Thursday's weekly export sales report put bean exports at 386 t.m.t. sold last week for future shipment versus 383 the week prior and 42% under the four week average. Key player China was in for 292. New crop exports for the 2013-14 crop year or delivery after September 1, 2013 to September 1, 2014 were 867 t.m.t. with China in for 694.
Slower old crop sales of 386 t.m.t. show importers are being patient as weather results on yields in Brazil in February will determine crop size and price. Good rains and China and others will buy from Brazil at cheaper prices; lack of rain and higher prices. China will take those new crop year purchases of 694 t.m.t. and switch delivery dates to near-term delivery and their previous purchases price value.
I view this surge in new crop exports as China putting on a weather hedge. Either way weather goes, they will eventually cancel most new crop year purchases and rebuy US old crop for near-term shipment before June 1 or rebuy on Brazilian ports at better value.
Corn weekly export sales were 186 t.m.t., versus 138 the week prior. It's as weak a demand number as you can get as the US government continues to ration historically low-ending stock reserves of 602 m.b., or about a 25-day supply. Export sales should stay weak until late May or early June when new crop season weather becomes clear. Corn rallies remain limited to supply-side production problems in South America through February.
Wheat export sales remain soft at 293 t.m.t., down 49% from the week prior and 32% under the four week average. All sales were small countries buying low grade feed-quality wheat. Chicken and hog populations don't double or triple overnight and stay generally constant. So you see only hand to mouth buying as needed. To turn bullish on demand we need big buyers of wheat from human consumption with shipments of 300 to 500 t.m.t. per country and 800 t.m.t. or more weekly. Those countries, like Egypt, remain absent as large buyers.
A demand rally in wheat seems unlikely near-term. A measurable rally of one dollar or more will come after the winter wheat crop breaks dormancy in March if weather in the Southwest states Texas, Kansas, Oklahoma, Colorado and Nebraska remain dry. Then the trend following funds should r shorts more than 50,000 contracts will begin to buy them back and go long.
The winter wheat crop went dormant with the last USDA crop condition rating at 33% of the crop in good to excellent condition. That's the lowest rating since ratings began in 1986. Current state ratings, less reliable, came in with Kansas 20% good to excellent, Nebraska 8% and Colorado 5% good to excellent.
Next week sets up like this: Sunday night trade into Monday prices in the South American weather. If we come in Sunday night and see rain for the week, prices drop. If hot and dry again for the fourth consecutive week, we rally. But they will price in the weather then take profits before Tuesday, as positioning of trades turn to thoughts on the Friday, February 8 USDA monthly crop report. I will cover that on my Tuesday report.
As of today, Friday, the AG weather site WXRISK.com has some rain in dry areas of Argentina and Brazil over the weekend but next week sets up dry all over Argentina and southern Brazil. Southern Brazil is the largest bean producing area where all the acreage increases of the year occurred. If this forecast holds, expect a rally to start the week but take your profits as traders won't risk weather profits into a USDA crop report that gives supply demand updates. It doesn't mean they won't buy into the report if perceived bullish, but there traded, weather and the report, from a different trading perspective. In other words, whatever the weather direction brings to pricing, they will take it and reposition ahead of the report.
Technicals read like this: March corn support is 7.30 then 7.10 with resistance 7.60. Beans support for March 14.65 then 14.30 with resistance 15.00 then 15.35. March wheat support is 7.60 then 7.30 with resistance 7.90.
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 firstname.lastname@example.org.
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