Tim Hannagan is one of the nation's most prominent grain analysts. His report for Tuesday, November 22, 2011:
THANKSGIVING WEEK ANALYSIS
Monday's weekly export inspections report showed a soft, pre-holiday demand pace. Wheat inspected by the USDA for near-term shipment came in at 11.5 million bushels, down from 14.9 the week prior and 4-week average of 14 million, even after a $.50 drop last week. Russia continues to sell wheat under U.S. posted prices to recapture customers lost when they suspended exports last year when the drought hit.
With populations growing in Asia, and economies expanding, the future is in being a reliable world grain exporter in agricultural products - no matter how much you produce.
Corn inspected for shipment was 37.5 million bushels versus 35.4 last week and the 4-week average of 26. Considering we dropped $.40 last week and $.66 over the last two weeks, we should see sales/exports picking up. The 37.5 number is friendly though we really need 40 million plus.
The key question is still, When will China resurface with bigger purchases? The last big weekly export sales week to China was October 13, when they came in for 900 thousand metric tons. We traded at a 6.34 basis December futures that day, well above where that week began.
Bean inspections were 40.7 million bushels versus 50 for the week prior and the 4-week average of 47. China, the big player, was in for 33 of the total versus the four prior weeks of 46, 40, 36 and 32 million bushels. We were off only $.15 last week from Friday to Friday even though there was not much of a spread ($.40 from the high to the low) in pricing, so the reality is last week's value drop was small.
Bean demand continues seasonally good but not great. China is not overbooking U.S. beans, as weather remains good for emerging beans in South America. The weather site WXRISK.COM reports .25 to 2.00 inches of rain fell over the weekend with 75% coverage in Argentina while up to 2 inches of rain will fall over key Brazilian growing areas Wednesday through Friday (our Thanksgiving holiday period). The much talked about El Nina weather pattern has yet to rear its ugly head and bring hot and dry conditions there, but many still talk of a turn to drier conditions in December.
Trader psychology: unless weather threatens South American crops, U.S. export business won't pick up enough to drive prices higher before their crops come to market in February. So...weather is the wildcard.
Technicals are looming. March corn this week has $5.90 as key support. If broken, it is down to $5.70 for the next stop. But $5.90 has a little history. Last October 3, we hit $5.90 after a $2.00 break off our year's high then rallied to $6.66 on the daily charts. Before that, we hit $5.90 July 1 after a $1.40 break then rallied to $7.88! Additionally, our weekly charts also show $5.90 as support.
Last year at this time we saw December corn break $.90 off the November high from the monthly USDA crop report release to the Tuesday low ahead of the Thanksgiving holiday. Then, from Friday after Thanksgiving there was a rally of $.60 into the end of December.
We always break into Thanksgiving as it coincides with the end of harvest (and harvest futures pressure) as importers step back and wait for harvest lows to signal a buy. So our past holiday rally tends to be on solid demand and short covering.
Now, will seasonal hold true, or will the U.S. financial uncertainties continue to have funds cutting risk and selling off their positions?
Beans find chart support at $11.25. Last year's pre-Thanksgiving break was $1.50 followed by a Friday, post-holiday rally of $1.50 into the end of December.
Wheat had a similar pre-holiday break and post holiday rally last year, too. March wheat support lies at $6.00 entering Wednesday (11/23/11). A close under and $5.60 is next. Old wheat traders will come in Monday and buy one contract long for old times' sake as with Monday's opening, and so comes the old adage, voice of the tomb which says buy wheat on that date. The ancient adage came as winter wheat is now planted and emerged and only the worst of Mother Nature lies ahead into spring as the crop lies dormant and vulnerable to winter's wrath.
Hey, that was fun. Now another note: you are hereby prepared with chart, hindsight, seasonal logic and old adages. Funds don't know a bushel of corn or grain from a phone booth and don't care. They're 90% technical and trade daily off of the U.S. dollar and crude oil direction.
Markets close at their normal times Wednesday. They are closed Thursday and though open for trading on Friday, the grain futures close an hour 15 minutes earlier (at 12 noon Central).
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