Grains Analysis

by Tim Hannagan, PFGBEST

1-800-563-9510

thannagan@pfgbest.com

Tim Hannagan is one of the nation’s most prominent grain analysts. His report for Thursday, Feb. 2:

Corn fundamentals remain constant as we enter next week. Cash prices being offered at U.S. shipping ports to meet export demand remain  40 to 80 cents  over March futures, a sign that crop problems in South America have importers turning to the U.S. to fill needs.

The drought in Mexico has also contributed to a wave of exports into Asia.  While demand is good, it  falls  short of great. Asian business accounts for 70% of our annual feed grain exports, yet, big U.S. buyer Japan has purchased record Q1 shipments of European corn, while China only nibbles.

This all goes back to last February, when President Obama told China and other regular U.S. customers, “We can't sell you all the grain you want, as we will run out. So, find secondary sources” – and they have. This is not a bearish export scenario; it supports current prices ahead of all our planting and growing season uncertainty here, but it keeps carryover stocks stable, preventing rampant price inflation.

Soybean fundamentals, too, are constant, as demand is robust.  China is actively buying in the U.S.  – we are the world's sole port of origin prior to the Brazilian harvest (which should soon start.)

Current long-term forecasts have the last half of February wet in Brazil's central grain regions, which were planted first.  If that comes true, it would lead to harvest delays, keeping U.S. exports solid. The big question to be determined as harvest results come in: will Brazil's historic wet  growing season in its central grain regions lead to lower yields?

Wheat fundamentals are changing slightly. U.S. and foreign stocks are huge. Trend following funds which had a record short  position two weeks ago have been short covering (buying back some of those positions) to trim risk as European and Russian wheat tries to endure below freezing temperatures.  Such cold can trim yields sharply even though the crop is dormant. We hear of 50% losses in some Russian grain areas, which would lead to better U.S. wheat exports the last 20 days. Further, that kind of yield loss sets up potential for a big price increase if Russia decides to protect domestic needs and prices by restricting future exports.

Next week's weather forecast across Europe and Russia calls for more below freezing conditions, further creating production concerns. The seasonal February trading pattern is subject to change with weather actualities, but keep this as a footnote. We always rally ahead of the USDA crop report such as next Thursday’s at 7:30 a.m. Central, then break afterwards into month’s end before a March-to-June U.S. planting and growing season rally.

There is a substantial risk of loss in trading futures and options. Past performance is not indicative of future results. 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. PFGBEST, its officers and directors may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report.

1-800-563-9510

thannagan@pfgbest.com

Tim Hannagan is one of the nation’s most prominent grain analysts. His report for Monday, Jan. 30:

USDA PREP

 After seven weeks with consecutively higher openings, we opened lower today. So what's up? Rain!

Tuesday night into Wednesday has Argentina's key growing areas with 1 to 3 inches of badly needed moisture. Late-planted corn will benefit a little, but beans are in their key pod setting stage and would benefit the most.

The price breaks were a little more than the rain event would suggest, but it's the end of the month when funds can pay bonuses on profits taken before Tuesday. We want to use the break in prices to be a buyer for next Thursday's February 9 USDA monthly crop report.

Whatever the low is to end the  month, I anticipate it will hold into the February 9 report on two issues. One, the weather site WXRISK.COM sees potential for a return to hot and dry conditions starting February 5 for all of Argentina and southern Brazil. Two, the ongoing drought through January in Mexico, Argentina and southern Brazil should create fear that the February 9 crop report will show the government increased U.S. export projections to fill Mexico's needs and replace South American exports on production losses.

Fear, too, will be that the greater exports will cut ending stocks inventories. No one will want to be short into the report, and speculators will want to buy long with the move supported by the weather forecast.

Technicals read like this. March corn support is $6.24 then $6.16 with resistance at $6.42. March bean support is $11.75 then $11.55 with resistance at $12.20 then $12.40. March wheat support is $6.35 then $6.10 with resistance at $6.70.

