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Grabanski: World economy concerns pressure markets

Wheat

Wheat slowed its sell-off last week, but the market still ended with losses, as three out of four sessions traded with losses. For the week ending Aug. 27, September Minneapolis dropped 7 cents, September Chicago was 15.25 cents lower and September Kansas City slipped 6.5 cents.

Wheat started the week off right, ending with gains. Wheat started off lower, with most of the pressure from spillover selling from the other grains and a sharply lower stock market. Cooler heads prevailed, as wheat seems to be more insulated from world economic issues than other grains. Late-session buying was spurred by a cent-and-a-half drop in the U.S. dollar.

The rest of the week had wheat on the defense.

The Aug. 25 session started with gains, but they couldn’t be sustained. Early support came from thoughts that wheat needs to see a slight retracement to correct oversold market conditions. Early buying spilled over from other grains, as they were higher to start the session. Once the U.S. dollar started to rally, wheat pulled back. By midsession, wheat was in a full-fledged sell-off with the sharply higher dollar the main pressure point. Wheat was searching for news of its own, and so far, it has not been able to find support.

The Aug. 26 and 27 sessions brought more selling into the Chicago wheat exchanges, and more support in the hard wheat contracts.

The soft red contract has not traded to new contract lows, as Minneapolis and Kansas City wheat has, mainly because Chicago has a production premium worked in because of poor quality.

Traders bought Chicago wheat in an attempt to secure needs by forcing delivery of futures contracts. That is shaping up to be less important now because of the high quality of this year’s spring wheat crop.

Chicago was under pressure from spill-over selling from the lower corn and soybean complex. Good harvest weather in the Northern Plains and reports of better-than-expected yields continues to put a lid on the spring wheat contracts. Additional bearish news came from the International Grain Council, whose world wheat production estimate increased 10 million metric tons to 720 million metric tons. Egypt again bypassed the U.S. and bought 60,000 metric tons of wheat from Russia.

For the week ending Aug. 22, the U.S. Department of Agriculture estimated the wheat export shipments pace at 10.2 million bushels and the wheat export sales pace at 19.4 million bushels. Shipments need to average 19.1 million bushels and sales need to average 14.1 million bushels to make USDA’s export pace of 925 million bushels.

As of Aug. 23, 75 percent of the nation’s spring wheat crop was harvested, compared with 53 percent the previous week and 47 percent for the five-year average.

Corn

The corn market struggled last week, with a combination of outside markets and strong crop conditions pressuring the market.

Ethanol has been under pressure because of the declining crude oil market. The upside was limited with more export cancellations. As of the Aug. 27 close, December corn was down 2.25 cents.

Corn started the week with double-digits losses from the negative outside market and economic concerns in China. Export inspections were disappointing. But the futures firmed by late morning and closed with small gains Aug. 24. Some support came from the Pro Farmer Tour, which predicted a smaller yield than USDA. The tour estimated a yield of 164.3 bushels per acre, lower than the current USDA estimate of 168.8 bushels per acre.

Traders expected USDA’s crop progress report to cut corn’s crop condition rating 1 percent.

Selling pressure came back into the trade Aug. 25. Early weakness came from the crop progress report that increased excellent ratings 1 percent. Traders were expecting to see a drop, which is usual this time of year. China cut its interest rate for the fifth time since November, which caused the U.S. dollar to push sharply higher. The funds have been liquidating long positions, and when the Dow Jones came off its morning highs to trade with red ink into the afternoon, that added downside pressure.

Red ink was on the agenda Aug. 26, with volatility in outside markets and no major weather issues causing most of the selling.

Additional selling came from a disappointing ethanol report, which showed production down and stocks up. This is the lowest production number since early May. The market closed slightly higher Aug. 27 with strength in the outside markets, while the Dow was sharply higher. Outside markets found support from easing economic concerns for China.

For the week ending Aug. 23, corn was rated 69 percent good to excellent, 21 percent fair and 10 percent poor or very poor. Corn in the dough stage was 85 percent, compared with 81 percent one year ago and 81 percent for the five-year average. Dented corn was at 39 percent, compared with 33 percent one year ago and 43 percent for the five-year average.

USDA’s export inspections report was bearish for corn at 34.8 million bushels, below the 128.79 million bushels to meet USDA’s projection. For the week ending Aug. 22, export sales were estimated at -5.2 million bushels, but still are above the amount needed to meet USDA’s estimate of 1.85 billion bushels for the year.

