Thursdays weekly export sales report drew a negative response from futures. The report tells us how much of each grain was sold for future shipment and becomes our best report on demand fundamentals. Corn sales were 142 t.m.t. down 13% from the prior week. Average sales the last four weeks were 159 t.m.t. Average weekly sales for October 2011 were 1.161 m.m.t. and October 2010 569 t.m.t.. The high price of corn in October 2011 was 4.50, October 2011 7.50 and October 1 this year's 7.75. Price rations commodity. That's the purpose of the market. But corn exports are sharply lower than a year ago as a result of world demand for feed grains increasing for three consecutive years lowering our corn ending stocks to historically low levels, while production issues failed to keep pace. The high price is rationing the crop but the government as well has played a role in rationing.
There have been many news bits that lead us to believe our government, on fear of running out of corn, has told many of our regular buyers to buy elsewhere first and use the US only to fill the gap in their needs. Our most reliable corn purchaser Japan has recently purchased corn from other foreign ports at a price higher than here in the US as well as in South Korea. At China's request, Argentina the world's second-largest producer exporter of corn, has planted more corn acres this year and agreed to supply China with its results for 2013 shipment. We are seeing cancellations of previous Chinese purchases of US corn. Clearly they intend to repurchase on another port. Corn sales can't get any weaker than they are, so any increase will see a market response but we can't project when any pickup will occur as harvest is about complete and exports continue to weaken when seasonally they should be increasing.
Bean export sales were very good but not great. Sales were equal the week prior at 522 t.m.t. but down 33% from the four week average. China was in for 274 t.m.t. versus the two prior weeks of 268 t.m.t. and 227 t.m.t. The market had expected better exports, so they dropped to down $.11 on the day after the report's release. These exports are enough to be supportive from a demand perspective bringing buying off breaks as traders see demand staying constant as were the world's only port to buy beans from until South American crops come in next February. But like corn, beans too see some rationing occurring. China is forward contracting to buy Brazilian beans for shipment February on out. The price of soy oil is over palm oil. Palm oil is not as high in protein as soy oil, and it's not as clean. China grain groups are already projecting a 5% increase in palm oil imports with big producers Malaysia and Indonesia cutting export taxes and tariffs to move there palm oil a little quicker.
Look for bean demand to remain relatively supportive until the South American weather, especially in Brazil, becomes clearer into late November, December and January. Should Brazil be dry during the growing season, US exports will increase as China and others buy insurance her; especially after last year’s drought in South America. Should Brazil have ideal growing season weather from December through March they will produce an estimated 15 million metric tons more beans to export and that will end up dropping beans two dollars or more here during a January and February correction. How's the weather as planting continues now. Argentina the world's third-largest exporter has had above normal moisture to date. Brazil the world's second-largest producer exporter has normal rainfall in southeast Brazil, but all the other regions in central and northern Brazil, very dry and hot. Wheat export sales were up 572 t.m.t. up 40% from the week prior and 61% over the four-week average. Sounds good, but 700 t.m.t. or more is needed to be bullish.
The good news is we’re up for the third consecutive week. What's happening is competing export competitors are having poor production and selling less. Australia, the world's current number two wheat producer exporter sees production down 28% to a five-year low. Russia the world's number three largest producer exporter, has apparently run out of exportable wheat after drought ravaged crops. Talk yesterday had Russia preparing to ban sales, effective November 15, which may mean they only intend to ship what was sold prior and no new sales. The negative news is a lot of that wheat on this week's export report went to countries buying feed quality wheat at prices under high quality. There's still a few countries in Europe that have wheat to sell at a discount to US prices. World's biggest monthly buyer of wheat, Egypt, purchased over 500 t.m.t. from France, and nothing from the US. We’re about a month away from being a primary port in the world to buy wheat from. When we break resistance at 9.15 basis December futures, buy with both hands as index and trend following funds should be aggressive buyers.
Technical read like this. December corn support is 7.30. A close under and 7.05 is next. Resistance is 7.55 then 7.75. November bean support is 15.40. A close under and 15.05 is next. Resistance 15.70 then 16.10. December wheat support 8.55 then 8.15 with resistance at 9.05 and major resistance 9.15.
For those looking to open up an account at Alpari and trade grains using me as your broker call 312-470-1112 extension 304 or e-mail me your suggestions and thoughts.
The article is provided by Alpari