THE GRAIN REPORT Tuesday, February 14, 2006 18:16 GMT Weekly Report By Alaron http://www.alaron.com
Corn We started the week’s demand side reports with Monday’s weekly export inspection report showing 38.5 m.b. inspected for near term export up 2 m.b. on the week and 16 m.b. over a year ago. Not bad considering last week’s Lunar New Year’s holiday closings. Thursday’s weekly export sales report showed 1.614 m.m.t. of corn was sold last week up 17% from the week prior and 20% over our four week average. Asian sales were 800 t.m.t. the over all demand picture is turning positive and looks to stay that way as Asian markets this year like china go from an exporter in 2005 to a mild importer in 2006 leaving more surrounding Asian neighbors of China to turn to the U.S. Thursday’s USDA monthly crop report put our carry over stocks or ending inventory come September 1st the start of our next harvest and new marketing year at 2.401 billion bushels, the second highest since 1987. It was down 25 million bushels from our January report as they raised corn used for ethanol production by 25 m.b. The crop report was considered a yawner but take note that after two year’s of climbing ending inventory on bigger crops were over the top now with ending inventory to continue to decline into 2007 and 2008 as lower production in 2006 off less acres planted, higher feed usage on bigger feed lot populations and potentially a massive use of corn for ethanol production the next two years cuts the inventory in half or better. We have seen a lot of fund buying, especially from funds that traditionally do not trade grains but with large trading funds holding over 70 billion dollars they just can not only buy metals and energies with current limited position limits so they are spilling over to grains and make it more unstable as they can take profits off any news or price. Corn remains long term bullish into July and September as demand remains improved and our March 31 planting acreage report comes in showing 2 to 4 m.a. less going to seed this spring but a late February correction is not ruled out. If we turn wetter the next 3 weeks in south America beans can fall hard with corn in Iraq. A late February break should be bought. A close under May support of 2.30 Friday or Monday sets up for 2.26 then 2.23. A close over 2.36 makes 2.40 then 2.42 next stop.
Bean Our demand side reports began with Monday’s weekly export inspection report showing 21.2 m.b. were inspected for near term delivery up 1 m.b. on the week but 6 m.b. behind a year ago. This is a weak demand signal for the week especially considering Asian markets are up and running after last week’s holiday closings. Thursday’s weekly export sales report showed 518 t.m.t. of beans were sold last week up 16% from the week prior but 23% under our four week average and under a year ago by 32 t.m.t. the only highlight was China in for 251 t.m.t. It is a neutral report at best. The big picture is still bearish for demand as we are running behind a year ago on demand while inventory is at record levels. Our USDA crop report Thursday put our ending stocks for 2006 at 555 m.b. up 50 from our January report and the highest on record. The higher ending stocks inventory came as they lowered export projections. If our March planted acres report comes in as expected showing 2.5 to 4 million less acres to be planted this spring we will surely see larger inventory in 2007. the next 3 weeks is all about weather and it is impact on Argentine and Brazilian bean fields as late crops fully mature. Timely rain through March 6th and March futures can push as low as 5.35. Hot and dry through March 6th and 6.10 is next stop with best case scenario 6.33. Beans look to aggressively trade each days weather update. The key to next weeks opening trend comes with Sunday nights electronic trading platform. They will hit the web site for weather to determine rain events. All of Argentina needs rain by Wednesday while Southern Brazil needs rain by Thursday or Friday.
Wheat Monday’s first demand report was our weekly export inspection report showing 25.1 m.b. of wheat was inspected for near term export up 2 m.b. from the week prior. It is a slightly friendly demand number as it comes on the legs of a sharp price rally last week. Thursday’s weekly export sales report showed 351 t.m.t. of wheat was sold last week off 7 t.m.t. from the week prior and equal a weak four week average. Demand remains a non-pricing influence until our new crop arrives at the May harvest. Thursday’s USDA crop report was uneventful showing our ending stocks at 542 m.b. unchanged from last month. They lowered world ending stocks 2.7 m.m.t. with cuts from lower production in Argentina and the European Union. Wheat continues to look for price strength from weather and its effect on our dormant winter wheat crop. Crop ratings this week showed Nebraska’s crop at 52% in good to excellent condition versus 64% the week prior and 56 a year ago. Kansas at 52% versus 61. Texas 1% G-E with 89% in poor to very poor condition. It does not look to get better as the week end looks to bring freezing temperatures from Kansas to Central Texas. Most of the wheat has no snow cover to insulate it so it is vulnerable to freeze damage. Next week looks set up to be warmer and dry, continuing talk of drought. March corn futures need a close over 3.65 resistance to find more fund buying to extend gains to next resistance of 3.81. Support remains at 3.47. March futures at the K.C. Exchange find support at 4.20 and resistance 4.50. Stay long with appropriate stops as weather problems look to extend into March when dormancy breaks.
