First things first; we've only had one report each of the last two weeks due to the holidays recently and the holiday closings. We will go back to having two weekly starting next week on Monday then again Thursday before the crop report.
Monday's weekly export inspections report unveiled more bearish export news. Wheat's weekly export inspections report by the USDA for near-term export came out at 7.7 million bushels down from 15.2 the week prior and 14.8 on our four week average. After a big weekly export sales number last week with world buyer Egypt in buying large quantities, traders want to know if they're going to be a regular weekly buyer or just once a month buyer. This report only suggest they're not in for US wheat as of Sunday, but they could show up on the USDA daily list of countries who purchased 100 thousand metric tons or more of any daily purchase. Traders have doubts as Egypt has purchased wheat two times in the last month with both buys spaced apart. The market likes consistency with back to back purchases. Consistency moves prices higher.
Fridays weekly export sales report showed 400,000 metric tons were sold for future shipment down 60% from the week prior and 37% under our four week average. Egypt was absent from the list with Taiwan and South Korea purchasing small amounts of feed quality wheat. That being said, this report was demand side bearish. We're starting to get our state by state sponsored crop condition reports on the dormant wheat crop. Note, the most important crop condition reports come from the USDA for wheat beginning in mid-April after we break dormancy in March.
In the meantime you can use these state run reports to track wheat progress. The market seldom responds with price movements on these reports though. Our number one wheat producing states Kansas came in at 24% in good to excellent condition, versus 29% last month. Everything else was very poor, poor or fair condition. This 24% is a very low number. This compares to the final USDA national numbers of the year back in November of 33% good to excellent. Oklahoma was 11% good to excellent versus 14% last month. The decline largely comes from a December freeze that hit before a snow-covered came in and currently 65% of our winter wheat crop has snow-cover to protect it. Note, though wheat is 6 to 8 inches tall when it went dormant, there are no kernels to be damaged yet. We only need enough snow cover, an inch or two, to insulate the ground and root system from a freeze. It's when a freeze hits the upper root system when you can damage the water and nutrient carrying capillaries. When that happens, the damage shows up at full maturity with blackened kernels and lower yields. Corn inspections were 7.9 million bushels versus 13.8 the week prior and four week average of 11.4. We need 30 million bushels plus weekly to be price bullish, so this is another bearish demand signal that will continue in January and February unless weather in Argentina and Brazil turns hot dry as corn crops mature there.
Fridays weekly export sales report showed 49,000 metric tons of corn was sold for future shipment down 53% from previous week and 63% under the four-week average. China was in for zero amounts. Beans inspections on Monday were 35.5 million bushels down from 45.4 the week prior and four week average of 44. China came in lower again in the total at 22 million bushels versus the four prior weeks of 26.1, 26.5, 34.8 and 37.6 million bushels. Another good week of growing weather called for in Argentina and Brazil keeps China slowly purchases and preparing to load up on South America beans in February through April. Fridays export sales report showed 434,000 metric tons of beans were sold for future shipment, up from last week's 87,000 metric tons with China in for 360 of the total versus zero last week and 424 the week prior. All three grains were down on the export inspection report Monday making new lows on the day after its release. But late session had corn and wheat turn up on the day and beans pull $.17 off the low as Monday was month end and year end and shorts in the market buying out ahead of the close to meet their year-end balancing.
Wednesday's return from the Christmas holiday brought a sharp opening rally on grains as those short going home Monday on failure to resolve the fiscal cliff problem, all were buyers on the opening after Christmas brought a settlement on fiscal cliff issues. But grains quickly turned lower on the day as weak demand news took over trading. Next week, Friday, January 11 is the USDA monthly crop report. Importance of the report is it's the final grain production number for 2012. The last update on production was in November. This report is known for big changes in production estimates and ending stocks inventory. Last year corn rallied mid-December into the January report. After a higher opening on report day they broke $.70. Last year's rally was drought related in South America. Beans had a similar rally and break.
Next week, we should expect trading to go from selling rallies on bearish demand markets this week to buying breaks on fear of a bullish crop report. On Monday we will get the pre-report trade estimates of the report based on an industry analyst poll. This tells us how the trade is positioned and their thoughts, bullish or bearish. It should lean bullish corn, neutral to bearish beans. As one of the analysts polled for the report, here's how I reported it. I look for corn production to come in at 10.500 billion bushels versus the November USDA report of 10.725. Harvested acres at 86.7 million acres versus 87.7 in November. I feel the crop through July's pollination stage had at least one million acres or more going abandoned and or cut for silage or animal feed. The late growing season rains were too late to help. Ending stocks coming in at 550 million bushels versus the USDA December report of 647. I would cut it further but I expect a drop in export projections to offset some of the production losses. Bean production, I estimated at 3.100 billion bushels versus the November report of 2.971 with harvested acres at 75.300 million acres compared to the November report at 75.693. Also a slight yield up adjustments at 39.5 versus 39.3 in November. Late planted beans caught the late August growing cycle rains offsetting lost acres from the earliest printed beans lost to the high heat and dryness in July. I'm leaving ending stocks unchanged at 130 million bushels as increased production is offset by a strong crush pace and demand.
In conclusion, perfect growing weather in South America to date has China and other countries slowing US purchases of corn and beans. Continuation of this good weather through mid-February looks to see US exports declined measurably, especially in beans as South America ports takeover world exports into May. Brazil alone looks to export 8 million metric tons or more beans from a production jump of 18 million metric tons. I look for a possible short covering rally next week prior to the report's release, but will look for any bullish report rally on report day as a selling opportunity with corn basis March futures pushing to 6.30 then potentially 5.60 and March beans potentially could see 12.30 before March 1. The crop report from the USDA will be released Friday, January 11 at 7:30 AM central time.
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