There is a substantial risk of loss in trading futures and options. Past performance is not indicative of future results. 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. PFGBEST, its officers and directors may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report.

Grains Analysis

by Tim Hannagan, PFGBEST

1-800-563-9510

thannagan@pfgbest.com

Tim Hannagan is one of the nation’s most prominent grain analysts. His report for Thursday, Jan. 26:

MONTH-END ANALYSIS

Thursday's weekly export sales report put corn sales a week ago at 958 thousand metric tons, making it a second consecutive strong week. Drought-stricken Mexico was in for 264 thousand in the eighth consecutive week of heavy Mexican purchases. Their drought is now considered the worst since records have been kept.

This will lend to talk ahead of the February 9 USDA monthly crop report that the report will raise U.S. export projections for 2012, and that will reduce already very tight ending stocks.

China was nibbling at 72 thousand tons of corn. Traders are on a China watch as it's perceived they will need to turn to the U.S. to fill their needs left from Argentina’s ongoing drought situation.

Soybean exports were 466 thousand metric tons, down 53% from the week prior but the week prior was a monster number. The key then was China, which had bought 360 thousand tons, its second-largest purchase in four weeks.

Business for corn and beans is very good but not yet great. A continuation of the drought in Argentina and southern Brazil into February 15 could lead to a surge in Asian business with China picking up the pace. The wildcard in Brazil is the dividing line of the La Nina drought pattern that has southern Brazil too dry and central Brazil receiving record rains! WXRISK.com sees up to 8 inches of rain in the next 6 to 10 days. We're starting to hear of rain-related diseases as the saturated soils are creating fungus problems. A continuation of these rain totals could lead to talk of yield cuts as problems worsen. This is a problem yet to be covered by the industry as drought conditions and their patterns are the more fashionable news events now.

WXRISK.com noted both the prized European and American models of software weather projections call for 1 to 2 inches of rain Monday and Tuesday in Argentina and southern Brazil, the driest areas. If we come in Monday and this forecast holds true, expect a lower price start to the week as more rain is forecast for February 4 and 5 as well. The break could be good as funds are fat with profits and couldn't pay handsome bonuses on profits taken before month’s end on Tuesday. Weather watchers are curious and cautious on this forecast as the last two weekends were called to be wet and when we entered the new week, prices rallied as rains dried up. We have opened higher six consecutive weeks. So, long and short positions into the weekend carry great risk and reward.

We had a emotional close today with March wheat closing at $6.53. Most importantly, it closed over its major downward resistance line on the chart at $6.40. This trend line goes back to the May highs, so traders are excited. Strength came on the heels of a corn rally, and also from talk that Russia, a major wheat exporter, may slow, delay, or even suspend wheat exports as drought hit the winter wheat crop very hard just before it went dormant.

Some suggest the Ukraine crop could be cut by 50%. This sets up the U.S. to move up in the line of exporting ports for wheat. As you know, existing wheat stocks here are huge, but most of the available wheat is low in quality only shippable into Asia. So, don't expect a massive export increase to surface, but Asian business should rise as seek quantity (at value) over quality.

Thursday's weekly export sales report showed 604 thousand tons of wheat was sold last week, up 59% from a somewhat weak 4-week average. Key players were as expected -- Japan, South Korea and Indonesia. Trend following funds entered this week with short positions on the supplemental report of a record 93,000 contracts. It doesn't take much short covering by funds to push wheat higher, but it could stop quickly. A close over $6.70 would be needed to create panic in shorts to begin covering or buying back tens of thousands of contacts. If Russia were to suspend exports, this would occur. In other words, we don't expect major short liquidation to occur until March, when dormancy breaks in the U.S. and Russia and traders worry that crops that went dormant in poor condition may not get favorable weather.

Technicals read like this for Friday. March corn support is $6.30. A close under and $6.24 then $6.15 would be the next supports. Resistance is $6.44. A close over and $6.58 and $6.64 become the targets. March bean support is a tight $12.20, then $11.90. Resistance is $12.30 then $12.45 and $12.60 on the next rally. March wheat support is $6.40. A close under and $6.25 is next. Resistance is $6.70. A close over $7.00 is next.

