Wednesday gave us our holiday two day delayed weekly export inspections report. Remember, the inspection report and our weekly export sales report is our link to demand for grains. Until the next crop report comes in next fall and with corn and bean ending stocks inventories historically tight, the market uses these reports as a price rationing cage.
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Last week's short covering rally kept Importers at bay. Wheat inspected for near-term export was 15.1 million bushels (mb), down from 16.6 the week prior. We need 28 mb or more weekly to be bullish. Thursdays weekly export sales report, a gauge of longerterm demand came in at 1.009 million metric tons (mmt) up 55% from the week prior, thanks to the 450 trillion metric tons (tmt) that Egypt bought. That's the second time in three weeks that the world's largest monthly wheat buyer has bought US wheat. Is it a signal a change in demand is beginning, making the US the world's primary port of origin for wheat or just an aberration?
We're about $1.50 off the high of the year. Wheat is still expensive here and this has kept our export commitments at the fourth lowest in 24 years. As world production declined sharply this year our prices have held high even with sharper price declines in corn and beans. It suggests lower prices are needed to a level under our competitors to get enough business to be price bullish. Corn inspections Wednesday came in at 13.4 million bushels (mb), down from 16.4 the week prior and 39.6 a year ago. Same old story since harvest started and that's price rationing. Export commitments are the lowest since 1987 while world usage and demand is at record levels.
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All comes down to our government's success in getting countries like China to buy their bulk elsewhere as to keep our ending stocks not to decline any further than the 40 day supply of 647 mb we expect to have left before our next harvest. Brazil, South Africa and Ukraine still have corn to export at prices under US posted prices. Fridays weekly export sales report showed only 104 t.m.t. of corn was sold for future shipment down 9% from the week prior and 37% under our weak four week average. China was in for zero. I still look for a short covering rally and speculative buying prior the June 11 USDA monthly crop report on fear final harvest acres were lower than the last update in November.
Good weather in South America projected for early January and weak demand sets us up for a break to new lows after the report is priced in. Wednesday's bean inspection report was estimated at 44.4 million bushels, up from 41 last week but under the four week average of 46 mb and eight week average of 53.8 mb. Beans broke .20 cents after the report even after being up from the week prior because the broader picture further suggests were slowing our export pace. China was in for 26 mb of the total versus the four prior weeks of 27, 34, 38 and 34 mb. It's certainly not a bearish number in the big yearly picture, it's just not bullish and with South America beans coming to harvest in February, the psychology is turned demand negative. Especially after last week's big Chinese cancellations of previous imports not yet delivered.
Friday's weekly export sales report showed 87 tmt were sold versus the three prior weeks of 619 tmt, 1.319 mmt and 1.142 mmt. This week's report was the first time China was in for zero beans since the marketing year began. Like corn, beans too should see some short covering and buying ahead of the January 11 final crop production number, even though most expect it to be neutral to slightly bearish. After the report, look for a break to the low 12.00 area assuming weather in South America stays good for bean yields.
In conclusion, on my report last week I said expect a down week this week as month end, year end and fiscal cliff fear has traders long from the week prior selling. We saw that occur. Next week we should expect a higher close on the week, meaning next Fridays close will be higher than today Fridays close. The reason is South America weather remains bearish and demand for grains largely weakening, traders don't want to build a short position ahead of the USDA January 11 crop report with the final corn and beans 2012 production numbers. Traders will be afraid to be short, so they will buy back shorts and speculators will by long on fear the 2012 drought had farmers abandon more acres than previously reported and cut for silage or animal feed. Opinions will vary prior the report's release but the market trades fear before fact and the fear from the drought is production was worse than reported. The technical read like this prior Fridays open, March corn support is 6.80 then 6.30. Resistance is 7.00, 7.10 then 7.30. March bean support is 14.00 then 13.80 and 13.50 with resistance 14.60 then 14.90. March wheat support is 7.75 then 7.10 with resistance 7.85 then 8.00.
For those who have questions on grains or would like to open a futures trading account at Alpari and use me as your broker, call me at 312-470-1112 x304 or email
timothy.hannagan@alpari-us.com.
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