Unless we get a more positive economic spin, the path of least resistance might be pointing downward to start the new week.
CORN:
Net weekly export sales for corn, came in at 758,100 metric tonnes for the current marketing year and none for the next marketing year for a total of 758,100.
As of November 25, cumulative corn sales stand at 46.2% of the USDA forecast for 2010/2011 (current) marketing year versus a 5 year average of 44.4%. Sales of 667,000 metric tonnes are needed each week to reach the USDA forecast.
WHEAT:
Net weekly export sales for wheat, came in at 663,300 metric tonnes for the current marketing year and 40,900 for the next marketing year for a total of 704,200.
As of November 25, cumulative wheat sales stand at 68.2% of the USDA forecast for 2010/2011 (current) marketing year versus a 5 year average of 69.4%. Sales of 403,000 metric tonnes are needed each week to reach the USDA forecast.
SOY COMPLEX:
Net weekly export sales for soybeans came in at 1,341,600 metric tonnes for the current marketing year and 60,000 for the next marketing year for a total of 1,401,600.
As of November 25, cumulative soybean sales stand at 76.7% of the USDA forecast for 2010/2011 (current) marketing year versus a 5 year average of 55.2%. Sales of 249,000 metric tonnes are needed each week to reach the USDA forecast.
Net meal sales came in at 133,800 metric tonnes for the current marketing year and none for the next marketing year for a total of 133,800.
As of November 25, cumulative soybean meal sales stand at 49.1% of the USDA forecast for 2010/2011 (current) marketing year versus a 5 year average of 36.2%. Sales of 95,000 metric tonnes are needed each week to reach the USDA forecast.
Net oil sales came in at 32,100 metric tonnes for the current marketing year and none for the next marketing year for a total of 32,100.
As of November 25, cumulative soybean oil sales stand at 61.0% of the USDA forecast for 2010/2011 (current) marketing year versus a 5 year average of 26.5%. Sales of 11,000 metric tonnes are needed each week to reach the USDA forecast.
COTTON:
Net weekly export sales for cotton, came in at 323,000 running bales for the current marketing year and 269,000 for the next marketing year for a total of 592,000.
As of November 25, cumulative cotton sales stand at 85.3% of the USDA forecast for 2010/2011 (current) marketing year versus a 5 year average of 50.0%. Sales of 61,000 running bales are needed each week to reach the USDA forecast.
BEEF:
Weekly U.S. beef export sales for the week ending November 25 came in at 8,100 metric tonnes, compared with the prior 4-week average of 12,675. Cumulative sales for 2010 have reached 635,700 metric tonnes, up 32.5% from last year’s pace.
The USDA Supply/Demand Report this morning was considered supportive against expectations given a lower ending stocks estimate but production and yield estimates came in higher than expected. The market is called 3-5 higher on the open. Average yield was pegged at 165 bushels per acre as compared with 163.5 last month and this pushed corn production up to 13.365 billion bushels, up 120 million from last month and up about 90 million from expectations. The USDA pegged the 2009/10 corn ending stocks at 1.426 billion bushels which was about 45 million below expectations. As a result of lower beginning stocks and a jump of 100 million bushels in the export forecast, 2010/11 ending stocks are now pegged at just 1.312 billion bushels from 1.373 billion last month and 1.573 billion the previous month. This is a stocks/usage number of 9.7% which has been under 10% just two other times since 1973. World corn ending stocks were revised down by about 2 million tonnes from last month to 139.2 million tonnes. China production was left unchanged at 166 million tonnes. Of more concern could be the revision down in world coarse grain ending stocks to 172 million tonnes from 180 million last month, 187 million last year and 193.8 million two years ago. This opens the door for a revision higher in corn exports ahead as the US makes up for losses in the FSU region. Production in this region was revised down by 9.6 million tonnes.
PRICE OUTLOOK: Ending stocks are already tight and traders see the weather since August 1st as a reason to suspect that this may be the high yield estimate of the year. With the possibility of higher exports and lower production ahead, look for the uptrend to continue. With high wheat and soybean prices, look for December 2011 corn to also see a solid uptrend ahead. Look for solid support for December corn near 409 with 451 1/2 and 493 as upside objectives. Use 492 as upside objective for Dec11 corn.