There is a substantial risk of loss in trading futures and options. Past performance is not indicative of future results. 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. PFGBEST, its officers and directors may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report.

Grains Analysis

by Tim Hannagan, PFGBEST

1-800-563-9510

thannagan@pfgbest.com

Tim Hannagan is one of the nation’s most prominent grain analysts. His report for Tuesday, Jan. 24:

When we went home Friday, the forecast called for good rains forecasted over all of Argentina and southern Brazil. It turned out rains missed many of the areas and were half or less of what was expected.

We have opened higher at the start of six consecutive weeks now.

The La Niña weather pattern that's led to the drought-like conditions in South America has lived up to its potential. When it's dry, it's very dry and when rain is called for, It's always far under estimates.

Monday saw beans with the largest gains as beans are in the heart of their pod setting stage when yields are most affected by weather, while corn's gains were smaller as it’s the last quarter of key yield time and most effects of weather have taken the toll already.

Current forecasts see the next chance for rain as February 2 in Argentina, leaving them dry until then, with some longer term forecasts dryer again after that moisture.

The general overall thinking is that conditions in South America are going to be hotter and drier than normal into February 3 unless there is an unexpected rain.

The demand side of grains has been supportive to prices. Last week's export sales report showed strong demand for corn and beans. Last week's daily export announcements were big and will show up on this week's export sales report. With the Asian lunar new year holiday this week, we don't expect China to show up as a buyer; but, it China sees South American weather problems as permanent, they could speed their purchases.  Asian business accounts for some 70% of U.S. feed grains exports in recent years.

China's business has been to buy beans, and with them on the sidelines now, or likely so due to their holiday, bean imports will be soft this week.

Corn demand, on the other hand, looks robust. One factor is Mexico's drought, so Mexico is coming to the U.S. for corn.  On Monday, 152 thousand metric tons were to Mexico and a weekly export inspections report showed a 5-million-bushel increase in the export projections over last week.

Technicals read like this. March corn support Wednesday is $6.24, with resistance at $6.46. March beans support is $12.15 and resistance is $12.45. March wheat support lies at $6.10, resistance at $6.50

There is a substantial risk of loss in trading futures and options. Past performance is not indicative of future results. 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. PFGBEST, its officers and directors may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report.

Grains Analysis

by Tim Hannagan, PFGBEST

1-800-563-9510

thannagan@pfgbest.com

Tim Hannagan is one of the nation’s most prominent grain analysts. His report for Friday, Jan. 20:

Tuesday saw traders buying grains on the drier than expected weekend rains in South America, and dry weather into Thursday. Then traders turned and sold grains Wednesday as the coming weekend forecast called for another system of rain to enter South America. As always, this time of year, when our grains are locked up on the farm and the wheat is dormant, we turn to South America growing season weather for trading psychology. It's all about the next weather report.

WXRISK.COM  sees the driest areas of southern Brazil getting some badly needed moisture this weekend. Far southern Rio Grande do Sul produces 14% of Brazil's beans and 10% of the corn. They already cut corn production estimates by 25%. Argentina looks to see .50 to 2.00 inches of rain with more than 60% coverage. This would be the second timely rain in 10 days.

It could be too late for corn. There's talk it's been the worst drought in 70 years. If so, the 2008 drought cut production of corn to 15 million metric tons. It's currently forecast at 21 million metric tons by the Argentine grain exchange, down from 26 million metric tons last month. Our recent USDA report pegged it at 26 million metric tons although USDA is expected to cut production further in its February monthly crop report.

Wednesday, traders see-sawed buying beans on breaks of 5 to 8 points (twice) bringing prices back up, and the market finally closed unchanged, but no one would buy at the daily highs with a wet forecast  ahead. The Wednesday trading psychology comes as they see the worst of corn's weather damage done – now, it is key yield time for soybeans.

