Friday brought us our weekly export sales report one day delayed due to our Thanksgiving holiday. Wheat exports last week were 635 t.m.t. versus 314 the week prior, and over our four week average by 74%. Last week we were down $.75 from the high of the week prior and our low last week was the lowest wheat price since July 9th. This triggered buying but largely low-quality wheat going to small purchasing countries previously buying feed quality wheat. There was no major wheat buying countries on the list. The largest single purchase was 118 t.m.t. We need countries like Egypt, who alone could buy 400 or 600 t.m.t., but it is still the highest collective weekly wheat sales since August 9, and we open six cents higher Friday. It's most likely a one-week aberration due to the price break.
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Corn exports were 769 t.m.t. versus 103 the week prior. The six prior weeks were all under 200. It had been rumored last week Japan was buying 500 t.m.t. and they did, coming in at 457. Like wheat, corn too last week was down $.50 on its low from the week prior and hit our lowest price since September 28th. Japan is one of our most consistent yearly buyers, but for several months they have gone to other foreign ports to fill their biggest needs. I'm not convinced this is a trend changer, so take it as one good export week after 26 weak weeks.
Soybean exports, same old, same old. Not great but good with 543 t.m.t. sold last week down 3% from the week prior but 8% over our four week average. Key player China was in for 394 t.m.t. versus the three prior weeks of 371, 294 and 382. Beans enter a period now, between December 1st and March 1st, when demand in the US surges or falls, depending on weather on yields down in South America. Regardless of near-term demand signals, common thinking in the market is world needs are so great that US demand must increase in the months ahead.
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This week, Chinese officials announced they would begin a stockpiling program of corn and beans by way of purchasing domestic homegrown grain. This program will last until May 1st, the beginning of the US planting season. The purpose is clearly to create supplies to live off of when the US, the world's largest producer exporter, goes through its summer growing cycle uncertainty. Prices the last five years have hit yearly highs during that period, two years hitting record high prices. Their purchasing during this period has taught them to prepare. This suggests that if they're now going to buy domestic grain to build the savings reserves, then we should at least expect China to continue buying hand to mouth as needed of US beans to meet near-term needs.
With record acres of corn and beans being planted in Argentina and Brazil, and good weather during the key growing season of December and January, we have to expect demand on a larger scale to turn to South American ports from late February on forward. Delivery demand falls here off record crops there would set up a break on March corn to 5.60 and March beans to 12.30 before March 1st. Of course, poor growing conditions in South America during December and January could mean a test of our 2012 contract highs here. Last year, dry conditions in South America led to a sharp rally in corn and beans in December and early January, followed by a late January break, then new highs into February before a March correction as the growing season ended. The importance of all this is to understand that weather reports become a huge pricing source out of South America through February. Any weather invariance could lead to a 1.50 to 2.50 rally or break for corn and beans. A tremendous trading opportunity lies ahead. We look to the AG weather site WXRISK.com for insight as they cover South America weather with a microscope.
Monday's weekly export inspections report for wheat showed 7.8 million bushels of wheat were inspected for near-term export, down from 11.3 the week prior and 16.4 a year ago. Inspections year-to-date are 446 versus 515 m.b. a year ago. Corn inspections were 15.9 m.b. up from 14.4 the week prior and under a year ago of 36. Inspections year-to-date are 198 m.b. compared to 362 a year ago. It's an improvement but not big enough to say demand is back, but enough to suggest it's proving it's short of the 23 m.b. needed to see weekly to reach the government export estimates of the year. Bean inspections were 45.4 m.b. down from 66.8 the week prior and 41.80 year ago. Year-to-date inspections were 547 m.b. versus 397 last year this time. China was in for 34.1 of the total compared to the three prior weeks of 46.8, 47.2 and 46.6. It's the lowest number in five weeks for both China and the report total.
It certainly will be in the back of traders' minds that an export slowdown may be coming until South America weather becomes clear. The last crop condition report of the year for winter wheat came out after the close Monday. It was put at 33% good to excellent condition, down 1% from last week and 52% a year ago. It's one of the worst ratings ever for a crop going dormant. When we break dormancy in March, wheat will be challenged to find improved weather. The trade will talk this condition problem up this week but next week it will disappear to only a foot note as wheat is a weed and will mature well next spring with marginally good weather. Wheat reverts back to a demand driven market now. Time to time as winter moves forward, there'll be talk of winter kill as storms roll down from Canada. These are one-day rallies as storms hit news starved winter markets but winter kill themes never post a lengthy rally. So don't let your trading get caught up on the poor condition theme as large trading funds will focus on demand side issues. The only supply side news to enter and support wheat could be the harvest uncertainty in Argentina. Untimely heavy rains at key yield times has talk surfacing of production problems. They are only 19% harvested.
Technicals read like this: March corn support is 7.40, a close under and 7.10 is next. Resistance is 7.75 then 7.95. January soybeans support is 14.00 then 13.70 with resistance 14.65 then 15.10. March wheat support is 8.50 then 8.25 with resistance 9.05 then 9.25.
For those interested in opening a futures account at Alpari with me as your broker call 312-470-1112 ext-304 or e-mail me your thoughts or suggestions at timothy.hannagan@alpari-us.com.
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