Short week with all our demand reports moving ahead one day. Our weekly export inspection report came out Tuesday, one day delayed due to holiday. For wheat it showed 15.8 million bushels of wheat was inspected for near-term export; off 2 m.b. from the week prior; 5 m.b. over a year ago; and equal our weak four-week average. I say weak because we are sitting on a record 981 m.b. ending-stocks. To be a bullish number enough to chew through ending-stocks quickly, we would need 30 m.b. or more weekly sold. So, from a shipment-to-inventory correlation, it is a neutral-at-best number and ignored by traders.
Corn inspections were 24.1 m.b. down from 30.8 the week prior; 34 a year ago; and four-week average of 28 m.b. In large, we have to expect lower sales interest as this week, China and neighbors celebrate the Lunar New Year Holiday until Sunday.
Soybean sales were 38 m.b. off from 41 the week prior; 48 a year ago; and four-week average of 41 m.b. It is surprisingly good considering China, our key bean buyer, is on a government holiday. China was in for 20.6 m.b. of the total, versus 23.8 the week prior; while outside countries were in for 18 m.b., versus 15.7 on last week's report. The mix of outside countries entering has expanded the last month, showing how strong world protein needs are.
We expect to see corn and beans to have a surge in demand next week as the Lunar holiday ends and pent up buying plays catch-up. Today was all outside markets with crude oil up sharply and the dollar index down, leaving funds to buy metals, stocks and grains, as we are still in that grey area of the year when supply-side issues on grains are sparse.
The negative news through month-end is it is our seasonal down-trend time and fresh in traders minds is that the last half of February last year saw corn drop $0.40 after the February crop report; beans fell $1.75; and wheat fell $0.80 before all turning up into March crop reports dealing with the acreage uncertainties.
The commitment of trader's reports shows large Index funds continue to hold large long positions with only light liquidation the last four weeks. Note, Index funds only buy long and never short. Trend-following funds who buy both long and short have switched their direction. Four weeks ago, they were long 185,000 corn contracts, and this week for the first time short 5,000 contracts.
In beans four-weeks ago, they were long 24,000, now short 36,000. Certainly, seasonal suggest the trend could continue to pressure prices, but it also lends to a very bullish situation soon or currently, when they buy back those shorts and go long.
In wheat, trend-following funds entered this week, short a record 74,000 contracts, versus 34,000 five weeks ago. This is important to note as the last time funds were short, a record volume of positions was last October at 60,000 short. The market was at 4.60. They spent three weeks buying back short positions to 13,000 short, pushing wheat 1.30 higher. We are getting close to the same situation.
We haven't made a new low in two weeks on all three grains and this further suggests at least a near-term low is in, but to confirm it would take another up-week as a higher weekly close with seasonal and the Lunar holiday working against it would set us up for our March rally.
March corn needs a close over 3.68 to set up next major upside resistance between 3.84 and 3.92 a gap. A close under 3.56 and 3.42 is next stop.
March beans need a close over 9.65, then a test of 9.85 is next, but a close under 9.35 sets up 8.90 as next stop.
March wheat needs a strong close over 5.04 to look chart-bullish, with a close under 4.80 support sets a test of 4.60 possible.