February 23, 2010

MONTH WINDS DOWN

                Full week of trading ahead to end the month.  We started Monday with our weekly export inspection report showing 17.7 million bushels of beans were inspected for near-term export versus 1.1 the week prior; 10.3 a year ago; and four-week average of 17 m.b.  It is neutral at best to demand, as we sit on a record 981 m.b. of ending stocks inventory.  Seasonals see wheat as turning up now as we head into March and the early Spring emergence uncertainties of our winter crop.  The old saying,  Voice of the Tomb, has wheat as a seasonal buy every year as of February  21, most of these old exchange sayings keep their longevity generally by looking back a month later or so.  Their exact timing is questionable, but seasonally we do look for a turn up into March through May as our winter crop breaks dormancy in the western plains of Texas, Oklahoma and Colorado in March and develops the head and kernals in April and early May with Kansas joining in.  This is when weather is critical for yield and quality development for the crop, so a weather premium is built in.  Take it for what it is worth.

                Corn inspections were 34.1 m.b.; up from 24 the week prior; 28.4 a year ago; and our four-week average of 27.2.  In part, the Lunar New Year Holiday is over and Asian countries are returning to the import market. 

                Bean inspections were 34.9 m.b.; versus 38.6 the week prior; our four-week average of 39.7; but over a year ago of 30.6 m.b.

                Key-player China was in for 21.9 of the total; versus 20.6 the week prior.  China is back from a week-off holiday with government closings.  So, the big question is will they play catch-up on imports this week, or will sales move to South America.  The El Nino weather pattern has brought record rainfall to large areas of Argentina and Brazil with areas of production seeing up to 800% of normal rainfall and some flooding.  This certainly lends thought that production there could be lower than earlier estimates, but increased acres planted are sure to have their crops over the year prior and competition against U.S. exports the next 90 to 120 days.  A year ago this week, corn, beans and wheat all hit their seasonal lows and turned up with sharp gains in March, which were a combination of shorts in the market buying back positions and speculators buying long into the period of planning and growing uncertainties.  The commitment of traders report showed for the first time in a month trend-following funds were buying back some of their short positions built in corn, beans and wheat.  Will they re-enter as sellers as they have after short-covering since early January, or is this our signal they are done with selling our seasonal downtrend in January and February to begin going from short to long the market as seasonal turn up after March 1.  Technicals read like this:

                March corn has resistance at 3.86 to 3.92; a chart gap left from the week of January 11; a close today over 3.68 is needed to push there.  A close under 3.68 and 350 is our next support.

                March bean support lies at 9.30; the 9.00 and 8.90, but a close over 9.65 says buy long either March for a near-term uptrend or July for the long term trend.  9.65 is critical resistance.

                March wheat support lies at 4.80; then 4.60; but a close over 5.04 major resistance signals a key-buying opportunity.

                Seasonals turn up in March, so buying breaks this week is a good idea.