Monday's weekly export inspection reports showed 21.1 million bushels of wheat was expected for near-term export versus 23.7 the week prior and four week average of 22.5. Key world player Egypt was in for only 3m.b. of the total. Recent wheat demand comes from, not large quantities of high protein and high quality wheat being sold, but small quantities of lower quality wheat only suitable for the feed ration. March futures for corn are at a slim 13 cent discount to March wheat and May corn had a 14 cent discount to May wheat. This will keep the US an active port for low-quality feed wheat but not enough to be bullish.
Competition has entered with India last week selling 750 thousand metric tons of low quality wheat to Asian nations who are regular customers of the US and another 60 t.m.t. today. Talk out of India, due to a wheat surplus, is they will continue to be active seller of wheat. Wheat remains bearish from a demand perspective. Trend following funds last week increased their short held position to 71,000 contracts from 62,000 the week prior. The record held short position was 97,000 last February. In May with the drought in the US at its peak and wheat at key yield time, funds began to buyback those short held positions and we rallied 1.20 in two weeks. We could be getting close to that seasonal watch period when another potential short covering rally occurs but not on demand, but production issues.
Wheat went dormant with the worst crop condition ratings since records were kept in 1988. Should we break dormancy in March and April unveils even weaker ratings, funds could start to cover shorts earlier this year. The wildcard is whether. The South West, hard red winter wheat states have been in a drought for over a year. The last two weeks have brought rain and improving drought conditions and this week again brings large snowfalls across Texas, Oklahoma, Colorado and Kansas, who need it most. The meltdown will generally help the topsoil. The recent weather trend has been the motivation for funds to increase their short held positions. So we will watch the long-term forecast for 11 to 15 day out looks closely now through WXRISK.com the AG weather site.
Corn inspections were 11.5 million bushels versus 9.6 week prior. It's a continuation of government price rationing until new crop weather becomes clearer to new crop production. I'm thinking late April and May. Bean inspections were 27.2 million bushels down from 40.8 the week prior and four week average of 41.2. China was in for 18 of the total versus 26 last week.
Last week's demand surge came on Brazil's talk of a dockworker strike further threatening shipping delays having China book US beans to keep their crushing facilities fed with badly needed bean supplies. Brazil's dockworkers canceled this week's one day strike but could quickly go on strike and have another spike rally overnight, any day. Be aware, but as I noted, sell sharp rallies on strike talk as any strike is a short one with five days consider a long one. China has taken beans this week from reserves to buy time on Brazil shipping logjam. Brazil is 28% harvested and it's certain the month of March will see more US bean cancellations of previous orders from China and new low harvest pressure prices before we round off a yearly spring low and started turn up into all the uncertainty the US planting and growing season will bring. Weather in Brazil and Argentina looks fairly wet to improve late maturing beans the next five days. But next week is March and South America will have the tail end of bean crops maturing. Large index and trend following funds see March as harvest month and use shipping issues for their pricing of futures bullish or bearish. As per production in Brazil, ignore private crop adjustment updates. Those who are low on their bean estimate will come up and those who were high come down. It's part of the shuffle at the end of the growing season. Funds generalize. They just see a record crop and crop pressure results. Note, the March monthly USDA crop report is next week, March 8. Expect posturing and positioning prior.
Technicals read like this. May corn resistance is 7.10 then 7.20; support 6.80, 6.65 and then 6.35. May bean resistance is 14.65 with support 14.20, 14.90 then 13.75. May wheat resistance is 7.20. To turn bullish, you need a close over 7.40. Support is 6.80.
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