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Funds to follow USDA report -- Tim Hannagan

Agriculture.com Staff 12/07/2010 @ 7:58am

We're starting the week with a report, our weekly export inspection and ending the week with the report Friday our November 10 USDA monthly crop report at 7:30 AM central time. We also have our usual spattering of weather updates and concerns, so volatility is the week's word. 

Wheat inspections were 19.2 million bushels, down from 22.2 the week prior and up from our four week average of 16.5. It's a decent demand number considering we rallied 1.10 last week. But, wheat is not riding up a strong demand pace, but fear that Australia's disastrous wheat harvest, further adding to tight world high protein wheat ending stocks for human consumption, may continue. 

We have heard talk that if rains continue, the amount of wheat that could fall into feed quality wheat is 30 to 60% of their crop. After this past growing season, worldwide being so poor, any news leading to our 2011 crop gets paid mega attention. It's more than just overall production of wheat, but production and availability of high protein quality wheat that miller's must have for the baking of breads, snack cakes, cereals and pastas. So, we enter the new year with tight high quality wheat stocks and big demand for low quality wheat for the feed ration. 

It may take until early spring when winter crops around the world break dormancy to get any good news. Corn inspections were 25.2 million bushels versus 29.4 the week prior and four-week average of 24.7. We need over 30 to be friendly and 40 plus to be bullish. So, the markets pushed lower Monday and await first sign of China entering as a buyer of corn. 

Bean inspections were 33.4 million bushels versus 64.2 the week prior and four-week average of 53. China was in for 21.8 of the total versus the weeks prior in order at 41.2, 48.2, 47.6, 41, 18 and 8 m.b. We're softening on demand, but it's still very supportive to the market. China goes in and out of buying patterns, but always maintains their long term goals of  more protein to keep pace with their domestic consumption increase. 

Corn and beans pushed lower to start the week, just as we told you to expect, as rain totals in Brazil are on the increase this week with potential for a major rain event 10 days out in the drier Argentine crop fields. But, Monday is when weather is priced in and Tuesday grain eyes turn to Friday's big crop report. It's probable prices will firm up into the report as each report since May was profitable only to the 'long's'. So, shorts will buy out and speculators buy a dip. 

March corn finds support Tuesday at 5.62 and resistance at 5.80 then 5.88 and 5.94. If we break support of 5.62 then 5.54 is next. January soybeans have support at 12.80 then 12.65. Resistance is 13.10, then our old high of 13.45. March wheat closed over its major resistance Monday of 7.80, flirting with the November 9 USDA crop report high of 8.00. A close over eight dollars and a test of contract highs at 8.60 could be seen. Putting charts aside goals this week were to buy any early week dip in corn and beans and look for a small rally into Friday's crop report. Then, traders want to go short after the report is released Friday and look for funds to take month-end and maybe year-end profits, as they do after each report since spring, where they were long and fat with profits going into the monthly reports release. The fundamentals of supply, demand and weather always get out of the way after report day, as funds and profit-taking to earn their income become fundamental number one.

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