We started the week's reports with our weekly export inspection report showing 24.5 million bushels of corn was inspected by the U.S.D.A. for near-term shipment. This was over the week prior of 23.3 but under our four-week average of 30 m.b. We need to stay over 30 m.b. to keep demand friendly and over 40 m.b. to be bullish. I look for a stronger demand pace in November as the late harvested corn comes in and this should have the world market, especially Asia, in buying aggressively. I have been talking of a strong harvest demand scenario to occur for two months to prepare you to buy the pre harvest lows. The U.S. is the primary port for feed corn and the only port of origin in the world for beans until South American crops come in starting in March. With prices down from the summer highs, it will pay to own grain at harvest-value as a hedge against South American growing weather issues and the uncertainty as to just how aggressive China will be on buying grain for their needs and strategic corn and bean storage building process now taking place. After the close Monday, our crop progress report came out showing a 30-year low harvest pace for corn at 17% harvested, versus the ten-year average of 46%. This is not due to weather delays as much as farmers harvesting beans first for cash to pay farm bills due at harvest, and allowing corn to sit in the fields as long as possible to save drying and storage costs with the intent to store more corn long-term to late spring, when prices should be much higher. Long- term remains bullish as demand will strengthen and when the crop is fully harvested it will be smaller than current estimates. Near-term corn will follow crude oil up as per its relationships to corn-to-ethanol and the dollar-index and its relationship to exports. Crude oil up and the dollar down will keep Index and trend following funds buying. A reverse and funds will start selling longs. Charts suggest we are due for a correction, but it will take these events to get it. One, a lower close Wednesday and Thursday with talk of a drier pattern next week to allow progression of harvest and pressure cash. If that occurs, we could pull back to the 3.50 support into next week. The reverse is. The wet Midwest weather thru Saturday, and talk of more rain early next week, with higher prices Wednesday and Thursday off a weaker dollar and stronger crude oil, we will push to the 4.00 to 4.10 resistance. Buy a close on December over 3.88 or a pull back to 3.50.
Monday's export inspection report showed a whopping 39 m.b. of beans were inspected for near- term shipment, versus 25 the week prior, and four-week average of 14.5. Of the 39 m.b. China was in for 29 m.b. The last two weeks of big inspections, in part, were China playing catch up after the October 1 to 8 Asian holiday that put import business on hold but in large bean demand at harvest is just what we projected for the last month. We talked of China over booking U.S. beans for January to March delivery when South American yields become clear. Last year, Argentina's drought left China scrambling to U.S. ports to fill needs and there's no certainty it won't happen again this year on several issues from weather to farm worker ongoing issues with their government. China sees the U.S as not just the current and only port for beans but as insurance against South American problems. The crop progress report put harvest at 30% complete versus the 10-year average of 72%. Key western grain belt producers with the highest crop and yield ratings were Iowa 37% and Nebraska 55% harvested. This lends to the talk of higher yields and larger production numbers on the way. But, be careful as eastern belt producers have much lower crop ratings and harvest has just begun with Illinois 13% and Wisconsin 14%. Like corn, beans too look a little toppy on the charts but it's up to these issues near-term. If crude oil is up Wednesday and Thursday with the dollar index down and all the harvest delaying rain expected through Saturday, we could see November beans push thru 10.00 to our 10.30 resistance. If crude fades and we see more short-covering buying in the dollar index and a drier forecast for next week, it's possible November futures could pull back to 9.55 with 9.35 worst-case scenario. That would be a great long-term buying opportunity. Put buy stops at 10.02 or buy a hard break to support at 9.55. Stay bullish long-term into next spring but watch for a late-month connection.
Monday's weekly export inspection report came in at 18.6 m.b. unchanged from the week prior and under our four-week average of 20.7. On the surface it looks weak but wheat's not trading demand fundamentals now but supply side issues. There is an undercurrent of thinking that the worst of world over production is over and though ending stocks are at record levels, they feel they can only decline from here and that has shorts in the market buying out on their way to a neutral position. Funds have bought back 23 thousand of their short positions the last two weeks. Production looks smaller in Canada, Australia, Russia and Argentina to start. Our current U.S. hard red winter wheat crop is 69% planted. But, there are some problems with the soft red wheat variety delivered against Chicago Board of Trade Exchange futures grown in the eastern belt. Illinois is 13% planted Indiana 22% and Ohio 45%. This is because the late harvesting of corn and beans in these states leaves the land occupied. It's possible a much later harvest could leave wheat acres unplanted. The worst of production and supply concerns are behind us but were not bullish either. We are still poised to see a market where funds are on a goal to get to a neutral position and that would take buying back another 47 thousand short position. Add to longs or buy a close over 5.20 basis December futures. Strong support lies at 5.08 so sell a close under.