The USDA’s supply and demand and Crop Production reports were considered bullish this morning with the opening call 10-15 cents higher in wheat. US production was raised above trade expectations with the all-wheat total at 2.265 billion bushels versus 2.216 billion on the July report. Expectations were for a rise of about 15 million bushels. However, exports were raised by 200 million bushels to 1.2 billion which resulted in a drop of 141 million bushels in 2010/11 US ending stocks to 952 million. This was about 10 million bushels below expectations. The overall US wheat yield was raised by a substantial 1 bushel per acre to 46.9 bushels per acre. Hard winter and hard spring wheat ending stocks saw substantial reductions, but soft red winter (Chicago) wheat stocks were raised to 179 million bushels from 162 million in July. On the world report, all eyes were on the Russian wheat number, and the USDA lowered its estimate by a larger than expected 8 million tonnes to 45.0 million. This compares to 53.0 million in July, 61.7 million last year and 63.7 million two years ago (2008/09). Kazakhstan was lowered to 11.5 million from 14.0 in July and Ukraine was lowered to 17.0 million from 20.0 million in July. In all, the producers of the former Soviet were lowered by nearly 13 1/2 million tonnes. The EU was lowered to 137.51 million from 141.82 in July. This resulted in an overall drop in world production to 645.73 million tonnes, from 661.07 last month. World ending stocks were lowered to 174.76 from 187.05 million last month.
PRICE OUTLOOK: World ending stocks and production numbers came in about as expected but traders expect further revisions lower next month and there are already concerns for winter wheat plantings in Russia. Look for importers to continue an aggressive buying program as well which should bring a test of at least 790 and maybe 808 for December wheat. Support is near 741 and 711.
The USDA Supply/Demand Report this morning was considered negative against expectations as the USDA boosted production more than expected. The market is called 3-5 higher. A yield of 44 bushels per acre as compared with 42.9 last month helped push soybean production to 3.433 billion bushels, about 75 million above trade expectations. A boost in demand due to strong China imports helped keep the ending stocks news just slightly negative as exports for the coming year were adjusted to 1.435 billion bushels, up 65 million from last month. Old crop ending stocks were pegged at 160 million bushels which was about as expected and ending stocks for the 2010/11 season were pegged at 360 million bushels which was unchanged from last month and about 40 million bushels above trade expectations. World ending stocks for the 2010/11 season are pegged at 64.7 million tonnes, down about 3 million from last months estimate but still up from 63.5 million last year and 43.9 million two years ago. This is a record high. Beginning stocks were lower and production was higher but demand was revised higher by more than 3 million tonnes. The demand numbers are strong and traders will question the high yield forecast given hot weather so far in August.
PRICE OUTLOOK: The report was considered slightly negative against expectations but the market is called higher due to wheat and corn numbers. November soybean resistance begins at 1027 and 1031 with support at 1005. Use 1062 as next upside objective.
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NEAR-TERM MARKET FUNDAMENTALS: Several factors suggest that the soybean market could struggle to add much more premium over the short-term including a less threatening weather outlook, news of a slowdown in unloading grain shipments in China and news of a much larger than expected net long position from fund traders in the COT reports. At the port in Dalian China an explosion at an oil pipeline has caused the closing of 80-90% of the shipping berths including iron ore and Agricultural imports. South Korea is tendering to buy 25,000 tonnes of non-GMO soybeans. Argentina crush in May jumped to 4 million tonnes, up 11% from last year. The market continues to find support from fears of stressful weather during the sensitive pod-setting period for US soybeans in early August. Traders are also concerned with the potential sharp drop in production of higher oil-yielding crops in Canada and Europe and from concerns for the sunseed crops in Russia. November soybeans posted a new high for the move early on Friday only to close lower on the session. The market ran out of buyers on the early advance and November soybeans pushed lower on the day before firming into the close. This came amid firmer bids for cash soybeans at the Gulf which traders said was in response to strong demand. While China is still a strong importer, spot basis levels in the US fell 10-15 cents in many locations due to increased producer selling. Evening up ahead of the weekend was considered a major feature on the day with some light to moderate activity in the old crop/new crop soybean spreads with old crop gaining on new crop on the day. Some forecasts call for hot and dry weather to last through the end of July and into early August, which was considered supportive on a day marked by profit taking. The weather forecast to start this week is far less of a concern for the soybean crop as the crop can do well in a hot and wet environment as compared with concerns for a hot and dry week ahead. The northern Corn Belt cools down for a few days and then temperatures jump back to the mid-90′s later this week. The ridge moves across the country in the next few weeks but there appears to be plenty of rains for the delta and southern half of the Corn Belt to see the potential for improving crop conditions ahead. Traders see a 1-2% decline in crop ratings tonight. The Commitments of Traders Futures and Options report as of July 13th for Soybeans showed Non-Commercial traders were net long 59,789 contracts, an increase of 58,094 contracts. Commodity Index traders held a net long position of 175,212 contracts, an increase of 5,932 contracts for the week. For meal, Non-Commercial traders were net long 60,185 contracts, an increase of 12,212 for the week. The Nonreportable traders were net long 15,102 contracts, an increase of 2,997 contracts for the week and this pushed the Non-Commercial and Nonreportable combined traders net long position to 75,287 contracts, up 15,209 contracts for the week. For Soybean Oil, Non-Commercial traders were net short 18,108 contracts, a decrease of 18,174 contracts for the week. The Nonreportable traders were net long 263 contracts, an increase of 7,367 contracts on the week. Commodity Index traders held a net long position of 104,171 contracts. This represents a decrease of 2,077 contracts in the net long position held by these traders.
