Alpari Grain Report 11/13

Fridays crop report by the USDA had no bullish surprises but came in slightly over pre-report trade estimates. Soybean production was estimated at 2.971 billion bushels up 111 million bushels from the month prior and 78 m.b. over the average pre-report estimate and over the highest estimate of 2.959. Ending stocks were 140 m.b. up 10 m.b. from last month and 7 m.b. over the average estimate. Clearly demand more than offset the production increases, but November bean export look to slow measurably now and that could lead to a bigger increase in ending stocks for the December report.

Corn production was estimated at 10.725 b.b. up 19 m.b. from the month prior and 55 m.b. over the pre-report estimate. Ending stocks at the end of 2013 marketing year were estimated at 647 m.b. versus 619 last month and pre-report as of 634. The corn and bean numbers were small marginal changes in the big picture, but essentially they were now out of the way so the market could get back to demand-side fundamentals which are largely bearish.

In Thursdays grain report of mine distributed prior the USDA report, I noted if numbers came in at or above the trade estimates, sell short the market as the grains will go back to a negative bias on a weakening demand scenario. Corn broke $.43 from Friday's high to Monday's low; beans broke $.98 and wheat $.61 down. Production fundamentals are shelved now as the USDA December monthly report will only adjust ending stocks and put final 2012 production on the January report. Our weekly export inspections report showed 10.4m.b. of wheat was inspected by the USDA for near-term export versus last week's 14m.b. Year-to-date inspections are 427 m.b. versus 488 a year ago.

Demand remains weak as some European countries continue to sell wheat at value under the US. Corn inspections were 9 m.b. versus 15 last week and 27 a year ago. We went back to 2009 and could not find a number as low as 9m.b. Corn will continue demand bearish as our government rations the crop through a slowing export policy to insure ending stocks do not decline further. Bean inspections were a little better at 64 m.b. up from 59 last week.

Key player, China, was in for 47.2 of the total versus the three prior weeks of 46, 47 and 49. The $.90 break in prices found a few outlying buyers. But China was constant with recent weeks. You would normally see a surge in their buying but we suspect they could be waiting for South America crops to enter in about 100 days from now. They know that the increase in acreage there and good weather in December and January would flood the market with over 20 million metric tons more beans and if all that occurs, buying it under $12. Of course if December and January unveil good growing weather, new highs are certain.

The article is provided by Alpari