Soybeans

Soybeans traded back and forth last week. In the end, good growing conditions and world economy concerns prevailed to push soybeans lower. For the week ending Aug. 27, September soybeans dropped 19 cents, while November dropped 10.5 cents. Both are new weekly lows.

Soybeans started the week on the defense. Early selling was tied to world economy concerns, as it appears most of the world’s major economies are devaluing their currencies. The lack of weather concerns added pressure. Soybeans have moved through the critical crop stages, with little adverse weather and that has been evident in the recent crop tour yield estimate, which was close to USDA’s projection. The soybean market did posted sharp losses to start the session, but recovered throughout the day because of export news. USDA announced crop sales of 120,000 metric tons to an unknown destination.

The Aug. 25 session had soybeans trading with strong gains. Support came from bottom-picking buying, as traders think it’s time for the soybean market to stage a recovery. Light support came from reports China will lower interest rates, making credit easier to obtain. This will make it easier for China to import soybeans. There was a report of another 7.7 million-bushel sale of soybeans to an unknown destination. Fundamental news remains bearish. Technically, soybeans need a recovery.

By mid-week, selling returned. Soybeans opened steady to slightly higher. Gains were short-lived, and soybeans came under extreme pressure.

Early support spilled over from the stronger performance Aug. 25. but once small trader buying dried up, selling took center stage. Pressure was tied to concerns about China’s economy. China keeps devaluing its currency and cutting interest rates.

The Aug. 27 session started with small gains, but ended on double-digit gains. Support was because of reports of another export sale. USDA reported another 4.8 million-bushel sale of soybeans to an unknown destination.

Gains were trimmed once USDA released its weekly export sales report. The report confirmed a cancellation of old-crop soybeans. Soybean export sales are running above USDA’s expectations, and it looks as if shipments will exceed USDA’s projection. New-crop sales were strong.

For the week ending Aug. 22, USDA reported the soybean export inspections pace at 7.7 million bushels. The soybean export sales pace was estimated at -4.8 million bushels. Shipments need to average 2.3 million bushels, while sales have exceeded the bushels needed to make USDA’s 1.825 billion-bushel estimate.

For the week ending Aug. 23, soybeans in bloom were at 96 percent, compared with 93 percent the previous week and the five-year average of 98 percent. Soybeans setting pods were at 87 percent, compared with 79 percent the previous week and the five-year average of 88 percent. Soybean condition ratings were unchanged at 63 percent good to excellent, 26 percent fair and 11 percent poor or very poor.

Barley

As of Aug. 23, the barley harvest was 86 percent complete, compared with 66 percent the previous week and 50 percent for the five-year average.

Aug. 27 cash feed barley bids in Minneapolis were $2.35 per bushel, and malting bids had no quote.

Durum

For the week ending Aug. 22, USDA reported the durum export inspections pace at 1.699 million bushels. Durum export sales were reported at 600,000 bushels.

USDA estimated North Dakota’s durum harvest at 37 percent complete, compared with 23 percent for the five-year average. North Dakota durum was 82 percent good to excellent, 17 percent fair and 1 percent poor.

Aug. 27 cash bids for milling quality durum were at $6.75 per bushel in Berthold, N.D., while the Dickinson, N.D., bid was at $6.50 per bushel.

Canola

Canola futures on the Winnipeg, Manitoba, exchange closed the week ending Aug. 27 with $7.40 (Canadian) losses.

USDA estimated the North Dakota canola harvest at 33 percent complete, compared with 23 percent for the five-year average. North Dakota’s crop condition was at 78 percent good to excellent, 20 percent fair and 2 percent poor or very poor.

Aug. 27 cash canola bids in Velva, N.D., were at $14.35 per hundredweight.

Sunflowers

As of Aug. 23, 4 percent of North Dakota’s sunflower crop had bracts turning brown, compared with none for the five-year average. Sunflower conditions were 72 percent good to excellent, 20 percent fair and 8 percent poor. For the week ending Aug. 22, USDA estimated the export sales pace for soybean oil at 17.1 thousand metric tons. This brings the year-to-date export sales pace for soybean oil to 879.2 thousand metric tons compared with 810.3 thousand metric tons last year.

Aug. 27 cash sunflower bids in Fargo, N.D., were at $17.05 per hundredweight.

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