Our first report for direction on the demand front came with our weekly export inspection report showing 16.9 million bushels of wheat was inspected by the U.S.D.A. for near-term shipment. This was off from 17.9 the week prior; 19.2 a year ago, but over our weak four-week average of 13.7. Neutral at best describes the number. Traders won't sell short off it, but the record-ending stocks inventory of wheat doesn't allow this to be a big enough number on demand to buy long either.
Corn inspections were 27.1 m.b., down from 39.4 the week prior; 30.5 a year ago, and equal our four-week average of 27 m.b. Inspections year-to-day are 13 m.b. over a year ago, so though the weekly number is off, it is consistent with a decent four-week average that has demand up on the year. It is not bullish, but at least a friendly number for demand. This time of year.
Soybean inspections were 39.5 m.b., versus 43.5 the week prior; 48 a year ago; and our four-week average of 41.7. Year-to-date inspections are up 263 m.b. over a year ago. China was in for 23.8 of the total versus 16.5 the week prior, consistent with their big one week, lower the next buying pattern. Here is a weekly review of China's purchases on this report:
23.8; 16.5; 31.8; 19.9; 29.9; 18.6; 38; 18.7; 43; 29; and 54 m.b. You can see the staggered pattern. This makes the four-week average a more important number to base the weekly numbers off of. That being said, it is a good demand number as it is equal the four-week prior Chinese average buy of 24 m.b. With all the talk of a seasonal slowdown in China, buying U.S. beans as a record South American crop soon to come in, cutting our export share. We are yet to see it. We are certainly under the act to December pace that our harvest brought on, but we are seeing consistency in Chinese buying and receiving as the amount actually loaded and shipped remains consistently strong, suggesting no cancellations of previous Chinese purchases could occur.
The U.S.D.A. monthly crop report came out Tuesday, today, at 7:30 am Central Time. It put corn ending-stocks for the start of our new harvest and marketing year, September 1, at 1.719 billion bushels, down 45 million bushels from the month prior, and 29 m.b. under our pre-report estimate. They lowered exports by 50 m.b. which was a bit of a surprise. I believe long-term over the next six months, they will raise exports. The other surprise was they threw in a 100 m.b. increase for ethanol usage. They could have put this in last month or next month, but chose this month. It is a given as mandates from the Obama administration have ethanol and bio-fuels on the fast track. They also lowered world-ending stocks by 2 m.m.t. The commercial end-users still see the corn-ending stocks as large, even though it is the fifth lowest ending-stocks in 22 years, as they are convinced that bio-genetic seeds can overcome the most miserable of growing years. It is this psychology that remains negative in February. Last year, we broke hard in January. Rallied $0.22 into the February report, then broke $0.35 before turning up in March. So far, we have mirrored last year. Now, the big questions is, will we have one more break to match or make new laws or are they in. We need a close above 3.74 basis March to confirm a low is in or we will push to 3.42 with 3.30 as worst case scenario, before we turn up in March through June.
Let's polish off wheat quickly. They put ending-stocks at 981 m.b.; up 5 m.b. from the last report, and just a mountain of wheat. Wheat simply assumes a follower's roll to corn.
Beans put ending-stocks at 210 m.b. , down 35 m.b. from the month prior; 9 m.b. under the average pre-report trade guess, and down for the third consecutive month. They raised exports 25 m.b. and the crush 10 m.b. This is a conservative government move as they have yet to determine South America's export roll this year. Will they sell right out of the field, cutting into U.S. export share in the world, or, as I suspect, they will hold beans back to build domestic inventory to 1) be a yearly supplier of beans to the world and not just a seasonal supplier and 2) to have inventory to sell at summer high price levels when they are traditionally sold out. They raised the crush number by 10 m.b. to acommodate soymeal demand. Soyoil stocks were higher on this report. This is temporary and here is why. The unusually harsh start to winter in late December and January, led to increased demand for more meal into the feed ration as western plains cattle shivered off weight leaving feedlots to over-feed to keep weights up. As they increased the amount of beans being crushed to get the meal to blend with corn, it left no home for soyoil to go to with inventory building. This changes after March 1, as western plains weather turns milder and the record demand on the world market has beans being crushed to get the soyoil. Long oil, short meal, will be the crush spread of favor for funds.
Like corn, beans to shadow last year's trading with a hard January break, a rally into the February report, and last year saw new lows into February end before a March-to-June rally. If beans have one last leg down, it could be to 8.90 first, then 8.60 worst case scenario. Last year we pushed to 8.50 late February. Failure to form a low means a close over 9.60 basis March means lows are in through June.
In conclusion, the report was friendly corn long-term, and bullish beans, but Wednesday traders come in and say What Report? where's the crude?, where's the dollar ?and go back to trading seasonal outside market influences