Thursdays weekly export sales report showed 888 t.m.t. of wheat was inspected for near-term export, up 44% from the week prior. 800 or more is considered demand friendly for prices. One week with bullish demand doesn't change months of bearish demand numbers, but it's the first signal demand is surfacing.
If weather remains dry in the south western wheat states as we break dormancy this weekend, the funds may buy back more of their short 71,000 contracts they entered the week with. To be demand bullish we need sales over 800 weekly. Wheat looks to break dormancy in a larger area next week in Texas, Oklahoma and Kansas. All three states have a crop condition rating under the last USDA rating of 33% good to excellent condition in November when the crop went dormant. That was the lowest crop rating on record for that date. So wheat will be challenged to find sunny warm days and timely rain.
The last half of April up to May 15 will be key yield development time on yields and quality and their made or lost. A close on May futures over 7.30 would be viewed as technically bullish with 7.50 and 7.75 next resistance. If 7.30 holds we could retest its 6.80 support low. If broken 6.70 is next then 6.25.
Corn export sales were 282 t.m.t. with China in for 111 and 126 for the new crop year ending September 1. No demand here as the USDA continues to ration our 632 m.b. ending stocks or 25 day supply, by pushing our big Asian customers to other ports leaving us to fill only the whole at the end of needs. But keep in mind, when you're down to a 25 day ending stocks inventory even 282 t.m.t. psychologically supports prices. If we're going to test and breakthrough our support low of 6.80 last week, it will have to come from lower cash prices here in the weeks ahead.
March futures expired Thursday at $.20 over May, in line with higher cash prices due to tight stocks. Now that May is in the leadership role, if cash stays up or moves higher May will adjust up to keep its pace to cash. How it could break (cash, that is), with futures following could come from two issues. One, farmers move grain off the farm ahead of southern delta planting to begin next week. Two, Argentina and Brazil harvest of corn, especially Argentina, is sold heavily onto the export market, further cutting our exports and some finding its way here.
May corn has major upside resistance at 7.28. A close over and 7.48 is next. If 7.28 holds and a close under 7.00 come first, we will quickly move to 6.80 key support. A close under 6.80 sets up a spring low of 6.55. Then get long for the summer weather premium rally by index and trend following funds.
Soy bean export sales were deceptive. It showed 657 t.m.t., up from 392 the week prior. It showed China in for 183, and 220 sold to an unknown destination which the trade sees as China. They put new crop sales after September 1 at 126 t.m.t. all to China. These numbers are from last week's export total. Tuesday of this week the USDA confirmed that a 345 t.m.t. sale to China last Tuesday for near-term old crop year sale was actually for new crop year after September 1 and 225, beans and 120 corn. Yet it showed new crop year sales to China at only 126 t.m.t. It appears they had not subtracted the 225 new crop year exports from last week's numbers as it was probably too late. So we have to know the 657 number needs to be moved down by 345. Half the original reported number and under the week prior. This explains why beans traded several cents higher after the report released, and then drop sharply.
A quick harvest now in Brazil into months end and April looks to see near-term exports measurably slow. The break in prices this week, reflect China backing away from buying US beans in large numbers. Next week's upside threat comes from a Brazilian dockworkers threat of a strike on Tuesday. The last strike February 22 saw an early 25 cent rally give way to a break to down on the day as the strike was a six-hour event. Any length to a strike of a week or so, even a walk out without talk of an ending date leads to a sharp rally and opens the door for China to return to US ports for near-term delivery. We entered Friday with May support at 14.40. A close under sets up 14.20 then 13.90. Upside resistance is 14.75 then 14.85 and 15.00.
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 email@example.com.
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