PRE- HOLIDAY NOTES

Thursday's weekly export sales report was mixed. Soybean sales last week were 436 thousand metric tons, off 28% from the week prior with China getting 206 of the total versus 338 the week before.

China stepped back a little last week as they prepared for their trade visit to Washington this week and a more aggressive buying pattern. Through Thursday, they had purchased 120 thousand metric tons, as well as reaching a long-term agreement for soybean purchases.

The longer-term agreement can be expanded or contracted depending on circumstances like price spikes and weather, so it's not like actual sales - more like a line of credit at $4 billion. We it to turn into sales/exports.

Corn exports reported Thursday were 1.005 million metric tons, up from last week's 694 thousand metric tons, and above the 4-week average of 830. Though China was absent, Egypt took 240, and Mexico for 415 were the big players. Mexico's drought has had them buying U.S. corn for 11 consecutive weeks. The drought continues, so we expect the demand to continue as well.

Domestic demand for corn remains robust as well. The sharp summer high price spikes for the past two years have ethanol producers blending and using the pre-summer low prices to build inventory storage. Therefore, when corn prices surge in summer, along with crude oil and gasoline prices (due to seasonal high consumption), they can sell the previously stored ethanol at a profit. Expect them to continue to buy corn for ethanol production heavily through March.

The USDA came out this week with its 10-year baseline projections for grain production. As usual, the market ignored it. The reason: it only gives planted acreage projections. Because world populations are always growing, they come in with higher acreage estimates to compensate. Population growth throughout the last five years has left acreage increases insufficient to meet demand. The other problem with the report is that it is void of demand indicators. As you know from being a regular reader of my reports, large trading funds controlling price trends focus on demand-side fundamentals over supply-side. Repeat after me: demand...not supply...controls the trend.

Markets are closed Monday for Presidents' Day in the U.S. Traders will be reluctant to add positions or risk, especially with the weather conditions expected in parts of South America. WXRISK.com sees a good soaking of 3 to 5 inches today through Sunday in central and eastern Argentina - the big producing areas of Buenos Aires and La Pampa with 70% coverage and another 1 to 2 inches Monday to Thursday.

Southern Brazil could get .50 to 1.50 inches Monday and Tuesday. If the rain totals are accurate, we should return Tuesday to start the week with lower prices. After last Thursday's February 9 USDA crop report remember we anticipated post-report profit taking by funds for a late February low to buy long and hold into the March 31 planting intentions report. Even longer than that, actually, as the late February low should hold through the summer growing season.

Corn prices advanced 30 cents off the crop report high. Beans gained 35 cents since just before that crop report, greatly influenced by talk of a heat dome entering South America while the beans are still in the growth phase. Wheat was pulled down 50 cents.

All signals in grains remain bullish in the big picture, but profit taking always causes a break after a key crop report.

Once we enter March, all talk turns to the March 31 planting estimates report; weather in South America will take a backseat but we'll be watching ending production and crop losses.

Technicals:

May corn support is $6.20 then $6.16. Any break to this level should be bought. Resistance is $6.48 then $6.56. May bean support is $12.35. Resistance is up at $12.70 then $12.90. May wheat support is $6.25 then $6.15. Resistance is $6.50.

If the rains do not happen in South America after all, then prices will not dip to test supports.

There is a substantial risk of loss in trading futures and options. Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. PFGBEST, its officers and directors may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report.