Saturday, October 2, 2010

The Grain Report

SURPRISE......... Thursday brought us two reports for the grains to trade off. The first was on the demand front with our weekly export sales report, telling us how much of each grain was sold last week for future delivery. Wheat exports were 630 thousand metric  tons down 34% from the week prior and 26% under our four-week average. New crop year sales after June 1, 2011 were 785 thousand metric tons up 3% over its four-week average. Were shuffling from current crop year to new crop year week to week. The last two export reports showed strong buying up front and cancellations of previous purchases for June 1, 2011 on out delivery. Today that reversed. The long and short of wheat demand is it's good but not great. Were double the weekly sales since August 1 versus the first four months of the year but ending stocks are high at 902 m.b , offsetting good demand. Demand isn't a driving force year. Corn export sales were 925 t.m.t  up 65% from the prior week with key Asian players in for 544 of the total versus only  84 t.m.t. the week prior. The last three weeks saw Asian buyers backing off as cash was weakening  with harvest progress and they  waited for harvest low prices. Rule of thumb is, once were 30% harvested demand picks up. Well, we were 27% harvested as of Monday so possibly we're seeing the seasonal demand kicking in. Soybean sales were expected to be large and the report didn't disappoint us coming in at 1.737 million metric tons sold last week, up 60% from the week prior, with key world player China in for 1.295 of the total. The surge comes as China is overbooking US beans for future shipments as insurance in case drought in number two world producer exporter Brazil continues. Brazil is currently planting their crop and will continue through 
October. WXRISK.COM , the weather site, sees generally dry conditions ahead. Central and eastern Brazil have seen under .25 inches of rain the last three weeks while central and eastern 
Argentina remains dry as well. Theres no real  rains threat next week. The next report was the quarterly stocks report, which tells us how much of each grain was on  hand as the September 1. 
Wheat came in at 2.459 b.b. up 19 m.b. from the average pre-report trade guess by the brokerage houses. It was considered neutral. Beans came in at 151 m.b. right in line with the average pre-report estimates. Then there was the corn. It was a real shocker at 1.708 b.b. only 35 m.b. over a year ago, but 301 m.b. over the average pre-report trade guess and 219 m.b. over the highest pre-report guess on a  range of 1.350 to 1.489. No one believes the government found 301 m.b. laying around in warehouses stumbled across. In the old days back in the 80s when the government owned the grain and stored 3 to 4b.b. for a rainy day. They would have quarterly reports that will say whoops, we lost 200 m.b. of beans and whoops we found 300 m.b. of corn over there. The governments out of the grain business to save billions of dollars in storage and interest costs. Here's what the trade thinks happened. Last year was one of the coldest and wettest grain seasons in history. It was so wet during the planting season there was fear corn and beans acres would go unplanted. At harvest time it was so wet and cold fear was we would never get the crops harvested. The quarterly report and monthly reports looked as if  we had no grain as it was still  in the fields. The harvest was the latest on record. 
This year is the opposite. We were generally dry and hot. We had a record early planting pace and harvest got underway earlier than ever. The trade believes that the USDA is including early harvested corn from the southern Delta into its quarterly inventory. When normally they wouldn't. 
The reality here is if added to this report. It's not added to the next. It's not discovered corn, but reshuffled inventory. The September 1 quarterly stocks report is the final ending stocks report for the 2009- 10 marketing year as the new grain marketing year begins September 1. Thinking is if they added 301 m.b. to the 2009-10 marketing year, which had last months ending stocks at 1.386 b.b. Now should jump to 1.687. Then last months 2010- 11 marketing year ending stocks number of 1.116 b.b. should or could dropped to 815,000 m.b. on the October 8 report  and or a 
significantly lower December quarterly stocks report. More food for thought to create  more fear of the October 8 crop report. A very confusing situation to traders but a great opportunity for traders wanting to buy and get long prior the feared to be bullish October 8 monthly USDA crop report,  as prices were sharply lower on the opening Thursday with a Friday dip. Nothing is changed as we head into the weekend, expected fast harvest pace and generally lower yield talks with a firmer tone to pricing ahead of the crop report next Friday. Corn looks to be the leader as just about everyone agrees the report will lower yield and production as well as next year's ending stocks. Beans find strength from talk of frost this weekend across the upper 

Midwest, Northern Illinois, Indiana and the Western grain belt and talk of drought in South America. The question is can we make new highs on the year for corn and beans or are the highs in. Because of the prices were at , we can't expect new highs ahead of the report. It will take report day to  be bullish enough  to break this past week's contract high prices. But expect prices higher prior the report's release. This next report is corn and beans last chance to make another new growing season high on prices as in October we will harvest the higher-yielding corn and beans in the upper Midwest and Western grain belt, setting up a more bearish psychology ahead of the November crop report. Ibtimes

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