearly, China and their Asian neighbors are awaiting new crop supply at lower prices. Old crop soybean shipments were 79,000 metric tonnes and hardly worth mentioning. New crop soybean sales were 1.0170 metric tonnes. China accounts for 95% of our bean exports and purchased 950,000 metric tonnes of the total. Chinese trade data released overnight indicated 7.2 million tonnes were purchased in July. This is a record for the second consecutive month. This aggressive buying by China comes as they sell expensive old crop reserves to domestic users. It's normal for China to sell old crop reserves at a high price and buy on the world market at a lower price. After pricing in the week's bearish weather scenario Sunday into Tuesday we've seen short covering in the corn and bean market. The shorts have the profits. Their risk is the market information released Monday in the monthly USDA crop report. If the weather reports for next week confirm a continuation of cool temperatures and normal rainfall, it will likely set the tone for a lower start Sunday night into early Monday morning. The USDA crop report will be released at 11:00 AM CDT and will likely dominate the trade into the close.
Pre-report trade estimates suggest that corn production will come in at 14.036 billion bushels vs. 13.950 the month prior. Soybeans are estimated to be 3.357 vs. 3.420. Regarding soybeans the trade believes that late planting cool evenings and in some cases excessive rain hurt the crop. On the other hand the latest USDA crop condition report suggests soybean quality is well over the 10 year average. Higher corn numbers come as traders see 81% of the crop in its pollination stage with no real heat damage and timely rain. The changes suggested are marginal at best. What traders will be looking at is the ending stocks or carryover number. Carryover for corn is estimated at 2.013 billion bushels vs. 1,959 last month. Here's where we could see a surprise. Last month's number was lower than the month prior and the government seldom switches direction unless there's a dramatic change in usage and that's not evident. Soybean ending stocks are estimated to be 262 million bushels, well under last month's 295. Keep in mind total usage for the 13/14 marketing year according to the last USDA crop report is 3.264 billion bushels and subtracted from this year's estimated production of 3.357 leaves ending stocks at 93 million bushels. I do not believe this is going to happen. Something will have to change in the USDA database. Perhaps lower feed usage, bio-fuel consumption or exports. There is certainly room for a big surprise in beans. The government generally leans to the conservative side in its August report and starts making changes in September. I expect more neutrality Monday's report. Once the report is over the trade will go right back to trading the weather and its impact on current yields. Support on December corn entering the new week is 4.48 with resistance at 4.78 then $5.00. New crop November beans havesupport at 11.50 and 11.10. Resistance rests above at 12.10 then 12.50.
Support in September wheat is 6.25 and resistance at 6.85. If there are surprises in Monday's USDA crop report traders forgo trading the charts and trade on emotion. This will likely create extreme volatility.
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.