If weekend rains come as expected and more rain enters the region next week, as is currently forecast, March corn futures could pull back to $5.76 (worst case scenario) and March beans could dip to $11.45 to $11.55.  If the rains are much lighter this weekend, and rain is also removed from the forecast for the week ahead, March corn will push back up to the $6.16 area and March beans to $12.20. We're simply trading the next weather report implications. Any breaks to the low end estimates would make a great buying opportunity as demand is returning to more price-competitive U.S. products.

Today’s Weekly Export Sales Report put corn sales at 759 thousand metric tons, well above the 4-week average of 414. China was nibbling again at 132, but drought stricken Mexico was in 438 versus the three prior weeks of 243, 128 and 125. The drought continues and looks to add another downward adjustment to corn ending stocks on the USDA February crop report as they increase our export projections at the expense of U.S. inventory.

Bean exports were 991 metric tons, with China taking 436 versus the two prior weeks of 257 and 136. Last week's price decline from the USDA crop report certainly made for an attractive price to buy beans, down $.95 the 10 days into last Friday (Jan. 13). But China could also be getting ahead on business; next week, they are essentially closed for commerce as they celebrate their lunar new year holiday. If weather this weekend holds to the forecast, expect  a  lower opening Monday, but support will underpin prices and we’ll see it as a buying opportunity since demand will continue at these price levels.

Note that WXRISK.COM sees a potential return to high heat in Argentina the last several days of January into the first week of February.

There is a substantial risk of loss in trading futures and options. Past performance is not indicative of future results. 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. PFGBEST, its officers and directors may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report.

Grains Analysis
by Tim Hannagan, PFGBEST
1-800-563-9510
thannagan@pfgbest.com

Tim Hannagan is one of the nation’s most prominent grain analysts. His report for Tuesday, Jan. 17:

Late Friday, the weather gurus added rain to the weekend forecast for South America and prices pulled down toward the end of the session. But they added weather premium back in Monday night, after the weekend was drier than expected. Now there is also talk of dry weather into Friday.  That's what the market is doing now, pricing in the forecast as the South American crop is developing.

WXRISK.COM still expects rain for this weekend in the dry areas of central Argentina of .50 to 1.50 inches with up to 60% coverage. This helped limit gains Tuesday. If outside markets pull back from today's gains Wednesday, and the rainy forecast still holds for the weekend ahead, grain prices could weaken Wednesday.

Then again, if they think the forecast for the weekend and even beyond is going to be drier, we should expect to fill at least 75% of the gap left on the charts from Thursday's USDA crop report on the upside. Grain agencies in Argentina and Brazil continued to lower eventual corn and bean production, but the trade here listens but doesn't react as they know their grain agencies are small, understaffed and generally rely on common perception and reporting systems that are far less sophisticated than USDA’s.

Farmers there have no incentive to report early crop results. I do believe corn and bean yields and production are much lower than our recent USDA report suggested as our government is always slow to adjust to foreign shortfalls. The reason or theory is the U.S. government is perceived by foreign entities to have superior crop forecasting tools such as weather satellites, and we don't want to dictate foreign pricing, and/or create panic as a result of our advantage at the expense of another government program of pricing and crop controls.

Technicals: March corn support is $5.90 with resistance $6.16 then $6.40. March bean support is $11.55 with resistance at $12.00 then $12.25. March wheat support is $6.00 then $5.75 with resistance at $6.50.

There is a substantial risk of loss in trading futures and options. Past performance is not indicative of future results. 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. PFGBEST, its officers and directors may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report.

by Tim Hannagan, PFGBEST

1-800-563-9510

thannagan@pfgbest.com

Tim Hannagan is one of the nation’s most prominent grain analysts. His report for Thursday, Jan. 12:

The first report this morning was the USDA’s Weekly Export Sales Report. Wheat exports last week were 365 thousand metric tons, up 17% from the four week average. Sales were largely to Asian countries more concerned about quantity and value and not quality. But low-quality wheat sales and value were on the low end of wheat’s demand list, while high-quality wheat for human consumption appeared to be in demand at foreign ports. Demand is weak at best.

