U.S.D.A. NUMBERS NEXT

11/9/2009

Thursdays weekly export sales report came out showing 564 T.M.T.  of corn was sold last week up 54% from the week prior but the week prior was a very low number. The total is neutral to pricing as 800 T.M.T is needed weekly to be friendly or price bullish. It’s much of the same we have seen the last several weeks as little to no corn is available for shipping as corn harvest is at a historical slow rate. As harvest pushes into high gear, product availability will see demand increase. Key Asian businesses did pick up with Asian sales of 290 T.M.T. versus 90 the week prior. Wheat saw export sales of 284 T.M.T. down 18% from the week prior and 49% under our four week average. With record ending stocks here were seeing hands to mouth as needed buying. Demand for wheat remains a non pricing fundamental. All eyes are on any changes in major exporter production  problems. Soybean sales were 522 T.M.T. last week off 24% from the week prior but still a very good number. China was in for 290 T.M.T. of the total and look to continue being a major buyer of U.S beans thru harvest. Today Friday they bought 356 t.m.t. to show up on next weeks report . Near term we get ready for the big November 10 U.S.D.A. monthly crop report next Tuesday at 7:30 am Central time. The pre report trade estimates of the 28 major brokerage firms and private analytical firms came out late Wednesday. The average pre report trade guess for corn production was 12.962 billion bushels. This is 56 m.b. under the October report. The ranges of guesses go from 12.656 to 13.200 b. b. The market had been fearing lower estimates as October was a terrible weather month as the corn and bean growing season came to an end. Too much rain and an early month freeze and frost. Soybean production had an average production estimate of 3.262 b.b. up 12 m .b. from last month with a range of 3.150 to 3.379. The fractionally higher average may be attributed to thinking beans were far enough along in their maturity to avoid weathers worst effect. Either way it’s all a guess.  Looking back the last five weeks here’s the pattern. They spent the first three weeks of October buying corn and beans as each week lent to a bullish weather pattern of either freezing temperatures, frost or excessive rain fall and flooding. The final week of October saw funds fat with profits take them pulling us back. The first three days of the this new month before crop estimates came out, we saws the fear of the potential November 10 report on Octobers foul weather bring buying back in with corn posting a 34 cent rally from Fridays low to Wednesday high. Beans a 50 cent rally and wheat in a followers roll a 40 cent rally. Then profit taking Thursday and Friday as pre report trade guesses came in not as bullish as thought having traders remove some of  the pricing fear from the weeks start. Conservative traders usually sit out these reports but aggressive traders who want to approach it with risk parameters can look at options. Consider buying 1 December 3.80 corn call at 8 cents or $400 you have that much risk on a futures trade just for the opening next Tuesday. Yet, if the report is bearish you can scalp out for probably less than half the option cost on the opening. Should the report come out surprisingly bullish we could push to 4.30. Soybean traders might consider buying a January 9.70 call and sell the 10.20 call for 15 cents or $750. Cost and risk. You have 50 cents profit potential or $2,500 on a bullish report, yet if it’s a bearish report you can sell it out on the opening for even less cost than you started with. Certainly there’s more than 15 cents risk on the futures when they open Tuesday. Now, let’s look at all the possibilities off this report. If the report comes in with a cut in corn production of 250 m .b. or more. December corn will push thru the 4. 08 resistance  on the charts and push to 4.30 before profit taking. If the report raises production by 100 m. b. or more than we head straight to 3.40. On beans a cut of 100 m.b. or more and January beans push to 10.70 before profit taking. An increase of 20 m.b. or more and we will drop to 9.30. Of course, any drop in prices will be looked at as a good long term buying opportunity, while a report rally only confirms further supply tightness to meet record soybean demand. Final note, harvest weather looks good for the next 7 to 12 days with normal temperatures and below normal rainfall. I m studying a new weather web site and find it to be very accurate. Give it a look at commoditywx.com

Tim Hannagan

PFGBEST Research Team
800.563.9510
thannagan@pfgbest.com