You are here
Tim Hannagan: Were you ready?
Thursday's weekly export sales report showed a gauge of demand.
It put corn sales at 561 t.m.t. off 4% from the week prior as Asian markets are sitting back and watching the fast harvest pace and lower cash prices for a chance to get a better buy. Meanwhile, they ignore the higher futures. It's a seasonal expectation.
Wheat sales were strange in that near-term sales were strong but cancellations of new crop year sales after June 1, 2011 offset the positive near-term sales. Total overall sales were over 500 t.m.t. viewed as a negative results as the cancellations tell us importers see ample US and world stocks and decided to stop the panic buying they were in.
It's wait and see now as to whether Russia will get their winter crop planted or fall well short of intentions. If they fall short by 30% or more panic-buying begins again for the 2011 marketing year.
Soybean exports were a whopping 1.083 m.m.t. with king of the world protein buyer China loading up with 810 t.m.t. of the total. Now, that's probably a little panic-buying with all the talk of LA-NINA weather drought conditions hampering planting of beans in Argentina and mostly Brazil, the world's number three and two producer exporters behind the US. In terms of South America weather and its impact on prices, we understand it's still early. They can plant beans thru October, yet September is the preferred month. So a change in weather conditions could yet occur.
The problem is the fear. The market trades the fear before fact. The word LA-NINA creates fear in traders minds like never before. This comes after the LA-NINA weather pattern brought the worst drought in 50 years to Russia and dry conditions destroying crops across Europe this summer. A drought in South America is far more bullish for beans than a drought in Russia for wheat, as wheat is produced all over the world, while the worlds exportable bean production solely comes from the US in the summer fall harvest and Argentina and Brazil early spring harvest. So, weather there will be watch daily by the trade.
To date, southern Brazil is getting some rain but central and northern regions have been dry since late spring. Near-term, rain could enter next Wednesday in southern Brazil and move into central regions by Friday.
In general, the main weather software being used by weather gurus sees the rains largely confined to the south. Last Friday's report that I wrote was titled GET READY. The reason for the title was, I noted in the report that after a higher opening would occur Sunday and Monday, off poor weekend harvest yields, all three grains would see selling into midweek as large funds, fat with profit,s would take their month-end profits and pay bonuses.
To be ready to buy that break and get along into the new weekend and position prior the potentially bullish October 8 USDA crop report. Corn Sunday night and Monday high was 524, a new high for the year with a pullback to 4.94 the price support we gave to buy on my Tuesday update. Beans hit 11.98 high Sunday and Monday trade with a pullback to 10.79 midweek Thursday. Wheat high to start the week was 7.60 the resistance we gave you prior to this week, then dropped to the 6.95 area. We gave support for you down to 7.00.
The long and short is we got the measurable late month correction as expected and a great buying opportunity for the near and long term. So, as this report today is titled WERE YOU READY. If so, you bought the dip this week.
Near-term traders should take profits on Sunday nights rally or Monday then look for another correction by mid-week and get along for the October 8 crop report.
Long-term traders should put profit stops in and trail them. On my regular
Friday saw sharply higher trade in the grains for the ninth consecutive Friday as traders again expect weekend harvest results to show poor yields for corn and beans. The bean rally dragged corn and wheat along a little higher than last week as beans battle with a surge in Chinese bean buying on fear of continued drought during South American September planting period.
Remember, only three countries export beans. The US, Brazil and Argentina. Any one of them in trouble and market psychology is a third of the world's exportable beans are threatened. In terms of the surge in Chinese buying, it's simple market strategy. They figure we will buy all the beans we can now at $11 from the US for January through May delivery next year in case drought in South America has beans sitting at 12 or $13 then.
If rains comes and yields are high and beans are $9 or $10 early spring, they just cancel the previous buys. That's world trade, how it works, without any penalty to them.