gain report

on December 24 2009 12:31 PM

Our weekly export sales report came out ahead of the open Thursday showing us how much of each grain was sold last week and becomes a strong gauge of demand. Now that harvest is complete, supply side news goes to the sidelines until the final production report in January, leaving us in a demand-side driven market. Wheat sales were dismal at 221 T.M.T., a marketing-year low, and 34% under our weak four-week average. These weak sales came off lower prices recently and that makes it worse. Key world-buyer Egypt continues to snub the U.S. and further develop its romance with Russian wheat. An Egyptian “Ag” Minister talked of increased Russian purchases and how the two countries will continue to work towards a long-term wheat purchasing agreement. The proximity to shipping savings make sense but clearly Egypt has abandoned U.S. ports for political reasons. Demand remains a non-pricing force for wheat and if wheat is going to find direction on its own for pricing, it will come from supply problems off 2010 crops. In the meantime, it’s a follower to corn and beans. Corn sales last week were 1.591 M.M.T., a new marketing-year high for the second consecutive week. We were up 28% from the week prior, 31% over our four-week average and over a year ago of 781 T.M.T. Key world-buyers were Asia – in for 430 T.M.T. versus the two prior weeks of 481 and 371. Drought-stricken Mexico was in for 553 T.M.T. Mexico’s purchases are a bonus as the U.S.D.A. couldn’t predict the drought, but increased Asian sales could have been anticipated as they load up ahead of our Christmas and New Year’s holiday export shipping slow-down. Soybean sales, too, saw big numbers as 1.195 M.M.T. were sold last week - up 28% from the week prior, and 31% over our strong four-week average. Last year this week, we sold a total 781 T.M.T. and all the talk was about bullish demand. We seem to be getting used to it, but watch out for talk of bigger crops in South America offsetting our demand as South America plans to store more grain this year leaving their exports in question and production a neutral issue. 2010 is the year of exporters and end-users building reserves. South America wants to be a 12-month-a-year exporter, even if only a small exporter three quarters of the year, as importers need reliable and timely shippers like the U.S. So, South America will be holding production back while China and other Asian nations build safe levels of inventories of beans and bean oil to insure the mandate for a more protein-rich diet goes uninterrupted by growing problems or wild price swings like 2008. March wheat has minor support at 5.20, then 5.14 and 5.06. We need a close over 5.40 before we can buy. March corn has support at 3.88 with resistance at 4.14. Buy support or on a close over 4.14. Bean basis March have minor support at 10.90 with resistance too high to mention. Next week is tricky to call as markets close early Thursday and shut down Friday, so, large funds don’t want to pile in or out the final week of the year but Index funds may inch in back long and get a head-start to what could be a bullish first-week of the New Year, as funds re-establish longs for the New Year and specs buy long into what should be feared to be a bullish U.S.D.A. crop report.

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