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Published August 18, 2008, 12:00 AM

RAY GRABANSKI COLUMN: Soybeans finish with high gains

The week began with soybeans finishing the day with sharp gains as traders consolidate after last weeks sharp loses. Traders were squaring positions ahead of tomorrow’s U.S. Department of Agriculture reports. Preliminary estimates call for soybean production to be at 3.003 billion bushels on average and yields to be at 41.6 bushels per acre. The July report put production at 3 billion bushels with a yield of 41.6 bushels per acre.

By: Ray Grabanski, Agweek

Soybeans

The week began with soybeans finishing the day with sharp gains as traders consolidate after last weeks sharp loses. Traders were squaring positions ahead of tomorrow’s U.S. Department of Agriculture reports. Preliminary estimates call for soybean production to be at 3.003 billion bushels on average and yields to be at 41.6 bushels per acre. The July report put production at 3 billion bushels with a yield of 41.6 bushels per acre.

Aug. 12 soybeans finished the day with gains as news of the USDA report paints a poor soybean crop, dropping yields 1.1 bushels from the July report. With soybean behind average crop development and worries of an early frost in the north this report gives soybeans some bullish news that was reflected in Aug. 12’s prices. The August report puts production at 2.973 billion bushels with yield of 40.5 bushels per acre down 1.1 bushels from the July report. Recent rain in the Western Corn Belt and Northern U.S. turned out to be beneficial, and Pro Ag highly doubts that the soybean crop will be as poor as USDA projected in this report. In our opinion, that was the condition of the soybean crop in June (they are two months late with this report).

Midweek soybeans finished with sharp gains after Aug. 12’s news of the USDA report putting a low yield at harvest. A $4 decline in the market since mid June probably meant we dropped too far, too fast. With the questionable carry-over and frost risk we are seeing some buyers get back into the market helping the gain. Also there was an increase in the crude oil market that soybeans and corn tend to follow. Weather conditions still remain favorable for parts of the U.S. that will reduce the amount of stress that is put on the plants. This will go along way in growth and yield potential, and as long as the crop continues to improve it might be difficult for soybeans to hold any gains.

Aug. 14 soybeans opened sharply lower with a rebound around midday. The midday push was short lived as the market gave back its gains and turned lower at the close. With an overbought market condition the bounce now has turned into a negative situation. There is some promising weather reports out that will support great growth in the soybeans. This has created some pressure on the markets that contributed to the loss Aug. 14. With rain in the central US and good temps the weather is favorable.

Export Sales were reported at the low end of expectations at 10.6 million bushels. Preliminary expectations were for 9.2 million to 20.2 million bushels. This is on the low end of expectation and it helped to add to the session’s losses.

In their weekly crop condition and progress report USDA estimated Soybeans percent blooming is at 88 percent currently compared to 78 percent for last week and 94 percent for the five year average. The percent Setting Pods is estimated to be at 60 percent compared to 37 percent from last week and 75 percent for the five year average. Soybean’s crop condition ratings saw a 1 percent drop in the fair category and are now estimated to be at 63 percent good/excellent, 26 percent fair, and 11 percent poor/very poor.

Wheat

Aug. 11, wheat finished the day sharply higher on short covering with traders positioning ahead of Aug. 12’s USDA reports. Price support also came from spillover from corn and soybeans which moved bullish for most of the day. In addition world wheat demand remains strong and with winter wheat harvest wrapping up this is adding some underlying support. Preliminary estimates for Aug. 12’s reports show an increase in winter wheat production. The average estimates are for 1.873 billion bushels; this is above the July figure of 1.864 billion bushels. Also, bearish is the current weather forecast which continues to look favorable.

On Aug. 12, wheat finished the day mixed with spillover providing support but pressure coming from USDA reports. The USDA reports were bearish for wheat. Both U.S. and world wheat production estimates were increased, with the US 08/09 production seeing a 2 million bushel increase from July. World wheat production was projected to be at a record 24.6 billion bushels, which is up 238.8 million bushels from last months projection.

Aug. 14, wheat closed a limit higher following rallies in corn and soybeans. After recent losses, and with the USDA reports out of the way, the market is due for a bounce which is opening the market up to technical buying. Export demand is providing underlying support for gains, which despite the bearish USDA forecast remains strong as importing countries continue to replenish stocks after last year. Also supportive outside markets and short covering are adding to the upward momentum.