Corn export sales were 321 thousand metric tons versus the 4-week average of 459. China was in for 119, and in for the sixth consecutive week. They're nibbling may turn to bigger bites if the South American drought continues. Mexico was also continuing to fill needs due to drought, with a 243 thousand metric ton purchase; it was the sixth consecutive week for them as well.

Beans saw 433 thousand metric tons sold, up 54% from the prior week. Key world player China was in for 257 of the total and, as they have with corn purchases, they are nibbling weekly with an eye on South American weather. Most of their beans come out of Brazil. Southern Brazil remains dry, but central Brazil with near record rain has me wondering when it will be too much and result in production problems. As the old saying goes, ‘BEANS HATE WET FEET’.

Today, the USDA announced a separate private purchase of beans of 414 thousand metric tons to an unknown destination. Unknown is spelled CHINA. We will watch for further good buys like this. They will show up on next week's report.

Okay, now the BIG report – the USDA monthly crop report. They put final corn production at 12.358 billion bushels, up 78 from the average pre-report estimate  and 48 more than the last report.  Hardly worth mentioning.  Key to the report is carryover, a.k.a. ending stocks come the end of our grain marketing year (August 31, 2012).

Corn ending stocks were put at 846 million bushels, down 2 million from the month prior and 282 million under a year ago. Needless to say this is very bullish in the big picture long-term as it tightens inventory further that already is dangerously low.  If USDA did not raise production, we would have come in 50 to 100 million bushels  Traders will expect lower ending stocks again next month to factor in the loss of production on corn in Argentina as January looks to remain severely dry until the end of the month.

Based on weather through January 1, the USDA cut Argentina’s corn production 3 million metric tons. January is their key yield development time, and it only rained two days in the two weeks so far this month.  The dry forecast through month’s end could see the next USDA report in February cut another 5 to 8 million. They won't have production in the U.S. to offset production shortfalls elsewhere as this last report was our final corn and bean production numbers.

Any production shortfalls in Argentina comes off their ending stocks and usually increases U.S. export projections at the expense of U.S. ending stocks. The other side of the report was, even though ending stocks dropped, they fell short of pre-report estimates for purchases of 93 million bushels.

Traders had gone long expecting ending stocks to be 753 million busels, so the pool sold everything they bought back from December 20. That's the synthetic part of the rally. Now, they come in Friday and refocus on outside markets and South American weather and trade the next update.

Bean production was put at 3.056 billion bushels, up 10 from the last report but  273 million under last year. The surprise was a larger ending stocks number of 275 million, up 45 from last month. Traders had expected 3 million bushels more or less. They raised the ending stocks by cutting the crush total of beans for oil and meal by 10 million, and they lowered export projections by 25 million.

As with corn, USDA lowered anticipated Argentina bean production by .5 million metric tons and Brazil 1 million metric tons. Bean traders will expect lower South American production numbers for January to show up on the February report. They will not have U.S. production to offset foreign shortfalls as this report was our final bean production number; and, with Argentina the world's largest oil and meal crusher and exporter and in the grips of a drought, traders will be looking for our crush to increase on better demand for foreign export.

The news is, for report day it was higher than expected, so traders took off all the buys since December 20. When we return tomorrow, then again next Tuesday after the Monday holiday, the trade will focus on weather.

The wheat market, too, saw better than recent trade positioning had expected. They put all winter wheat planting at 41.9 million acres up from 40.7 last year and pre-report estimates of 41. Ending stocks were put at 870 million bushels, down  8 from last month but 39 over pre-report estimates.

The numbers are just too high. To have tight stocks, we need to be around 450 million bushels. So it's all about production when the winter wheat crop breaks dormancy in March. Until then a followers roll to corn. Just a note, if you haven't received the PFG 2012 crop research report  with my grain  review for the year, just go to the PFG website and fill out your e-mail address to receive the report.

