Mish's Global Economic Trend Analysis Message Board

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Strategies & Market Trends : Mish's Global Economic Trend Analysis

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To: regli who wrote (42897)	12/16/2005 5:14:57 PM
From: mishedlo	of 116555

Hi, this is Tim Hannagan. It is Friday, December 16th and this is my weekly review- Corn: Corn started the week with Monday’s weekly export inspection report showing 33.3 million bushels of corn was inspected for near term export, off 5 m.b. from the week prior and 7 m.b. under a year ago. A little disappointing considering we made new contract lows last week but it is all part of the bird flu concerns in Asia. Thursday’s weekly export sales report showed 920 t.m.t. of corn was sold last week up 33% from the week prior and 4% under our four week average. The positive note was Asian sales were 799 t.m.t. versus 480 the week prior with Japan the key player at 632 t.m.t. I like the Japanese numbers but I would have preferred the total spread out among multiple Asian countries that are hit by Asian bird flu. This week’s overall demand numbers off reports are friendly but certainly not bullish as we sit on near record ending stocks inventory. We would need 1.2 m.m.t. or more weekly to be bullish yet the numbers are not bearish either considering all the bird flu concerns and fear of last export business to Asian markets where the virus is worst and 70% of our annual feed grain exports are shipped. A nice short covering week as funds entered short over 50 thousand contracts and other speculators over 90 thousand all saw fit to buy some back as year end and pre-holiday book balancing takes its seasonal place. Next week looks to be the same. We should expect short covering off dips only. We need a close over 2.09 basis March to test next resistance of 2.13. Buy dips in the March futures and a February 2.05 put option for protection at 4 cents or 200 dollars cost. You can get out of the futures on a close under 2.04. Ignore the news that Canada placed a 1.65 per bushel tariff on incoming US corn as we have a tariff on incoming Canadian wheat. Their retaliation is political. We can live with their corn tariff as there at the bottom of our export movement list but they need US markets for wheat distribution. Bean: Beans began the week with Monday’s weekly export inspection report showing 16.6 m.b. of beans were inspected for near term export down 18 m.b. from the week prior and 9 m.b. behind a year ago. Like corn, beans too continue to see negative demand signals on bird flu concerns. Thursday’s weekly export sales report showed 504 t.m.t. of beans were sold last week, down 47% from the week prior, which was a marketing year high, and 4% below our four week average. Asian sales were 180 t.m.t. versus 640 the week prior with China in for only 66 t.m.t. versus 523 the week prior. Soy meal sales fell as well coming in at 120 t.m.t. versus 272 the week prior with only 11 going to Asia’s feed market. A tough week for demand but we do have to consider the price of beans were up 20 cents on the week into last Friday’s close and with amply US supplies and South America’s crops off to a good start with harvest due in March to compete against our exports, importers will by the breaks and not the rallies. After reporting 25 bird flu cases in October and November, China has not reported any in December. Those in charge must have decided what people do not hear will not hurt us. In the meantime, beans saw pre-holiday and year end short covering. Next week could see more short covering especially off or after down days. Beans are taking a strong lead from what China’s bean exchange does overnight now. January needs a close over 5.98 and March over 6.10 to break resistance. **Wheat: Wheat’s first demand report was Monday’s weekly export inspection report showing 26.9 m.b. of wheat was inspected for near term export, up 7 m.b. from the week prior and 10 m.b. over a year ago. Though it is not considered a big bullish number it did come after hitting contract lows last week and certainly had bulls wonder if maybe we finally found a price low enough to move some wheat to the export market. Thursday’s weekly export sales report showed 712 t.m.t. of wheat was sold last week up 65% from the week prior and 70% over our four week average. A nice number, yet the big question is how much of our recent rally was recent contract low prices creating value on the world export market and how much was large funds buying back some of their massive short position ahead of year end and paying year end bonuses on profits taken. My guess is it is 85% funds taking profits and 15% value. There still remains a heavy profitable short position in wheat that can buy back next week. March has resistance at 3.25. A close over here and 3.32 is next resistance then 3.46. 3.25 is a big number as it is our first chart barrier off the two month break on prices we had and it is eclipse would signal shorts in the market to wheat from Colorado north through Kansas, the Dakota’s and east to Ohio lie under a protective snow cover but Texas and Oklahoma remain exposed and while conditions continue drought like through next week a bitter sub-zero weather event looks to hit early week before warmer temperatures return late week. Consider buying March on a dip or on a buy stop at 3.26 and a February 3.10 put for 6 cents or $300. cost. End.

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