Alpari Grain Outlook 02/15
By Tim Hannagan | February 16, 2013 7:30 AM EST
First things first: Markets are closed Monday for the Presidents' Day holiday. Electronic trading will begin at 7 PM Central Time Monday night. Our weekly export sales report came out Thursday at 7:30 AM Central Time telling us how much of each of the grains were sold for future shipment. Wheat exports were 651 t.m.t. versus 290 the week prior. It was a good jump from the week prior but lacking were any large buyers of wheat for human consumption. The players were all small marginal buyers of low quality wheat, like Nigeria, Peru, Japan and Indonesia; all buying small lots of 29 to 40 t.m.t. of feed quality wheat.
Wheat remains fundamentally demand bearish. If we're going to rally, it will take trend following funds, who hold a short 61,000 contract position, to start buying out. We can't expect that until we break dormancy in March and green up into April when the head is developed. If we have problems with weather then, suggesting poor yields, we look for short covering and a buying rally to pull wheat up.
Corn export sales were 225 t.m.t., up 34% from the previous week and 2% over the four week average. We need 800 t.m.t. weekly to be bullish. It's a bearish demand signal. With Argentina's corn crop 95% through pollination and rain this week and next, expect production levels to stabilize. Look for corn demand to be a negative pricing source until late April when our US weather picture for the summer growing season becomes clear. If normal rainfall appears apparent, then the USDA will begin selling corn for new crop delivery after September 1.
Soy bean exports saw a reduction of 109 t.m.t. as China canceled 230 t.m.t. of previous purchases, offsetting any new demand on the report. In my last report I warned that this would be coming soon and here it is. The better weather in Argentina and southern Brazil this week and next has the trade believing the crop is made and that recent dryness is behind us, leading to a record corn and bean production as harvest begins in earnest at month end.
WXRISK.com, the AG weather site, sees this weekend as very wet in South America and next week looks wet but not nearly as much rain as we've seen the last six days. Traders feel the next 10 to 15 days will finish the soybean pod setting stage in Brazil. The current rain forecast makes this crop. This looks to continue to erode US export sales and expect further cancellations of previous shipments for old and new crop delivery.
China had been buying old crop delivery soybeans for near-term demand and new crop delivery after September 1 with hopes that spreading the purchases out would have less of a bullish impact on near-term prices. If the drought continued all the way in the March they would take delivery of all the old crop and new crop shipments as prices rally. If rain returned they would cancel old crop and new crop shipments and rebuy on Brazilian ports.
Friday, February 21, the USDA agricultural Outlook conference will take place. Look for news to show record corn and bean acres to be planted this year followed by the March 28 poll of farmers by the USDA on their planting intentions to show even a larger number.
A combination of ample rainfall in South America the next 10 to 15 days followed by two bearish crop planting intention reports and the harvest of record crops from South America over the next seven weeks, should have traders looking to sell rallies in the market, leaving those rallies attributed to short covering or profit taking off breaks. Worst-case scenario on the downside for May corn is 5.65, with May beans 12.65 and May wheat 6.50.
Okay, a little short covering Friday ahead of the three-day holiday: If we are going to start the week higher it will take weekend rains in South America to dry up and a new 6 to 10 day outlook that's hot and dry. Should weekend rains be as big as expected and our softening demand intact, expect to take out this week's lows.
Technicals read like this: March corn resistance is 7.20, then 7.35. Support is 6.80, 6.65, then 6.40. May bean resistance is 14.30, support 14.10, then 13.70. May wheat resistance is 7.45, then 7.60. Support is 7.20, then 6.75. 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 x3304 or e-mail firstname.lastname@example.org.
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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