On Thursday the market finished sharply higher on spillover from rallying corn. The market opened bullish out of the overnight on follow through buying, with Wednesday’s strong close that expanded the limit to 90 cents on the CBOT and KCBT. By midday the market had fallen on spillover pressure from corn, soybeans and crude oil. But as corn recovered and rallied higher wheat followed. Technically speaking, the prices are still due for a bounce adding to the upward momentum by inspiring technical buying and short covering. Fundamentals are also supportive as there continues to be a strong demand for US wheat as importing countries continue to restock supplies.

Export Inspections were reported to be at 30.8 million bushels. This is the largest inspection report since last fall. Primary destinations were Indonesia and Iraq. Export Sales were within expectations at 23.9 million bushels.

In their weekly crop condition and progress report USDA estimated winter wheat harvest progress at 92 percent complete compared to 86 percent for last week and 95 percent for the five year average. Spring wheat is currently 16 percent harvested compared to 6 percent for last week and 36 percent for the five year average.

Overall wheat prices saw a nice dead cat bounce this week early, but it looks like we are destined to make new lows this fall yet on a large world wheat crop and large U.S. hard red spring wheat yields in central and eastern hard red spring wheat areas. Also corn and soybean crops might be record large if we have an average frost date or later, and that could also pressure wheat prices further before we recover into next winter/spring.

Corn

The week began with corn closing with slight loses on a quiet trading day. The market opened bullish out of the overnight on short covering with traders looking ahead to Aug. 12’s USDA reports, which are expected to be bearish for corn. Preliminary estimates are that the USDA will report increases in both corn production and yields. This increase is attributed to improved growing conditions with corn coming back from the June floods. The forecast remains favorable which is applying some pressure to the market. However, there is some concern about the first frost which is more of an issue this year due to the late planting. This could provide some risk premium to the market as we move towards fall.

Aug. 12, corn finished sharply higher rebounding after the mornings bearish USDA reports. In the morning the USDA released its monthly crop production report, which projected corn production to be at 12.288 billion bushels, which was 573 million bushels higher than July’s projection and higher than the pre-report average estimate of 11.938 billion bushels. Yield projections were also increased to be estimated at 155 bushels per acre, which is up from the July projection of 148.4 bushels per acre. This is higher than pre-report average estimate of 152.3 bushels per acre. If these yield estimates hold true for the year this could be the second largest yields on record. These increases are seen as a result of July’s favorable weather conditions. Ending stocks were bearish as well, with the projection for 2008 to ’09 marketing year increased to 1.113 billion bushels. This is up significantly from the July projection of 833 million bushels, and well above the average pre-report estimate of 991 million bushels. The increase is seen as a result of increased U.S. and world production. Though the report was bearish, the market is seen as being oversold. Corn has been positioning for this report and with the report released, the market is due for a boost. Also, frost concerns continue to add some risk premium to the market.

Midweek the market finished a limit higher due to technical buying. The market is viewed as oversold and with the USDA reports out of the way the market is rebounding. Stepping in to add support is follow-through buying after Aug. 12’s strong close and some short covering. In addition, gains in crude oil is lending some underlying support to the upward movement. cast through Aug. 16.

Aug. 14, corn finished the day sharply higher because of technical buying and concerns over dry weather. Opening out of the overnight corn fell lower with prices correcting after Wednesdays limit up finish. Adding to this downward move was pressure from soybeans and falling crude oil.

Export Inspections were reported to be at 35.8 million bushels. This is below the 67.1 million bushels needed to stay on pace for the marketing year. Primary destinations were Japan and Mexico.

In their weekly crop condition and progress report USDA estimated percent silking to be at 93 percent compared to 83 percent for last week and 96 percent for the five year average. Corn percent dough is estimated to be at 30 percent compared to 17 percent for last week and 50 percent for the five year average. Corn percent Dented is estimated to be at 6 percent compared to 16 percent for the five year average. Corn’s crop condition ratings improved by 1 percent in the good/excellent category and are estimated to be at 67 percent good/excellent, 23 percent fair, and 10 percent poor/very poor.