Alpari Grain Outlook 01/24

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By Tim Hannagan | January 24, 2013 10:13 PM EST

Alpari

Our first demand related report of the week was released with our 10 AM central time weekly export inspections report. This report tells us how many millions of bushels our US exporters or ask the USDA to inspect for a near-term shipment. It's a near-term demand signal report. This grain can be shipped within 5 to 30 days.

Wheat inspections were estimated at 21.8 m.b. up from 10.6 week prior and four week average of 11.6. It's the highest weekly numbers since June 26. Let's not get too excited as 28 m.b. or more is needed to be price bullish. Wheat was up five cents prior to the report's release and when it came out the market dropped down ten cents quickly.

Reason: Key player China was thought to have been in bigger so it was one of those reports that even though the numbers were somewhat bullish but not as bullish as they thought. Demand continues to simmer with potential to become bullish very quickly now that the US wheat prices are among the lowest of world exporters.

I still suggest that our biggest export problem is demand in the Middle East that continues to turn to other foreign ports, viewing us as a political enemy. They would rather pay five dollars per ton more from Russia than pay less from the meddling US.

Trend following funds are still short over 50,000 contracts. We need them to begin buying back those positions if we're going to go sharply higher. Two issues can have that happen. One, a surprise demand for US wheat over 28 m.b. for at least two consecutive weeks; and two, we enter March and dormancy breaks in the winter wheat states of Texas, Oklahoma and Kansas. We went dormant with historically low crop ratings and with a continuation of the drought in the Southwest. We could see funds go from short 50,000 to long 50,000. Now, trade the chart parameters.

Corn inspections were 10.9 m.b. versus 9.5 the week prior and four week average of 9.2. There's nothing to say other than the bearish demand scenario continues. Countries who normally would be a US buyer continue to buy from foreign ports. The pattern is consistent with my explanation on my ports that the USDA is rationing our historically small ending stocks by asking our regular customers to buy their bulk needs elsewhere.

Bean inspections were 48 m.b. up from 41 the week prior and four week average of 39.5. Key player China was in for 26.8 of the total versus the three prior weeks of 20.3, 25.4 and 22. Note that last Thursday's weekly export sales report was 1.608 m.m.t. versus the four-week average of 365 t.m.t. The trade believes China was in last week again with those numbers to show up on this Friday's report. The inspection report is further evidence of a pickup in Chinese buying.

We're in a weather market with soybeans being the leader. When we come in Friday, after we look at the weekly export sales report, look at the weather in Brazil and Argentina. If weather gurus are projecting a third consecutive hot dry week, funds will go home long looking to extend those longs on confirmation Sunday night into Monday. Should the pattern turn wet we look for a measurable correction in the market.

Technicals read like this. March corn support 7.20 then 7.10 with resistance 7.35. March bean support 14.30 then 14.20, resistance 14.65 then 15.00. March wheat support 7.60 with resistance 8.00 then 8.20.

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 e-mail timothy.hannagan@alpari-us.com.

Disclaimer: Trading foreign exchange, commodity futures, options and other over-the-counter products carries a high level of risk and may not be suitable for all investors. The high degree of leverage associated with such trading can result in substantial losses, as well as gains. The past performance of any trading strategy or methodology is not indicative of future results, which can vary due to market volatility; it should not be interpreted as a forecast of future performance. You should carefully consider whether such trading is suitable for you in light of your financial condition, level of experience and appetite for risk, and seek advice from an independent financial advisor, if you have any doubts. Alpari (US), LLC is dually registered with the CFTC as a Futures Commission Merchant and Retail Foreign Exchange Dealer and has been a member of the NFA since 2007 - Member ID: 0379678.

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