Tim Hannagan: Civil unrest
Thursday's weekly export sales report started the day with mixed demand signals.
Corn exports were 414 t.m.t., off 54% from the week prior, 31% under our four-week average and well under a year ago of 902. Key Asian customers were in for 207 t.m.t. versus 197 the week prior, but under the 400 t.m.t. needed to be friendly from a demand perspective. Corn demand continues to be in the future. Exports have been neutral at best for months. Yet, all demand fundamentals long-term into fall remain as bullish as we have ever seen.
Ending stocks, as of the last USDA report are 745 m.b., about a 40-day supply come September 1, 2011 the end of this year's grain marketing year. The last time we had a stocks-to-use ratio this low was 1996. January through February then saw a gradual $.50 rally. Then March to July saw a two dollar rally, over planting and growing concerns. Very little bearish news exists.
We're beginning the new year with a lot of little pieces of bullish news from all over. Floods in South Africa look to have corn planting down 8%. Argentina, the world's second largest corn producer/exporter, as we all know look for a much smaller 2011 corn crop due to a La Niña weather drought pattern.
Early US acreage estimates are coming in with only slight acreage increases expected, setting up 2012 ending stocks to be lower. Meanwhile, the first summer weather forecast of the year believes a strengthening La Niña will bring warmer and drier conditions to the US. So, nerves are frazzled in the corn giving us a very volatile 8 day trading period.
Near term, the question remains will funds match the two years prior, with a price correction into February to re- balance their books before re-entering long for the planting and growing season. Or, will a similar pattern to 1996 and 2008 persist with higher prices into spring?
Follow the charts. Corn technicals read like this. Entered Friday, March support is 6.48. A close under makes 638 then 628 our next support. Resistance is 6.68 then 6.90. If 6.48 holds Friday, 6.50 is support Monday.
Soybean export sales were 780 t.m.t., up 7% from the week prior and 36% over our four-week average, with key world player China in for 395,00 versus the two prior weeks of 493,000 and 217,000. It's a good indication of just how strong demand is as seasonal business turns to South America this time of year. In part, the demand surge could be credited to China's New Year Lunar Holiday, beginning February 3, for one week. China could be loading up on beans before the government goes on holiday.