The Grain Report - Mid-Month
Posted by Tim Hannagan I PFG Best Research • Friday, March 12. 2010 • Category: Rohstoffe
Wednesday’s U.S.D.A. monthly crop report was viewed by most as a “yawner” and would be forgotten 10 minutes after the open. Reason, the changes from the month prior were so small you wonder why the government bothers. That is when trader analysts like me come in and put the report under a microscope and look for the hidden message.
With wheat, there was no message other than ending-stocks got fatter. They raised wheat’s ending-stocks come the start of wheat’s new marketing year June 1, to 1.001 billion bushels versus 981 m.b. last month and 657 m.b. a year ago. The ending-stocks remain a bearish fundamental for at least a year or more but market strength will still come from time to time as trend-following funds build record short positions held, then buy them back.
Soybean production for 2009 was lowered 2 m.b. to 3.359 b.b. Why did they bother, that much falls off the truck on the way from the fields. Our 2008 production was 2.967. They raised export projections and cut ending-stocks 20m.b. come the start of bean’s new marketing year, Septemeber 1, to 190 m.b. versus 210 last month and down for the third consecutive month and the fourth consecutive year of under estimating world demand for beans and high protein crops. This is the hidden key. Even with all the talk of record South American production and potentially more bean acres seeded this year, demand continues to out-pace production. The 190 m.b. number is still far too high considering Asian and European protein needs.
Corn production was pegged at 13.131 b.b.; down 20 m.b. from the last report; and they raised ending-stocks 80 m.b. to 1.799 b.b. by cutting export projections. Don’t be fooled by that perception. The government for the first quarter was too high on demand prospects even though demand is over the year prior. Here’s the hidden key in the report. They left China’s production on corn unchanged at 155 M.T. for the second consecutive month, while drought in China’s key corn area has private local groups with corn production no higher than 140 M.T. and dropping. This sets up China to go from being an exporter of corn to surrounding Asian neighbors and becoming an importer. China has set for 2010 a sharp increase in hog and chicken populations in need of more corn. They intend to top off their strategic corn reserve as billions were spent to build grain storage to insure corn needs are met and they have an increase on ethanol production on the year. This all sets up exports to China and their neighbors filling needs by turning to the U.S. The last three quarters of the year will reflect this. Asian markets have increased the U.S. corn imports for the fourth consecutive week as of our last weekly export sales report, suggesting the switch over has begun. Remember, the government does not project trends. They begin the marketing year with a thought process on production and ending-stocks due to useage, based on 5 and 10-year trends. Then each month they make adjustments based on current news reality. This is where I come in. I project the trend before the government reports reflect the reality.
The next big report comes with the March 31, planted-acreage report. This may be considered the biggest in many years. Trade guesses as to acres being planted of each crop should have wide ranges creating great fear ahead of the report’s release. This at some point will have shorts buying back positions and speculators entering long as prices are down. Question is: At what point does a near-term low set in and strength follow?
Technicals read like this:
May corn finds support at 3.60; a close under and we push to 3.50; and then 3.34 worst-case scenario on a break. Resistance is 3.74. A close over and 3.88 is next stop. Follow these chart selections closely when putting on new positions.
May beans entered this week with major chart support at 9.30; a close under and 9.10; then 8.90 worst-case scenario before the March 31 report. Resistance is 9.65; a close over takes us to 9.75; then 10.00
May wheat needs a close over 4.94 to turn chart-friendly. Support lies at 4.72.
Tim Hannagan
PFGBEST Research Team
800.563.9510
thannagan@pfgbest.com
www.pfgbest.com
About the Author:
Tim Hannagan joined PFGBEST from Alaron Trading Corp., with more than 30 years of experience as a futures and options trader for retail accounts. As a Senior Grain Analyst, Mr. Hannagan has helped not only his investor clients but also media, grain producers and corporate executives wishing to sense, identify and capture the slightest moves in the grain futures and options markets. His concise and analytical research reports appear every trading day and can be accessed at www.pfgbest.com/research.
For 10 years, prior to joining Alaron, Hannagan was Vice President and Senior Market Analyst for Harvey Commodities. During that period, he refined his trading methodology and developed a centralized focus on individual trading clients. It was here that he developed and tested the technical reversal system he created to enter and exit all trades.
Mr. Hannagan is a nationally recognized expert on grain markets and his opinions frequently appear in The Wall Street Journal, Barron’s, Futures Magazine, Investor’s Business Daily and other periodicals as well as on international newswire services and online blogs and commodity news services. He also has an impressive list of broadcast appearances.
In December2007, Tim released his 2008 grains yearly outlook, leading the industry by accurately predicting the historic high price rally in grains. In December 2008, Tim released his 2009 grains yearly outlook. This was when the U. S. and world economies were in a collapse. He accurately called the low of the grain movement and predicted the sharp rallies into the spring/summer planting and growing season.
PFGBEST is among the largest non-clearing U.S. Futures Commission Merchants, with customers, affiliates and brokerage offices in more than 80 countries. The company is a leader in sustainable investing through diversified products including managed funds, futures, forex, options, full-service and discount brokerage, trader education, market research, and direct online futures trading through its BESTDirect™ platform, and numerous other platforms and applications.
