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Holiday profit-taking coming up

Thursday's weekly export sales report was typical of the last two weeks. Weak wheat and corn and strong sales for beans. Wheat export sales last week were 317 thousand metric tons, 5% under our 4-week average.

For months now, it has been small-lot business from countries looking for quantity (at value) and not quality. Larger world trade for high-quality milling wheat for human consumption continues to turn to the Ukraine, Australia and several small European countries.

Corn exports were 208 million tons versus the three prior weeks of 251, 622 and 336.  All are well under the October weekly average of 1.161 million metric tons when futures were hitting $5.80 to $6.20. China was in for 60 million versus the three prior weeks of 119, 60 then 60 again, and well under China's October weekly average of 284 million.

China is now booking soybeans. U.S. beans are plentiful as  harvest winds down, and also the price is $1.16 off the October high.

The trade expects China to be a major corn buyer into 2012. It's all but certain, but as corn harvest here is being completed, exporters have plenty of corn. China will be patient and show up on price breaks only.

Soybean exports were 746 million tons, up from the three prior weeks of 604, 209 and 207. China was in for 517 of the total. On Thursday, the USDA announced China was in for 420, and another 124 from Friday should show up on next week's weekly export sales report. China is active, but as I have noted the last couple of weeks,  they are not overbooking as they had been for three years as a hedge against bad weather in South America.  As that continent’s beans emerge  and grow into December, more and more weather gurus are suggesting La Niña will bring a warmer and drier December through February for them.

This would bring greater exports for the U.S. Watch South American weather closely now. Brazil particularly has a sandy soil and dries out quickly. 

Okay, holiday ahead. Markets are closed Thursday for Thanksgiving. Grains and other markets are open Friday, but traditionally the trade sees it as a 4-day holiday – funds don’t want to buy long into it, since they have only one day Friday where they can exit trades.  Besides that, grains close early on Friday, at 12:00 noon Central.

History shows a pattern of long futures liquidation ahead of holidays. Our recent Veterans Day closing saw a 30-cent corn correction going into that holiday and a 93-cent drop the week prior to the July 4 holiday closing.

We are already seeing a decline in prices. The bullish wildcard is China can jump in for corn tonnage suddenly.  We started the first half of October between $5.80 and $6.20 and our average weekly exports were 1.1 million metric tons with China buying aggressively. So it's conceivable we could come in next week and see some new Chinese purchases.

On the technical side, March corn support entering today, Friday, is $6.12 then $5.90, which is the super buy point. Resistance is $6.34. January bean support $11.65  today then $11.50 and on down at $11.25. Resistance is $12.00 Monday and $11.95 Tuesday and Wednesday. Wheat support basis March is $6.10 today, $5.65.  Wow! Resistance is at $6.35.


There is a substantial risk of loss in trading futures and options. Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. PFGBEST, its officers and directors may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report.


Written by Tim Hannagan, senior grain analyst

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