Weekly export sales report came out Thursday at 7:30 AM Central Time with a swath of bearish demand numbers. Wheat export sales last week were 484 TMT, down 46% from the week prior and 25% under the four week average. All the buyers were small lot feed quality purchases, with no big buyers of wheat for human consumption. The world's big monthly buyer, Egypt, was absent from the list. They're boasting a 90 day current wheat supply to carry them until the world winter wheat crop comes to harvest in May out of the European Union, US and Black Sea regions.
Wheat's recent low the week of March 4 at 6.80 has given way to a $.48 short covering rally as trend following funds have gone from short 72,000 contracts to short 65,000 entering the week and covering more this week. Demand isn't the driving force, but supply side production fears as our winter wheat crop broke dormancy last week in most areas. Crops went dormant in November rated 33% good to excellent condition, the lowest rating since 1988. Next week looks to bring below freezing temperatures Monday through Wednesday. Wheat early development leaves it not as vulnerable to damage, but the market trades fear before fact and the fear is that damage could occur.
Offsetting this, the new 30 and 90 day forecast came out bearish with warmer temperatures and normal rainfall, which was previously below normal. A close over 7.25 basis May futures, major resistance and we could uncover more shorts and move to resistance of 7.50, then 7.75. A close under for the week keeps us in a bear market channel with support at 7.00, then 6.80. Corn export sales were 92,000 metric tons, down 67% from the week prior and 59% under the four week average. China was in for 110. There were a smattering of switched port destinations, decreases of previous commitments and cancellations all offsetting any new buys.
Demand looks to further weaken as Argentina's corn harvest floods the market with corn; $20 per ton under any US posted price. Near-term cash prices are at a $.40 premium to May futures putting a floor under breaks. Next Friday's quarterly stocks report will attract more buyers than sellers. Bears need a break in cash prices. That cannot happen until after Thursday's report, as farmers are hoping to sell grain after a rally report day. A surprise that's bearish looks for selling as well.
Pre-report trade estimates put next Thursday's planted intention report numbers for corn at 97.339 million acres, versus 96.5 last year. Corn stocks are estimated at 4.99 billion bushels, versus last December of 6.023. A close over 7.24 makes next resistance 7.36, then 7.46. A close under support is 7.10, 7.00, then 6.80. Bean export sales were a weak 107 TMT off 84% from the week prior and 71% under our four week average. Brazil's crop is 54% harvested. Getting ships out of ports is always a slow process but it's moving.
China has backed off US purchases big time knowing waiting will pay. For the second time in a month they have released over 1 million metric tons of beans from reserves to get to the crushing facilities to ensure adequate domestic bean supplies, also buying a lesser quality protein oils like palm oil and rapeseed oil. They're doing whatever it takes to keep from buying expensive US beans. Upside moves are limited to threats of a dock strike in Brazil and that would bring fears of China re-purchasing in US ports.
Pre-report trade estimates have quarterly stocks are coming in at .948 MB, versus 1.314 BB in December. Planted acreage is estimated at a record 78.351 MA, versus 77.5 last year. May support is 14.20, then 13.90, with resistance 14.50, then 14.70.
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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