Alpari Grain Outlook 03/05

Demand-side fundamental showed up with our weekly export inspections report Monday. Wheat, inspected by the USDA to be shipped near-term, came in at 23.9 million bushels versus 21.1 the week prior and a four week average at 22. The slight increase came from Egypt and China combining for 10 million bushels. There were rumors last week that China was looking for some wheat. It's a nice bump in demand but far short of the 28 needed weekly to be bullish. There are still competition issues. Saudi Arabia bought 465,000 metric tons over the weekend, but all from other foreign ports. India looks to unload 900,000 metric tons or more in March. This will keep demand from becoming a bullish price source for wheat.

It's all about weather. Another snowstorm is crossing the Western Plains wheat states into the Eastern red winter wheat states Tuesday and Wednesday. This will bring badly needed moisture to the dormant wheat as it gets ready to break dormancy mid-March, weather permitting. The snowstorm led to wheat pushing $.22 lower at mid-session Monday. Trend following funds came in short 71,000 contracts. They're not ready to buy out of shorts yet as we have had three consecutive wet weeks in the previous drought stricken winter wheat states, suggesting a good start to early growth as topsoil is improved. Also, the 6 to 10 day outlook has the potential for a big rain event. Funds look to stay short for now.

Corn inspections were 15.7 million bushels versus 11.7 last week. The increase comes with help from China in for 2.3 of the total. Corn demand remains bearish in the big picture with harvest to progress quickly in Argentina and Brazil through March to April putting the record production on the world market. Bean inspections were 40.2 million bushels, up from 27.7 last week with China in for 25 of the total. That helped support beans Monday but the remainder of March could see demand slow.

Brazil's expected record harvest is at 37% complete. Central Brazil looks to be dry the next 10 days speeding up the harvest. Most of Argentina looks dry as well. Argentina harvest beans in April not for export, but to crush them, then export the soy meal and soy oil. Argentine crush will compete against our crush pace, the next 30 to 60 days. Cash bean prices are weakening in anticipation of the glut of grain entering in South America. We will hear more and more about more ships lining up for long waits to trucks lined up for miles waiting to unload with lines getting longer. The psychology will be Brazil can't get beans exported fast enough to meet foreign demand, especially to China. But the fact is as beans get out of the field they are safe from weather and potential problems cutting yields like mold and other diseases. It's those diseases that could prevent them from being exported due to low quality. The wildcard is will China be patient and wait for Brazilian beans or jump in for more US beans now. Rumors this week are that buying for US beans are certain and a positive tone to futures.

Just a note, Fridays USDA monthly crop report comes out at 11 AM central time. Expect some measure of posturing and position squaring Thursday and Friday. Technicals read like this. May corn support is clear at 6.80. A close under and 6.60 is next then 6.35. Resistance is 7.20 then a major trend line at 7.30. Close over and 7.50 is next. May wheat support is 6.65. Resistance 7.20. A close over sets up 7.40 next. Close over 7.40 turns wheat technically bullish. May bean support is 14.25 with resistance entering today Tuesday 14.60 then 14.75, 14.85 then 15.00. A close over 15.00 sets up two points of resistance at 15.25 then 15.70.

Beans are the leader holding corn and wheat up today. As long as China keeps buying US beans for near term shipment off Brazilian port shipping delays, fund psychology is the price has to move high enough to shut off demand and ration our historically tight US beans stocks. With corn, there are ports worldwide to buy corn at any price but exportable beans are only found in the US and South America. Watch the daily demand releases closely as any shift to or away from US ports will give us a sharp rally or break near-term. The long-term into March and in early April looks to be supply side priced and futures bearish.

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 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.