TODAY’S GUIDANCE: A much wetter forecast for the drier areas of the US along with the COT report which showed aggressive buying and a hefty net long position from fund traders are forces which could pressure the soybean market over the near-term. Farmer selling is on the rise and prices are favorable and unless the rains in the forecast for the coming week do not materialize, the market may be close to a near-term peak. Some traders think there is too much rain in the forecast but crop conditions are likely to improve this week and next week if the weather comes in as expected to start this week.
TODAY’S MARKET IDEAS: Trend-following fund traders were aggressive net buyers of 57,660 contracts for the week to shift to a net long position of 34,057 contracts which is higher than expected. Selling resistance for November soybeans comes in at 986 1/2 with key resistance at 993 3/4. Look for set-back to at least 955 early this week. December oil support is back at 38.40. December meal looks vulnerable to a set-back to near 278.60 with selling resistance today at 289.20.
US Initial Jobless claims came in higher than anticipated, increasing by +25,000 to 471,000. The sudden increase to new 6-week highs erases recent optimism and breaks the downtrend pattern. The continuing claims component came in slightly higher then expectations to 4.625 mln and below last week’s levels. The treasury market lurched higher on the report and sent June bonds above 124-00, while the S&P 500 broke down to new lows on the day. Signs of an improving labor market would take place on a break in weekly claims below 400,000.
The USDA reports this morning were considered bearish with the market called 8-12 cents lower on the opening. Quarterly stocks as of March 1st came in at 1.27 billion bushels which was about 65 million bushels more than traders expected. Soybean planting intentions came in at 78.098 million acres as compared with 78.5 million expected and 77.5 million last year. While the plantings number was slightly below expectations, the hefty stocks number eases traders fears of tightening ending stocks for old crop. This also means that beginning stocks will be about 60 million bushels above trade expectations.
PRICE OUTLOOK: Traders see the stocks number as bearish as this will boost both old crop and new crop ending stocks estimates for upcoming supply/demand reports and we could also see adjustments higher in world ending stocks which are already at the second highest in history. November soybean resistance comes in at 930 3/4 with 895 as initial downside objective and then 880 1/4.
The USDA planted acreage and March 1st stocks reports were considered bearish with the market called 3-5 lower on the opening. Planting intentions came in a bit below expectations at 88.798 million acres as compared with trade estimates near 89.2 million and 86.5 million last year. However, the need for the extra acres may come into question with the bearish grain stocks numbers. Stocks came in at 7.694 billion bushels which was near 200 million bushels above trade expectations and a whopping 740 million bushels above last year. The stocks number should lead to a sharp revision higher in old crop ending stocks in the next supply/demand which means a higher beginning stocks number for the 2010/11 season.
PRICE OUTLOOK: The report is clearly bearish with resistance for December corn now at 385 with 370 3/4 as initial downside objective. July corn looks set for a further break to 356.
Today’s USDA reports were considered negative across the grain complex. In wheat, acreage was higher than expected, but quarterly stocks came in slightly below trade expectations. Traders are looking for the wheat market to open 2-4 cents lower. The USDA pegged all-wheat acreage at 53.8 million, about 500,000 acres above the average trade estimate. Last year’s planted area for all-wheat was 59.133 million acres. Spring wheat area was pegged at 13.9 million acres this morning, about 500,000 above trade expectations. Winter wheat was also bumped to slightly above trade expectations at 37.7 million. Stocks as of March 1st were 1.352 billion bushels in wheat, about 15 million below trade expectations. This compares to stocks of 1.040 on March 1st, 2009.
PRICE OUTLOOK: The overall negative tone of the reports could pull May wheat back down to new contract lows. If so, this would mark the fifth day in a row that May wheat has made new lows. The question then may be whether trend-following funds will add to their near-record large net short position at these price levels, or whether they will be more interested in covering shorts on weakness.
