Tim Hannagan is one of the nation's most prominent grain analysts. His report for Tuesday, November 29:

Support Holds

Monday's weekly export inspection report showed beans with 41.4 million bushels inspected by the USDA for near-term shipment, versus 40.8 the week prior, but under our 4-week average of 47 and a year ago of 63 million.

Worldly buyer China was in for 31 million bushels versus the four prior weeks of 33, 44, 40 and 36 million. Like last week's report, it's good demand but not great. Without a weather issue in South America, and with freshly harvested beans available, China is not overbooking U.S. beans like they were for the past three years.

Weather since last weekend has brought ample rainfall and good early emergence in South America. Some forecasters are seeing a drier trend ahead into December, so the market will be watching weather closely. It should change to hotter and drier outlook. With any weather concern we could see a fairly measurable rally occurring with short covering and re-establishing of new long positions in the market.

Trend-following funds went from long 31 thousand contracts to short 6 thousand entering last week. A weather reversal could bring those 31 thousand contracts back and 6 thousand shorts could trade out.

Corn inspections were 30.5 million bushels, down from 37.8 last week and slightly over the 4-week average of 28. Traders are disappointed, but cautious; with corn off 78 cents in two weeks, demand has shown no measurable increase and China remains sidelined on corn purchases even while it is actively buying beans. This could change with the purchase of a million metric tons or more.

Wheat inspections were 15.3 versus 13.7 the week prior and the 4-week average of 12 million bushels. Demand continues weak as higher quality wheat out of Europe is a better value.

Overall demand for all three grains remain mildly supportive to neutral for futures with the sharp recent price break causing the trade to fell like demand will surface. A lot of undercutting of U.S. grain prices is ahead as the Ukraine makes up for lost export business from the prior drought with a much improved crop to offer now. But, things are turning again, as the Ukrainian winter grain crops finished early emergence in severe drought-like conditions. As you know our own wheat crop is going dormant in December with sharply lower crop ratings due to the Southwest drought. Markets do not usually trade early emergence problems before going dormant; it's in the spring when dormancy breaks and yields and quality are made or lost. But the Ukraine has fresh on their minds the prior year's drought and suspension of their export program. Plus, we recently saw a sharp drop in their exports in October from September. It could be they will further slow exports until it becomes clearer about longer-term weather. This of course would just improve U.S. export business opportunities, not guarantee better pricing and demand.

Mexico continues to stumble through its own drought, setting a potential for corn exports to improve. Note, Mexico's corn tortilla is essentially their bread and used every meal. So corn becomes the crop to import, not wheat. Almost 70% of the country is suffering from water shortages and that caused the government to cut its recent corn forecast by 3%.

The crop condition report after the close Monday showed 52% of the U.S. winter wheat crop is in good to excellent condition off 2% from the week prior, and 5% over the year prior. The 10-year average is 60%. Yes, an improvement but still one of the worst crop ratings to start a year in modern times. Last year's 47% was a 20-year low.

WXRISK.COM the weather site sees heavy rain Saturday and Sunday across the driest areas of Texas and Oklahoma. Meanwhile in the soft red winter wheat states in the Midwest, temperatures turn much colder into next week, probably putting the crop dormant. As always, we keep note of early emergence conditions, but don't trade the dormancy breaks.

Market psychology: we have held key $5.90 support on March corn for four days, and the January $11.00 beans, looking to make shorts in the market. It's nervous and shorts are exiting, but we have yet to see aggressive new longs. If short covering continues Wednesday new buying could enter pushing March corn to the $6.34 to $6.40 area and January beans to $11.65 near term.

This will precede the January 9 USDA crop report. The wildcard is that outside markets may worsen, pulling grains down as grain fundamental factors are thin.

Technicals: March corn support remains $5.90. A close under and $5.70 is next. First resistance is $6.12 then $6.34 and $6.40. January beans have support at $11.00 then $10.90. Resistance is $11.45 then $11.65. March wheat support lies at $5.80, then $5.50. Resistance enters at $6.08 today. A close over and $6.35 is next.

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