7/8/2009

Take The Money

Corn:

The Week’s Report began with Monday’s weekly Export Inspection Report showing 31 million bushels of corn was inspected by the USDA for near term shipment, up from 29.3 the week prior and four week average of 30.5.  Not bad, but not good- more neutral.  A negative near term demand number is under 30 m.b.  Bullish is over 30 mb.b and friendly demand is anything between 30 and 39 m.b.  However, with our recent price correction and the number at the low end of our friendly scale and have to say it is a neutral number for price action this week.  The Crop Progress Report at 3:00p central time Monday showed 71% of the projected 87 million acres of corn planted are in good to excellent condition.  This was down 1% from the week prior but 9% over a year ago and 3% over our 10 year average.  Traders had expected an improvement on the week as last week’s weather was good for crops.

Note:  I mentioned several weeks ago that these early condition numbers were 10% better than the year prior even though weather was worse on the year and planting later.  This had me ask were last year’s estimates too low or this year’s starting too high.  The question is answered leaving this year too high, having the USDA guys making adjustments.

Either way the crop is off or running to a good start as far as quality and condition concerns.  The late planting dates can only become a problem if we turn dry and hot the last half of July and early August when yields are lost or made.  Now that the entire first half of the year supply demand fundamental price rally is removed from the market as weather the first three weeks of the growing season has been better than perfect.  We have had ample rainfall, sunny days, warm evenings and a fair share of hot days.  We came in Monday and saw a forecast through Sunday of much of the same.  The Midwest sees rain Tuesday and Wednesday, then heat into the weekend over the Western Grain Belt with more rain in the Eastern Grain Belt Saturday and Sunday.  Followed by more Midwest rain on July 15th and 16th.  The only thing that can uncover some short covering is this coming Friday’s USDA Monthly Crop Report at 7:30a central time.  After the June 30th Planted Acreage Report showed 2 m.a. increase in acres from the March 31st Planting Intension Report we have to think that the report will raise next year’s ending stocks from the June report but may lower this year’s ending stocks.  The report can not be looked at as Bullish but uncertainty and fear may see the recent drop give way to light buying and short covering before its release.  However, as I preached on Friday’s Report.  90% of our pricing influence is weather and its impact on emerging crops through mid-August on corn and late August on beans.  Last Thursday’s Weekly Report we said if weather is good when we return this week, next downside stop would be 3.35 basis December futures.  We hit 3.362 at midsession today.  A close under and 3.10 is next support.

Bean:

Monday’s Weekly Export Inspection number came in at 14.1 m.b. vs. 14.3 the week prior and four week average of 11.7.  The key here is China was in for 4.2 m.b. of the total and this is far old crop delivery before September 1st, the beginning of the New Grain Marketing Year.  Some may see this as friendly to demand as old crop year delivery ending stocks might come in under 100 m.b. on this Friday’s Government Monthly Crop Report.  Monday’s Crop Progress Report showed 66% of the crop is in G-E condition down from 68 the week prior, 59 a year ago and 10 year average of 63%.  Like corn, beans too saw great weather but lower ratings as prior government estimates were too high.  Either way was off to a good start even though planting dates were late.  The first two days of the week saw sharp declines as we returned from the three day holiday to find a 10 day weather outlook for heat, rain and sun through July 16th and that is perfect growing weather.  We said last Thursday if the weather this week ended up Bearish November Futures could drop from its current price of 10.05 to 9.43.  We hit a low today of 8.93.  8.90 was the next support under 9.43.  So how did beans get 70 lower today while wheat and corn held gains most of the day?  Simple wheat’s profits since January 1st have all been taken as well as corn.  Index and Trend following funds saw the only profits to take were left in beans.  Unless crude comes under more pressure on Wednesday, we might look to some short covering and profit taking before Thursday’s close as the Crop Report comes out ahead of the open on Friday.  Traders may fear that old crop ending stocks may come in under that 100 m.b. mark.  After the report, trade the next weather report and each one as their released until the pod setting stage completes mid to late August.

Wheat:

Monday’s Weekly Export Inspection Report came in at 12.1 m.b. vs. 11.3 the week prior and weak four week average of 10.2 m.b.  Same old- same old weak demand until they start buying what could be a high quality spring wheat crop.  The spring wheat crop condition came in lower at 72% G-E condition vs. 76 last week but well over a year ago of 69 and 10 year average of 66%.  Like corn and beans, wheat too was over estimated at its early emergence but this crop to date is in great quality condition and if it continues to hold over 70% G-E demand will return to buy this crop as millers here and abroad are in desperate need of high protein milling wheat as they are awash in low quality wheat world wide.  I am looking to be a buyer but not sure the near term low is in.  Trend following funds increased their short positions last week for the third consecutive week.  When they are done we are buying.  The low is this month we are not sure if it is this week.  Patience.

Tim Hannagan

Alaron Research Team
800.563.9510
thannagan@alaron.com

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. Alaron Trading Corp. 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. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.