There is a substantial risk of loss in trading futures and options. Past performance is not indicative of future results. 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. PFGBEST, its officers and directors may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report.

Tim Hannagan is one of the nation’s most prominent grain analysts. His report for Monday, Jan. 9:
USDA  NEXT
We came in Monday addressing the weather issues in South America where the growing season is underway. Importantly, Brazil is the world's number two soybean producer exporter and number three on corn.  Argentina is the number three world bean producer exporter and number two on corn.  Needless to say, production out of that region affects world inventory enormously. The rule of thumb is that whatever they can’t/don’t produce in South America will end up being bought from U.S. ports.

We started off lower Sunday night, but only by a couple of cents as the rain expected in Argentina this Tuesday and Wednesday was expected to be much lighter than forecast last week; it should be .50 to 2.00 inches at 60% coverage. That’s a beneficial rain if it came every six days, but WXRISK.COM the weather site sees Friday through the 18th as hot and dry again and the last two weeks of January dryer but not as hot.

All of this is clearly a bullish weather scenario for corn and beans.

Southern Brazil generally looks dry the next seven days. This caused strength on Sunday’s close and into Monday's day session opening. Additionally, we got mild support from the pre-report trade estimates for Thursday's 7:30 a.m. (Central) USDA crop report.

Pre-report estimates put corn production at 12.262 billion bushels, down 48 million bushels from the last report. Estimates range from 12.100 to 12.375. Anything under the low end and I would expect the market to open 12 to 16 cents higher initially.

If production numbers are above the high end, then expect 12 to 16 cent declines on the open.

Ending stocks inventories for 2012 corn are estimated at 756 million bushels, down 92 million with a range of 582 to 1.020. Anything near the average production is bullish and gives you a higher opening.

Bean production is estimated at 3.043 billion bushels, down 3 million with a range of 3.000 to 3.079. That’s a very tight range. Ending stocks are tight at 232 million but up 3 million from last month.

Both corn and bean numbers came in under the last report and under a year ago for production. Whether we open higher and hold gains depends on how close we come to the friendly to bullish numbers and/or under the low end of estimates.

Traders won't buy too aggressively on these numbers, but no one will want to be short as  South American weather problems look to take ending stocks even lower in the months ahead. Weather is 90% of corn pricing influence and the crop report 10%.
Tomorros, Tuesday, weather in South America will again dominate trading. Then, Wednesday, look for traders to even up positions before the close, ahead of the report.

Technicals are broad. March corn support is $6.48 then $6.40 and resistance is at $6.76. March bean support is $11.80 with resistance $12.60. March wheat support is $6.20 with resistance at $6.50 then $6.85.

There is a substantial risk of loss in trading futures and options. Past performance is not indicative of future results. 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. PFGBEST, its officers and directors may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report.

Grains Analysis

by Tim Hannagan, PFGBEST

1-800-563-9510

thannagan@pfgbest.com

Tim Hannagan is one of the nation’s most prominent grain analysts. His report for Thursday, Jan. 5:

A  LITTLE RAIN

The dry weather in South America has the Chinese buying grain as a weather hedge; their purchase totals reflect concern, but not panic. Last week's weekly export sales report showed China was in for 188 t.m.t. of corn, versus the two prior weeks of 58 and 123. They also purchased 422 t.m.t. of beans versus the two prior weeks of 188 and 354 so. Again it’s an increase in buying but not panic buying, at least not yet.

By the end of January, if weather continues to erode yields of corn and beans in Argentina and Brazil, purchases could double or more. What China can't get seasonally from South America in February through March, they will have to get from U.S. ports.

Weather this week was as expected, hot and dry all over Argentina and only light rain in South Brazil giving us a sharply higher opening to start the week. The last three weeks, we went long into the weekend looking for the start of the new week to trade higher and price in another hot dry week, but this week looks different, so don't buy going into the weekend!

WXRISK.COM, the weather site, sees next Tuesday and Wednesday bringing rain over Argentina with coverage of 60%, netting .50 to 1.50 inches of rain broadly. This suggests holding off from buying until Monday.

