Tim Hannagan: A profit-taking pullback in the grain market
We started Monday with our weekly export inspection report at 10 am central time showing 21.4 million bushels of wheat was inspected by the USDA, unchanged from the week prior, up from a year ago of 17.8 and 4 week average of 18 m.b.
The number is bullish in the big picture of strengthening demand off world production short falls. But, it's not a big enough number on the week to suggest panic-buying.
Corn inspections were 37.6 m.b versus 32.8 the week prior and 4 week average of 36 m.b. Not a panic number on the buy side but consistent with the record export pace on the year.
Soybean inspections were 11.7m.b. versus 16.5 the week prior, 11.3 a year ago and four week average of 8.2. Ditto, not enough up on the week to draw in new buying for the week, on the demand side, but consistent with a record export pace on the year. Demand near and long term remains strong for all three grains and looks to be even stronger in 2011.
The last two reports I talked about the seasonal pointing to a pull back in grains as harvest begins in September and something new has to enter to take out the years highs from August 5. That something could be weather across the Russian wheat prairies preventing planting of their winter crop. It still appears, as of today, rains will enter today thru Friday and if enough would see planting begin. Failure of the rains to come and wheat rallies with corn and beans in tow. But, it appears that won't be the case.
Be aware of another potential bearish event. Their are five trading days left in the month. Funds are fat with profits and can pay bonuses on profits taken if taken before the month ends. Corn is still holding long profits. Trend following funds added 70 thousand long positions to their corn portfolio this month. So, a profit taking pull back could occur. Beans and wheat still have ample profits even with recent declines. December corn entered Tuesday with support at 4.28. A close under and 4.10 is next with a close under 4.10, 4.00 is next stop. November beans entered Tuesday with 9.98 as support. A close under and 9.80 is next stop.