Alpari Grain Report 11/02

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By Tim Hannagan | November 3, 2012 8:23 PM EST

Alpari

Monday's weekly export inspections report, that comes out every Monday at 10 AM central time, had beans as the big player again. The inspection report is a gauge of demand and tells us how many millions of bushels of each grain was inspected by the USDA for near-term shipment. Note, the weekly Thursday export sales report tells us how much of each grain was sold for future shipment which could be one to eight months out, so the inspection report is for more immediate shipment, weeks to a month out. Wheat inspections for near-term shipments were 9.7 million bushels versus 16 last week. The October 2011 average was 18 m.b. It’s a weak number for near-term demand. Corn inspections were 15.5 million bushels versus 9 last week. The October 2011 average was 29 m.b. It's a very weak demand signal, consistent with the last eight weeks. Bean inspections were again a whopping 63 m.b. versus 61 last week. The October 2011 average for the month was 30 m.b. and the October 2010 average 45 m.b. Needless to say the numbers continue to be supportive for breaks on near-term demand. Of the total number, number one world bean importer China was in four 49 m.b. of the total versus 47. Last week. As I've noted recently, bean demand will remain good, but maybe not great. Were the sole port of origin in the world for exportable beans. South America new crop year beans won't see the first acres harvested until late February. So expect good demand the next 90 days. What may slow demand or keep us at a pace of exports that cushions price breaks but not enough to rally us, is the demand for beans to crush for the cooking oil. Especially for China. China grain groups announced China will import 5% more palm oil this year. Palm oil is not as high in protein and soy oil, and it's not as clean requiring more filtering. Not a problem, as Asian markets are more concerned about quantity and value over quality. Palm oil inventories jumped to an all-time high in September with soyoil almost $380 per ton over palmoil. The two largest palm oil producers, Indonesia and Malaysia are cutting export taxes and tariffs so product moves quickly. This shift in crush demand may be enough to yet see beans fill charts gaps from July 3 on January futures at 14.70. The wildcard here is if any weather issues arise in Brazil as planting winds down, and there growing season begins. On last Tuesday's grain report, I made note of a monster hurricane to hit the East Coast by October 28 bringing big snows to three states who have the most unharvested corn and experience crop damage. Well, it hit and snows in Ohio, Pennsylvania and Indiana were heavy. There's talk of crop loss. The fear of what may be lost will show up on the November 9 USDA monthly crop report but actual losses won't be known until our final report in January. Hats off to Dave Tolleris on the ag weather site WXRISK.com. His report was first to report on this hurricane and call for it on Monday updates. The others didn't get on the board untill Wednesday. Other than crop loss, harvest progress is at a standstill. The crop progress report came out two days delayed due to government offices closed down on the East Coast. Corn and 91% harvested. Those states hit with snow were Ohio 64% harvested only a 14% jump on the week, Pennsylvania 64% and 6% jump and Indiana 81% harvested a 9% increase. All were well under the average leaving a measurable amount sitting at risk in the field. Bean harvest was 87% complete with Ohio at 79% and Indiana 81%. It doesn't appear the market is too concerned about risk in the fields but growing concern about South America crops now been planted. The Tuesday and Wednesday strength on prices, in part was credited to talk of dry conditions in Brazil now 22% planted on beans and corn seeded came in at 55% planted. After drought in Brazil and Argentina this past growing season and the US this summer, grains will be sensitive to any talk on of new growing season weather problems even if early. There's less than no room for error in the new world growing season. Our winter wheat crop came in at 88% planted. Our first crop condition report came out showing 40% of the crop in good to excellent condition versus 46%
last year. Key states read like this. Texas 40% good to excellent, Oklahoma 27%, Nebraska 9%, Colorado 30% and number one US wheat producer Kansas 37% good to excellent. On the surface it's a bad start to a critically important crop year, but we shouldn't see prices respond. The market has no history of pricing futures on early emergence of wheat before going dormant in late November. It's April and May when dormancy breaks and yields are made or lost when ratings drive prices. Finally our last delayed report Friday morning was our weekly export sales report. Corn remains weak at 167 t.m.t. sold versus 142 last week and 1 million metric tons needed to be bullish. Unless something bullish enters that's not there now, corn will work its way lower. China canceled 60 t.m.t. an earlier purchase. Wheat exports came in at 362 t.m.t. down 37% from last week and 8% under our four week average. Beans were a robust 741 t.m.t. up 42% from the week prior and 4% over our four week average. China was in for 382 t.m.t. versus the three prior weeks of 274, 265 and 227. As I have noted prior, I expect good export sales weekly but not great sales of 1 million metric tons or more. Corn and beans look to move lower near-term but watch weather reports in South America as dry weather in Brazil is now being talked about and may be traded soon. Technicals read like this. December corn support is 7.30. A close under and 7.05 is next. Resistance is 7.60 then 7.75. January beans support is 15.30 then 14.70. Resistance 15.70 then 16.10. December wheat support is 8.55. A close under and 8.15 is next. Resistance is 8.95 then 9.15. A close over 9.15 is a major buy signal for index and trend following funds. Just a note. Monday I will post a magazine article on index and trend following funds that I wrote last year, followed by the second one on this topic Wednesday next week. This will help you understand the success we have projecting price movement and fundamental analysis. You need to understand what index and trend following funds are all about and how they .

The article is provided by Alpari

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