Tim Hannagan: USDA seen raising export projections
We started the week's reports with our weekly export inspection report. This report is important because it's a gauge of demand. We have two reports each week that the government informs us exactly how demand is going. Once the supply side of the market is known, then demand will become the driving force weekly export inspection report comes every Monday at 10 A.M. Central Time.
Wheat inspections were 25 million bushels and that was up from last years 16m.b. bushels and our four-week average of 19m.b. Clearly that's a strong number and suggests that it could even get stronger.
The spring wheat crop harvest is underway and as the harvest progresses over the next 30 days and finishes up we expect demand to be very aggressive. Corn inspections were 45M.B. up from a year ago of 37 and and a very strong four-week average of 35M.B. This was the second consecutive week over 40 m.b. Anything over 40 is considered very bullish for demand. What I liked about the number this week was that it came after Friday's close the highest close of the year.
So, traders were not concerned about the high price, they just needed corn. Soybean sales inspections were 7M.B. expected for near-term export. That was down from the week prior of 11M.B. and just under the four-week average of 9M.B. What we've seen the last two weeks is China backing away from what was a very aggressive export pace, as they know the harvest is just about underway. As the harvest begins here in September, they expect to have the cash availability for beans to be a much better value.
Overall, export demand for wheat, corn and beans looks to maintain a record pace going into 2011.
The next report was Monday at 3 PM central time after the close .Our crop condition report came out. Traders had expected to show a reduction in the quality of corn and beans from the week prior being very hot and very dry and they were surprised that it came out unchanged. Corn condition was put at 70% of the crop in good/excellent condition, unchanged from the week prior, and one percentage point above a year ago. This is what has traders confused, as last year's pre-harvest weather was the coolest and wettest on record. This year, we had over 65% of the Midwest much warmer. Some of the Corn Belt states recorded hottest temperatures on record and very dry.
How can the condition of the crop be equal? Traders are saying to themselves we will ignore the condition for now and just focus on the harvest that's getting underway and that'll tell the whole story. Harvest is beginning in the southern Delta and in southern and central Illinois and Indiana. Early reports are that the yields are coming in lower than expected but it's still too early to have the government respond. They (USDA) don't have enough harvest at this point to get a feel for what the crop condition really should be.