Our first demand-side report came with our regular Monday 10:00am central time weekly export inspection report. For wheat it showed 12.9 million bushels of wheat was inspected for near-term export, down from 16.5 the week prior, 13.2 a year ago, and a weak, four-week average of 15 m.b. Year-to-date inspections are down 186 m.b. from the year prior. Record U.S. and world wheat inventories will keep U.S. wheat exports weak through year-end and the first half of January.
Corn inspections for near-term export were 25.9 m.b. down from 29.8 the week prior, up from 24.8 a year ago and just over our neutral four-week average of 24 m.b. Year-to-date inspections are 430 m.b. versus 428 a year ago. This is the first time we moved over a year ago since the new marketing year began September 1. Demand has not been as good as the trade had expected and I think that is due to bean demand being a priority to importers, but in the big picture were ahead of last year - - last year saw great demand.
Bean inspections were 58.2 m.b., up from 46.8 the week prior, 41 a year ago when demand was soaring and equal are very strong four-week average of 58 m.b. Year-to-date inspections are 542 m.b. versus 397 a year ago. China, as always, was the big buyer at 38 m.b. versus 29 last week. As always, its important to note that other importing nations were in for 20 m.b., so it is not just China in for high protein crops, but the world continues to expand their protein needs. It remains a very bullish-demand scenario for beans with the only chance for a pull-back in demand being perfect weather in Argentina and Brazil, January through March, allowing them to cut into our currently, sole market-share of world bean exports.
Pre-report trade estimate for ending stocks on Thursdays 7:30 am central time monthly U.S.D.A. crop report came out. Of the 17 major brokerage houses polled, the average wheat ending-stocks number was 886 m.b. versus last month's U.S.D.A. report of 885. The range of guesses were 846 to 910 m.b. Even the low range of the estimates is a huge inventory and tells us no one expects any surprises other than another month to digest record wheat stocks.
Corn came in with an average guess of 1.646 billion bushels versus 1.625 the month prior, and 1.674 a year ago final numbers. The range tells the story at 1.500 to 1.725. Those coming in high feel not enough corn was harvested yet in the lower-yielding, eastern grain belt to just assume yields are lower than the big yields seen in the western grain belt harvested first. They also see any abandonment of acres won't show up until the January report, as well as possibly seeing exports adjusted lower. On the other hand, the low range of estimates see a crop report who's survey of farmers went through December 7 and enough poor eastern belt yields were seen and poor weather that the U.S.D.A. will prepare the trade this month for potentially a very bullish number come January when the crop is in and final numbers show unharvested acres at record levels. That could be debatable as to what is unharvested. We probably will have a great deal of acres sit in the fields this winter only to get harvested early spring, not to be confused with acres flooded and or destroyed. The U.S.D.A. doesn't have a category to differentiate from acres gone to acres not harvested yet.
Anything on the low end of the range is very bullish as the trade will believe even further cuts will come in January. This will make this week's low hold through to the January report. If it comes in near the high end of estimates, we will break to a new low on the week but the slide will be limited and create a buying opportunity as the trade will fear December gains will be given back on the January report.
Finishing with beans. The average guess is 235 m.b. versus 270 last month with a range of 170 to 260 m.b. Like corn, beans also see a wide range. The low range guesses are not coming from a production or yield mindset but a demand thinking that the U.S.D.A. has under estimated demand, particularly from China and now is the time to address it. Demand certainly has been better than the U.S.D.A. estimates suggest. Others on the high range of estimates believe that since the U.S.D.A. raised last month's ending stocks by 40 m.b. from the month prior, they are unlikely to wipe it all out and then some, especially with a potentially slower export season ahead if South American weather and crops look to steal a share of our export market. Many believe they will use the harvest, which has shown great yields to play with the numbers and address demand increases on the January and February reports. There are arguments for all to justify and that is what makes the report potentially very bullish or bearish.
Monday's 3:00pm crop condition reports came out and should be the last of the year. For wheat, it showed 63% of the crop is in good-to-excellent condition unchanged from the week prior. Last year this date, we were 65% G-E on the last report as the crop went dormant. When we broke dormancy last March, the first crop condition report on April 6 came in at 43% G-E, showing a hard winter effect and not so good weather in March. So, though this is a good quality number, we will need a good winter snow cover to protect the young wheat seedlings from ice storms and high winds. Texas was the worst rating at 45% G-E, so they will be challenged this coming spring to find better than good weather to improve.
Corn harvest was put at 88% complete. Laggers were North Dakota 53%; South Dakota 73%; Wisconsin 77%; and Illinois 85%. These crops in these states look to get hit with a hard winter snow storm of 6 to 12 inches of snow. This could mean some damage to beans and corn if the snow is a heavy wet snow but suggests there will be plenty of acres to sit until spring now. There was no bean number as the harvest is seen as over. The technicals at midsession today read like this:
January beans have support at 10.30 but it's minor support, and a bearish crop report Thursday could see a move to major support at 10.10. A bullish report Thursday would have us push to and through 10.70, a surprisingly bullish number and a move to 10.90, but not past the 11.10 resistance before profit-taking. High risk traders should be long the report on a dip or conservative traders consider buying a January 10.50 call option and sell a 11.10 call option for $0.12 or a cost of $600 total cost and risk, plus commission. You have $0.60 profit potential or $3,000. If the report is bearish, you can sell out for probably half what you paid, but you have to assume there is more than 12 cents risk with a futures trade on the open Thursday.
Corn technicals have March support at 3.75 and first resistance up at 4.04 then 4.24.
You can buy under 3.80 and as close to 3.75 as possible and bet the ending stocks won't come in higher as some think. Conservative traders can buy the January cereal corn call that trades off the March futures. Buy the January 3.85 corn call for $0.10 or $500, plus commissions, total cost and risk. You have $0.10 risk on the futures with the opening and if a bearish report surfaces, you can sell the call on the open for probably $0.05. It is a way of getting in cheap, addressing risk yet have an open-end profit opportunity. The bean and corn calls should expire on the 18th, but you would take your profit or loss by Friday's close as it will be there.