Disclaimer
There is a substantial risk of loss in trading futures and options.
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, directors, employees and brokers 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
With wheat, there was no message other than ending-stocks got fatter. They raised wheat’s ending-stocks come the start of wheat’s new marketing year June 1, to 1.001 billion bushels versus 981 m.b. last month and 657 m.b. a year ago. The ending-stocks remain a bearish fundamental for at least a year or more but market strength will still come from time to time as trend-following funds build record short positions held, then buy them back.
Soybean production for 2009 was lowered 2 m.b. to 3.359 b.b. Why did they bother, that much falls off the truck on the way from the fields. Our 2008 production was 2.967. They raised export projections and cut ending-stocks 20m.b. come the start of bean’s new marketing year, Septemeber 1, to 190 m.b. versus 210 last month and down for the third consecutive month and the fourth consecutive year of under estimating world demand for beans and high protein crops. This is the hidden key. Even with all the talk of record South American production and potentially more bean acres seeded this year, demand continues to out-pace production. The 190 m.b. number is still far too high considering Asian and European protein needs.
Corn production was pegged at 13.131 b.b.; down 20 m.b. from the last report; and they raised ending-stocks 80 m.b. to 1.799 b.b. by cutting export projections. Don’t be fooled by that perception. The government for the first quarter was too high on demand prospects even though demand is over the year prior. Here’s the hidden key in the report. They left China’s production on corn unchanged at 155 M.T. for the second consecutive month, while drought in China’s key corn area has private local groups with corn production no higher than 140 M.T. and dropping. This sets up China to go from being an exporter of corn to surrounding Asian neighbors and becoming an importer. China has set for 2010 a sharp increase in hog and chicken populations in need of more corn. They intend to top off their strategic corn reserve as billions were spent to build grain storage to insure corn needs are met and they have an increase on ethanol production on the year. This all sets up exports to China and their neighbors filling needs by turning to the U.S. The last three quarters of the year will reflect this. Asian markets have increased the U.S. corn imports for the fourth consecutive week as of our last weekly export sales report, suggesting the switch over has begun. Remember, the government does not project trends. They begin the marketing year with a thought process on production and ending-stocks due to useage, based on 5 and 10-year trends. Then each month they make adjustments based on current news reality. This is where I come in. I project the trend before the government reports reflect the reality.
The next big report comes with the March 31, planted-acreage report. This may be considered the biggest in many years. Trade guesses as to acres being planted of each crop should have wide ranges creating great fear ahead of the report’s release. This at some point will have shorts buying back positions and speculators entering long as prices are down. Question is: At what point does a near-term low set in and strength follow?
Technicals read like this:
May corn finds support at 3.60; a close under and we push to 3.50; and then 3.34 worst-case scenario on a break. Resistance is 3.74. A close over and 3.88 is next stop. Follow these chart selections closely when putting on new positions.
May beans entered this week with major chart support at 9.30; a close under and 9.10; then 8.90 worst-case scenario before the March 31 report. Resistance is 9.65; a close over takes us to 9.75; then 10.00
May wheat needs a close over 4.94 to turn chart-friendly. Support lies at 4.72.
Tim Hannagan
PFGBEST Research Team
800.563.9510
thannagan@pfgbest.com
www.pfgbest.com
About the Author:
Tim Hannagan joined PFGBEST from Alaron Trading Corp., with more than 30 years of experience as a futures and options trader for retail accounts. As a Senior Grain Analyst, Mr. Hannagan has helped not only his investor clients but also media, grain producers and corporate executives wishing to sense, identify and capture the slightest moves in the grain futures and options markets. His concise and analytical research reports appear every trading day and can be accessed at www.pfgbest.com/research.
For 10 years, prior to joining Alaron, Hannagan was Vice President and Senior Market Analyst for Harvey Commodities. During that period, he refined his trading methodology and developed a centralized focus on individual trading clients. It was here that he developed and tested the technical reversal system he created to enter and exit all trades.
Mr. Hannagan is a nationally recognized expert on grain markets and his opinions frequently appear in The Wall Street Journal, Barron’s, Futures Magazine, Investor’s Business Daily and other periodicals as well as on international newswire services and online blogs and commodity news services. He also has an impressive list of broadcast appearances.
In December2007, Tim released his 2008 grains yearly outlook, leading the industry by accurately predicting the historic high price rally in grains. In December 2008, Tim released his 2009 grains yearly outlook. This was when the U. S. and world economies were in a collapse. He accurately called the low of the grain movement and predicted the sharp rallies into the spring/summer planting and growing season.
PFGBEST is among the largest non-clearing U.S. Futures Commission Merchants, with customers, affiliates and brokerage offices in more than 80 countries. The company is a leader in sustainable investing through diversified products including managed funds, futures, forex, options, full-service and discount brokerage, trader education, market research, and direct online futures trading through its BESTDirect™ platform, and numerous other platforms and applications.
Disclaimer
There is a substantial risk of loss in trading futures and options.
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, directors, employees and brokers 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
0 Comments
Add Comment