Grains Analysis

Weather Equals Demand:

Thursday's weekly export sales for corn came in neutral at 504 million tons sold, but over the 4-week average of 373 million. A closer look sees China in for the second consecutive week with a purchase of 123 million vs. 238 million the week prior. These are not big buys, they're nibbling. Their nibbling comes from their fear of drought-like conditions in South America - particularly Argentina, where less than 30% of normal rainfall has occurred the last 30 days.

China had reached an agreement early last spring with the Argentine government to buy large quantities of corn; that led to growers expanding production. If the drought pattern continues, China could quickly go from nibbling at U.S. ports to feasting on corn!

Bean export sales were 468 million tons, with China in for 354 million vs. 551 million the week prior. Not a big number collectively, nor by China, but they are consistent weekly buyers of U.S. beans. However, we're just not seeing overbooking. That may come, if the dry conditions in Brazil continue. The only day where we didn't see short covering off lower openings for beans and corn in the last nine trading days was yesterday, when outside markets collapsed and pulled the entire commodity board with it.

Grains continued to weigh out potentially very bullish weather problems out of South America and continuously weak economic issues in Europe. My thinking is that there are 10 trading days left in the month and year. The shorts have all the profits this month and hefty profits off last month's highs, and should look to buy back those shorts thereby taking handsome profits on the month-end and year-end basis.

Additionally, the 10- to 15-day outlook in South America looks like conditions will remain generally drier than normal. This should help support beans and corn by keeping sellers away.

Technicals read like this: strong support for corn lies at $5.70 with first resistance at $5.90 then $6.12. March bean support lies at $11.05 then $10.85. Resistance is $11.40 then $11.55. March wheat support is $5.80 entering today's session, then $5.60. Resistance is $6.05 then $6.35. If month-end short covering occurs and dry weather persists, we could see the second resistance areas approached on all three grains. That's $6.12 on March corn, $11.55 for March beans and $6.35 for March wheat.

Of course, if we come in next week and the weather turns wet in South America and outside markets collapse, the markets could hang at unchanged, meaning that even the first areas of resistance would become a best-case scenario.

I'll be closely watching weather updates on South America through the weekend.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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