Thursday's weekly export sales report showed wheat sold last week was 150 t.m.t. down 13% from the week prior; and 21% under our four-week average. 95 t.m.t. went to Asian markets as the U.S. is their closest port of origin and they cannot buy low quality wheat from China as China is keeping grain home now. The sales are too small to move prices up. We need 650 t.m.t. or more weekly to draw buying to futures from demand. In the mean time, look for trend-following funds to continue their trek of reducing their once record short position pulling wheat prices up again in the month of May.
The last five week's saw the trend-following funds, not to be confused with large index funds, reduce their short held positions like this: 75,000 contracts; 74; 70; 61; and now 55,000 short positions held entering the first week of May. A close for the week over 5.10 is a signal to them to buy back more setting up 5.30 as next stop. If they continue to reduce positions as far as having 12 to 20,000 left, we will far take out 5.30, but one step at a time.
Bean export sales were 283 t.m.t. for old crop year sales, prior September 1, with 180 going to China and 209 for new crop year sales after September 1, with 168 going to China.
CHINA, CHINA, CHINA! Same old story leading to another record U.S. soybean export year. Sales remain seasonally slower as South America sells their crop but with harvest all but finished, we look for their exports to run heavy through May end and then they store the rest for later sales with the U.S. returning as the primary world port of origin for beans after June 1. Demand into China will not go away as the mandate of a more protein-rich diet is a cultural change in eating habits and looks to keep China in the import market through this decade. At some point, when the acceptance of biogenetic crops in China occurs and that is coming soon, they will be able to plant and grow enough to meet needs. That time is 4-6 years from now in my opinion. Growing season problems have China scrambling now.
We know their corn and bean production suffered recently and current planting season weather couldn't be worse with talk of bean planting three week's behind. They are boycotting Argentina soy oil setting the U.S. up to fill the hole. This has traders starting to sell meal ; buy soy oil spreads as a resurgence in soy oil demand means buy beans, crush them, sell soy oil to meet demand with meal stocks building. Stay long beans as seasonals and fundamentals of demand remain strong.
July beans have major support at 9.48 wich is the major trend line connecting the oct, feb, mch and april lows. A close under and 9.30 is next. 10.05 is minor resistance; then our May objective of 10.30 Buy first support, add over 10.05 and add again on a close over 10.30.
Corn exports were 1.850 m.m.t. a new high for the marketing year high. 51% over the week prior. Over our four-week average by 46% and the largest sale of corn since January 17, 2008, when Asians returned from their lunar new year holiday and played catch-up on purchases after a holiday slow-down. Asian business on the report was 950 t.m.t. of the total. This went to Asian neighbors of China as China's crop problems had them stop selling corn to their neighbors and pushing that business to U.S. ports. China was in for 115 t.m.t. of the totals and 240 t.m.t. sold to an unknown destination, which I am sure is China.
As you know, on my PFG web page reports each Tuesday and Friday, I accurately projected in February, March and April, how China's issues would force them out of the export market and eventually become an importer of corn. We do not know yet to what degree they will buy, but their sales of corn from their strategic grain reserve to domestic feeders to insure their hog and chicken expansion continues and other government mandate to increase their strategic corn reserve to 40% of domestic usage sets them up to replace all the corn they sold from reserves at a price currently over U.S. cash corn prices and buy it back on U.S. ports. Basic math suggests 200 to 300 m.b. and Asian neighbors of Chinas that have turned to us for corn, another 250 to 350 m.b. leaves ending-stocks here somewhere around 1.4 b.b. from our current 1.9. One thing is certain, around all the variables of demand and that is our corn-ending stocks will decline in the months ahead.
Corn basis July has support at 3.60 and resistance 3.74. Add to longs on a close over 3.74 with next resistance at 3.88; then 4.04. WXRISK.com the weather site sees a very wet pattern across the Midwest grain belt from Sunday through to next Thursday with a second system entering May 16 to 20. This should be supportive is well as frost fears Sat. and Sun. in the upper plains. But, Tuesdays, U.S.D.A. crop report has something to say about price movement. The common thinking is we could expect lower ending-stocks for corn and beans. Don't forget to go to RYAN@weatherbyrequest.com They are giving a free one-month trial of their weather site to help assist you in grain trading.
Don't miss my Wednesday web session talks each Wednesday at 2pm Central Time. I talk about all the grain issues of most importance to the price movement. It lasts about 40 minutes on average. For a password call 800-542-1022.