MIDDLE OF MONTH
We started week's reports on the demand side with our weekly export inspection reports.
Wheat inspections were 9.1 million bushels down from the week prior; 21 m.b. our four-week average of 17.8; and a year ago 12.8; you would have thought after last week's $0.15 decline and $0.20 drop in prices the week before, that we would have drawn in some demand but apparently not. This had wheat drop from down $0.01 on the day, Monday, ahead of the 10:00 am report to down $0.09 three minutes after the report's release. Don't read a lot into this, as demand has been a negative fundamental for a year now and a negative through 2010 or until ending-stocks inventory turns tight again from our current record 1 b.b. to under 500 m.b., when we turn supply-side friendly again. In the meantime, wheat remains in a downtrend until 1) we get short-covering prior the March 31 planted acres report when spring wheat acres should come in lower; or 2) when trend-following funds begin to cover or buy back their recent record short position now at 59,000 contracts. History lesson, last October trend-following funds were short a record 60,000 contracts. In three consecutive weeks, they bought back 48,000 contracts pulling up wheat basis our current May contract from 3.72 to 6.02. It is not unthinkable that a similar short-covering rally is coming. What could trigger it is we break dormancy on our winter wheat crop late March and experience adverse weather from Texas north to Kansas. Then the planted acreage report shows a sharp cut in spring wheat acres pulling wheat through key resistance triggering a substantial rally in a horrible bear market. Be ready. This week, if May futures close above 4.92, buy long lightly, then buy heavily above 5.00. Short-term this week, 4.72 is major support.
Corn showed 36.5 m.b. were inspected for near-term shipment versus 37.8 the week prior; 35.2 a year ago; and four-week average of 32.7 m.b. From 30 to 39 is friendly; over 40 m.b. is bullish. It had corn trade both sides of unchanged several times into midsession on Monday, corn sees this week as another week of trading outside market influence of the crude oil and dollar index before next week becomes a transition week when we can start to see profitable short positions buying back and getting out as they begin taking month-end profits and getting positioned ahead of the March 31 planted acreage report. Technicals for corn are the same this week as last. We entered Monday with May support at 3.60. A close under and 3.50 is next stop with 3.34 as worst-case scenario. A close over minor resistance of 3.68 sets up 3.76 as next stop.
Bean inspections were 31.4 m.b.; versus 33.9 the week prior; 23.8 a year ago; and four-week average of 36 m.b. China was in for 13.4 m.b. of the total; versus the four-week average of 22.4 m.b. The total weekly number of 31.4 is good and shows more countries than China need and want beans for protein, but the Chinese 13.4 number shows the seasonal slowdown for China as they purchase freshly harvested South American beans now hitting their ports. Oddly enough, even though China is buying more near-term needs from South America, they are active buying U.S. beans for next year's 2010-2011 marketing year. There is nothing negative in the export demand-year unless China cancels large tonnage of previously purchased U.S. beans for future shipment and re-tenders to buy on South American ports. Bean charts show support basis March again at 9.30. A close under sets up 9.10 and 8.90, as worst-case scenario. If those lows are to be hit, it would have to be between Wednesday and Friday as next week is the last full week of the month and funds with short profits will begin month-end profit-taking and we can expect short-covering and positioning ahead of the March 31 acreage report. If new lows on the week don't occur late-week and Monday's lows hold, first resistance to test is 9.65; then 9.75. A close over 9.75 signals an upside, break-out. For those who want to listen to my Wednesday 2:00 p.m. Central Time web session talk on grains, you can call for a password to enter at 800-542-1022. I will break down the demand news currently happening by discussing the weekly export inspection report and weekly export sales report. Cover the weather in the grain states as pertaining to potential planting problems and discuss the grain charts and trade recommendations. Tm Hannagan 800-563-9510