If Monday sees an opening break in prices, buy that break and get long on two issues. One is the 11- to 15-day outlook, calling for a return of the heat dome to Argentina by Saturday, January 14. This will have traders back in to go long on the overall drought pattern, as one rain doesn't make a crop. The second issue is that USDA monthly crop reporter is out at 7:30 AM Central Time on Thursday, January 12. The fear is the report may lower final 2011 corn and bean production due to late crop season dry conditions. And assessments could lower expectations for South American corn and bean production, all leading to lower U.S. and world ending stocks. The market trades fear before fact.

Because of the short holiday week, this will be our only report until next Tuesday. Trade timing is not as chart- important as what day we find the low  and expect to turn up…and that day is Monday  when the  opening low range will hold as the low for the week.

The charts say $6.21 is the worst-case downside scenario for March corn on the low side. For March beans it's $11.85. Upside potential for corn next week is $6.76 and beans $12.60. The FREE PFGBEST Research Outlook 2012 report should be out by Monday. There's two ways to get a copy. One, go to the home page of PFGBEST.com and click on the ad, or send me your e-mail address and I will e-mail it to you as soon as it's out. My e-mail address is t.hannagan@PFGBEST.com.

There is a substantial risk of loss in trading futures and options. Past performance is not indicative of future results. 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. PFGBEST, its officers and directors may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report.

Grains Analysis

by Tim Hannagan, PFGBEST

1-800-563-9510

thannagan@pfgbest.com

Tim Hannagan is one of the nation’s most prominent grain analysts. His report for Thursday, Dec. 29:

The week is ending up as expected, with trend-following funds buying back short positions to  settle their month-end and year-end book balancing.  Prices are also supported by a stream of bullish weather reports out of South America.

WXRISK.COM, the weather site used by the agricultural industry sees a monster heat dome entering in South America, primarily in Argentina, bringing the season's hottest and driest conditions with the longer-term forecast potential for January to stay warmer and drier than normal throughout Argentina and Brazil.

Argentina is the world's second-largest corn producer/exporter, and last spring, it reached an agreement to sell more corn from its new crop to China. This agreement to some extent is in jeopardy. Argentina is into its key yield development time through most of January, when production is made or lost. The import agreement between Argentina and China has caused U.S. corn exports to lag last year’s record pace.

Brazil – the world's number two producer/exporter of beans – sees its major southern growing areas starting to see early planted  beans entering their key pod setting stage, and the month from January 10 to February 10 will be do or die time for yields there.  Brazil has forward sold 76% of its bean crop, largely to China. This, too, is in jeopardy. The expectations of January bringing dry weather to these two major world corn and bean producing areas has begun to create fear that China may soon turn to the U.S. ports to overbook grains as a weather hedge.

This would suggest selling will be limited only to profit taking; traders will buy breaks until the weather changes, and only outside market weakness would cap gains, with U.S. grain stocks  at dangerously low levels entering 2012.

Any factors through the end of summer here that would lead to larger U.S. export demand will lower our ending stocks.

This week, I have filed only one posting, as I spent my time doing the forecast that will be published in the PFGBEST Research Outlook for 2012. (Receive it FREE by signing up at www.PFGBEST.com/Research.

As you know, my grain report last year accurately predicted the bull rally which accurately anticipated the rally would peak in the spring.  Hopefully this year's report will give you again, the  reasoning, timing and pricing to trade grain futures in 2012.

If the next two weeks stay dry in South America, March corn futures will test $6.58 resistance potentially as soon as next week. The downside risk is to $5.76 prior to or into the January 12 USDA crop report.

March beans see $12.40 resistance then $12.60. The upside target for March wheat is $6.85.

Remember, markets are closed Monday and will not be open Monday night on the Globex trading system. When we come in Monday, if this weather forecast holds true, we expect a sharply higher opening.

There is a substantial risk of loss in trading futures and options. Past performance is not indicative of future results. 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. PFGBEST, its officers and directors may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report