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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Knighty Tin who wrote (42144)	12/2/2005 2:32:18 PM
From: mishedlo	Respond to of 116555

Hi, this is Tim Hannagan, and it is Friday, December 2nd and this is my weekly review. Corn- Our first report of the week was our weekly export inspection report showing 27.7 millions bushels of corn was inspected by the USDA for future near term export. This was down 5 m.b. from the week prior and a year ago and 7 m.b. under our four week average. It suggests a slower demand pace ahead. Our Thursday weekly export sales report showed 611 t.m.t. of corn was sold last week off 41% from the week prior and 47% below our four week average. Asian sales improved to 375 t.m.t. versus 200 the week prior. I thought Asian sales were decent and we did have a shortened export week last week with our Thanksgiving holiday but the number still shows slowing demand and now that harvest is in, demand fundamentals are our sole driving force. Next week Friday, is our monthly USDA crop report. The trade will be looking for a increase in the carryover stocks number as they factor in loss of exports due to the bird flu virus in Asia. Nothing bullish can come out of that report. After posting new contract lows early in the week we saw some of the massive shorts held positions buy back giving us light strength into Friday. Though we expect further poor export mews in December over the Asian bird flu issues it is still year end and the mechanics suggest that large trading funds heavily short with profits will cover many of the positions taking profits and paying those year end bonuses on profits taken. Small speculators heavily short as well will look to buy back those shorts before month end to make their tax liability work easier as they loath the paper work on carrying trades over from one tax year to the next. It is all part of the mechanics of the market that look to occur in one form or another. Now, for next week, I look for a friendly start to the week on prices on further technical short covering but the last half of the week looks to see bearish positioning ahead of Friday’s crop report. March corn have support at 2.01 and resistance up at 2.10. A close over 2.10 leaves 2.20 as next resistance. A close under 2.01 puts 1.96 next support. Bean- Monday started with our weekly export inspection report showing 21.8 m.b. were inspected for near term export, down 12 m.b. from the week prior and the year prior, while coming in 10 m.b. under our four week average. Sales year to date are off 84 m.b. versus a year ago. Needless to say it is a negative near term demand signal. The weekly export sales report Thursday showed 370 t.m.t. of beans were sold last week, up from a marketing year low of 219 the week prior but 31% under our four week average. China was back in for 292 t.m.t. but that could be for crushing to get the soy oil for human consumption and not for the soy meal for the feed ration. Soy meal sales were off 47% on the week. These numbers are not positive for demand. Next Friday’s USDA crop report should show an increase in our carry over stocks for next year as they lower the crush for beans to get the meal for feed and overall bean exports lower due to the bird flu virus in Asian cutting feed grain exports. China is our biggest soy bean buyer. They have now 31 cases of the bird flu virus found on chicken farms. Though they continue to need beans for the soy oil they get from the crush to add to their diet for humans it is the soy meal demand for the feed ration that is in jeopardy. China produces 14 billion chickens a year, a fifth of the word’s production. Because 95% of the chickens are on isolated farms it is nearly impossible to control the spread. It is surely to get worse before it gets better. Which most believe they are only telling us the tip of the problem for fear of chicken consumption collapsing, especially after three related human deaths after eating diseased chicken. December looks to be a month like corn where we have funds and large traders holding a big short position with profits. Whether it is the first half or last half of December they take their profits is to be seen but the overall supply demand fundamentals look to remain bearish. Other than a year end profit taking, beans only other hope for an appreciable rally will come if South America turns dry and hot threatening seeded bean acres. Go to WXRISK.COM for updates on weather over there as he covers it the best. Key growing time if January and February, but early weather fear there mean building of a weather premium here. January beans have support at 5.46 and resistance 5.70 March support is 5.56 then 5.48 with resistance 5.86. Like corn, we should start the week firmer and fade into Friday’s report. Wheat- Monday began with our weekly export inspection report showing 18 m.b. were inspected for near term export up 2 m.b. from the week prior, 5 m.b. over a year ago but equal a weak four week average. It would be stretching it to call it neutral from demand at best. Monday’s winter wheat crop condition report showed 52% of the crop in good to excellent condition off from 55% the week prior and well under a year ago of 76%. It was down for the fourth consecutive week mainly due to dry weather in key producing states Texas and Oklahoma. All our northern producers are dormant until spring. Thursday’s weekly export sales report showed 250 t.m.t. of wheat was sold last week down 42% from the week prior and 64% under our four week average. We can not blame poor numbers like this on a holiday shortened export week. The U.S. continues to be a third or fourth port of origin for milling wheat behind Australia. The French as our availability of milling quality wheat for human consumption remain tight while feed quality wheat remains overpriced to corn with December wheat 1.14 a bushel over December corn. Competition from our exporters continues to worsen with Australia’s production now called to be 24 m.m.t. up 18% from last year and china the world’s largest wheat producer continues to auction off old crop inventories of feed quality wheat to surrounding Asian neighbors. Demand does not look to be the factor that will turn wheat around ending this bear market as it will take until next May’s winter wheat harvest to hopefully have a huge crop rated 80% in good to excellent condition leaving the U.S. as the primary port of origin in the world with excess high protein milling wheat to turn too. That is to be seen. In the meantime winter wheat from Colorado north into the Dakotas and east to Ohio are now dormant and at decent ratings as fall moisture was adequate. The concern areas are Oklahoma and Texas. Ninety one per cent of Oklahoma and 95% of Texas soil moisture is deficient enough to sustain early crop development. We need new rains now as subsoil is not there. The National Weather Service data shows only 49% of normal moisture for the year has fallen in the bottom third of Texas. Waco had the driest fall period on record. No rain fell for November in San Angelo for only the fifth time in 105 years. November saw the drought expand north into the panhandle. This all looks to add to further poor quality ratings ahead of the start of dormancy. Note, no matter how bad the fall growing season is the crop is in its weed stage or it is earliest stage of development. If weather is perfect from when dormancy breaks in March and into our key yield development period, April and May, the quality conditions can improve appreciably. So, the concern over these areas is limited to just that- concern. Wheat will take up production pricing in the spring. Monday looks to start off firmer in anticipation of lower quality ratings on Monday night’s crop condition report but softer on prices mid-week before shorts cover more ahead of Friday’s USDA crop report. March wheat has support at 3.10 then 3.04 with resistance up at 3.30. There is over 100 thousand short positions being held by traders that could cover or buy back giving us a year end rally in a bear market. End-