Gold & Silver: Uncertainty Leave Gold as “The” Primary Flight-To-Quality
by Blog Admin on September 6, 2011
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OUTSIDE MARKET DEVELOPMENTS: While equity markets in Asia were generally lower during overnight trading, stock indices in Europe are stronger this morning. Early indications are that US equity markets will open with substantial losses later on today but well above their overnight lows. The US Dollar is close to unchanged levels against most of the major currencies this morning, with large gains forged versus the Swiss Franc and Japanese Yen. The Swiss National Bank announced that the Swiss Franc will have a minimum exchange rate of 1.20 Francs to the Euro. The German Finance Minister stated that Greece will get no more emergency debt aid if that nation does not receive a positive result from ECB and IMF inspectors. Euro zone Retail Sales during July were up 0.2%, above market forecasts. Euro zone GDP during the second quarter was up 1.6% year-on-year, in line with expectations. The only major US economic number to be released this morning will be a private survey of US non-Manufacturing industries during August at 9:00 AM. In addition, Fed Regional President Kocherlakota will give a speech during the session.
GOLD: The gold market ramped up to another new high overnight but that action was tempered somewhat by reports of currency intervention overnight. While gold seemingly became short term technically overbought, with the sharp upward extension overnight, residual macro economic uncertainty toward the US economy and renewed European debt concerns have rekindled safe haven interest in gold regardless of the adverse currency market action. Some gold traders might even suggest the Swiss Franc was damaged as a flight to quality instrument by the SNB peg and that in turn leaves gold as part of a shrinking flight to quality contingent. While US equities are expected to open sharply lower this morning and that might add to the uncertainty in the marketplace, it could take a noted decline in the ISM Non Manufacturing reading to push fresh additional buying into gold, especially after the additional range up action this morning. The gold market could have garnered some support from news that the Russian central bank was planning to buy some gold this week, but the quantity of that anticipated purchase wasn’t that significant. The gold market might also be impacted by a Fed speech around mid session today, as the promise of easing from the Fed might tamp down some macro economic concerns. Comex Gold Stocks were 11.584 million ounces up 7,570 ounces. Gold stocks have increased 11 of the last 20 days. The Commitments of Traders Futures and Options report as of August 30th for Gold showed Non-Commercial traders were net long 232,638 contracts, a decrease of 15,331 contracts. The Commercial traders were net short 274,457 contracts, a decrease of 15,182 contracts. The Non-reportable traders were net long 41,820 contracts, an increase of 149 contracts. Non-Commercial and Non-reportable combined traders held a net long position of 274,458 contracts. This represents a decrease of 15,182 contracts in the net long position held by these traders.
SILVER: At least in the early US Tuesday action, the December silver contract was unable to take out the prior session’s high and that seems to have prompted talk overnight that silver is destined to lag behind gold prices. It is possible that silver is being partially held back by its industrial component, but with the intervention seen against the Swiss, some traders are suggesting that the list of effective flight to quality instruments has been reduced and that in turn could ultimately benefit the silver market. In another element that could be detracting from the bullish bias in silver, the trade saw news recently that Mexico had become the world’s largest silver producer, but since that was the result of a 1st half 2011 decline in silver production from Peru, many traders probably come away from that news with a somewhat bullish supply side vibe for silver. Comex Silver Stocks were 102.891 million ounces down 1,446,794 ounces. Stocks have declined 11 of the last 20 days. The Commitments of Traders Futures and Options report as of August 30th for Silver showed Non-Commercial traders were net long 33,577 contracts, a decrease of 1,936 contracts. The Commercial traders were net short 53,599 contracts, a decrease of 3,704 contracts. The Non-reportable traders were net long 20,022 contracts, a decrease of 1,767 contracts. Non-Commercial and Non-reportable combined traders held a net long position of 53,599 contracts. This represents a decrease of 3,703 contracts in the net long position held by these traders.
PLATINUM: While platinum did manage a temporary higher high for the move overnight, it wasn’t able to return to its contract highs. Like silver, platinum seems to be periodically undermined by its physical commodity market roots. However, the platinum market recently hasn’t paid that much attention to classic physical fundamentals lately and that suggests that a flighty to quality focus generally remains in control of prices. In fact, the market doesn’t seem to be that interested in the prospect of a major platinum miner being forced to sell partial ownership to the Zimbabwe government. The Commitments of Traders Futures and Options report as of August 30th for Platinum showed Non-Commercial traders were net long 26,942 contracts, a decrease of 1,582 contracts. The Commercial traders were net short 33,155 contracts, a decrease of 1,233 contracts. The Non-reportable traders were net long 6,213 contracts, an increase of 349 contracts. Non-Commercial and Non-reportable combined traders held a net long position of 33,155 contracts. This represents a decrease of 1,233 contracts in the net long position held by these traders. There might not be much in the way of solid support in October platinum until the $1,860.50 level.