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Published January 19, 2009, 12:00 AM

Wheat should stay on pace

Trade was dictated by bearish news from the U.S. Department of Agriculture Jan. 12. The wheat market opened the day lower on news of increased carry-over by USDA and traded near limit down for most of the session. In the grain stocks report, USDA increased its ending stocks estimate for wheat to 655 million bushels, which is 47 million bushels above pre-report estimates. World ending stocks also were increased by 1 million tons, which leaves world wheat stocks nearly 29 million tons higher than this time last year.

By: Ray Grabanski, Agweek

Trade was dictated by bearish news from the U.S. Department of Agriculture Jan. 12. The wheat market opened the day lower on news of increased carry-over by USDA and traded near limit down for most of the session. In the grain stocks report, USDA increased its ending stocks estimate for wheat to 655 million bushels, which is 47 million bushels above pre-report estimates.

World ending stocks also were increased by 1 million tons, which leaves world wheat stocks nearly 29 million tons higher than this time last year.

Limit or near-limit losses by the corn and bean markets also helped pressure the wheat market. The near-limit losses may have been an overreaction to outside markets spurred by technical selling, because despite the big losses in Jan. 12’s session, USDA did have some positive news for wheat. It lowered its estimate of planted winter wheat acres to 42.098 million acres, which is down more than 4 million acres from last year. The weekly export inspection report also provided positive news for the wheat market as inspections showed 19.6 million bushels, which is 4.5 million bushels more than needed to stay on pace with USDA projections of 1 billion bushels.

After a mixed overnight session on Jan. 13, the wheat market opened slightly lower, but shortly after, the open surged higher. By midmorning, wheat was trading with 20- to 30-cent gains across all three exchanges. Late in the session, the wheat market lost its momentum and was only able to hang on to small gains at the close.

Winter wheat losing more than 4 million acres from last year and export inspections showing shipments increase 18.1 million bushels from the week before along with strength in the soybean market provided support to the wheat market.

The wheat market opened lower Jan. 14 as expected on carry-over selling from the overnight session, which was trading lower on the sharp declines in the stock market. After opening lower, wheat made a push upward and was trading with solid gains by midmorning. Choppy trade the rest of the session sent wheat trading above and below Jan. 13’s close and, at the end of the session, all three exchanges were mixed to slightly higher. The choppy trade came from pressure from the sharply lower stock markets and support from corn and beans along with some short-covering as the wheat market begins to find its feet again after the big selloff Jan. 12.

The wheat market started the session lower Jan. 15 and traded with decent losses early in the session. All three of the exchanges were lower with most of the selling being tied to the morning’s bearish export sales report. Last week’s wheat export sales pace was estimated at 3.2 million bushels for old crop and 2.9 million bushels for new crop.

Even the combined 6.1 million bushels total was disappointing. This pressured the wheat exchanges throughout the session. Once the strength started the build in the soybean complex, the buying frenzy spilled over to help push the wheat exchanges.

The wheat market opened the day Jan. 16 with solid gains carried over from a higher overnight session. All three exchanges traded higher all session and closed with gains of 6 to 15 cents for the day. The outside markets were supportive, with corn and soybeans higher and the dollar lower. Traders also are becoming increasingly concerned that the bitterly cold temperatures may have caused some winterkill in the northern winter wheat crop.

Keep in mind that wheat cannot afford to lose much of the winter wheat crop because it already has seen planting cut by 4 million acres from last year. While this news is supportive for new crop wheat, the market is continuing to see pressure from poor export sales, which has been limiting any big upward movements in price.

Corn

The corn market opened sharply lower Jan. 12 with March futures down 22.75 cents. Additional selling pressure had the market locked limit down late in the session, closing with 30-cent losses. The USDA quarterly grain stocks report had 2008 corn production at 12.1 billion bushels, less than last year’s 13 billion bushels, but above previous estimates.

Exports, ethanol, feed and food usage all were lowered for corn, which resulted in an ending stocks number that went from December’s estimate of 1.474 billion bushels to a sharply higher 1.79 billion bushels. Traders were expecting a higher carry-out number, but the magnitude of the change and the increase in 2008 production were not expected.

The corn market opened lower Jan. 13 with March futures down 8.25 cents. Support from soybeans weakened late in the session, resulting in closing prices down 15 to 18 cents. Corn lost ground to wheat and soybeans, which traded higher. The only supportive news was a continuation of dry weather in Argentina.

The corn market opened higher Jan. 14 with March futures up 1.25 cents. The market traded with light gains for most of the day, closing with 4- to 4.5-cent gains.

The dry weather in Argentina and very light farmer selling were supportive factors, while the bearish demand numbers continued to put the brakes on any attempted rallies. Buyers finally were willing to step into this market and the corn market actually performed better than wheat and soybeans.

The corn market opened lower Jan. 15 with March futures down 2 cents. The market had a narrow trading range with light losses for most of the day, closing with 0.5- to 1.5-cent losses. Another week of disappointing export sales weighed on the market, while the dry weather in Argentina and light farmer selling were supportive factors.

The corn market opened higher Jan. 16 with March futures up 7.25 cents. The lower dollar was supportive as was the continued dry weather in Argentina, where corn is in the pollination stages. Informa acreage estimates of 82.7 million acres were neutral for the corn market. Position squaring and profit taking ahead of the long weekend also affected the market.

USDA estimated last week’s corn export sales pace at 8.5 million bushels. This brings the year-to-date export sales pace for corn to 847.1 million bushels compared with 1.69 billion bushels for last year at this time. We needed corn sales of 26.8 billion bushels to keep pace with projected export sales of 1.75 billion bushels.

With strong carry-in in the futures market and weakness in the cash market, farmers would be wise to store corn at this time. Options could be used to protect the downside.

Soybeans

Soybean markets opened sharply lower Jan. 12 with March futures down 33 cents. Additional selling pressure came later in the session with closing prices down the limit of 70 cents. The USDA quarterly grain stocks report had 2008 soybean production at 2.96 billion bushels, which was above last year’s 2.68 billion bushels and above trade expectations. A decrease in domestic demand and an increase in exports resulted in an ending stocks number that went from December’s estimate of 205 million bushels to a sharply higher 225 million bushels. Traders were expecting a shrinking carry-out, so the larger carryout brought in heavy selling pressure.

Soybean markets opened higher Jan. 13 with March futures up 10 cents. Additional buying interest had the market sharply higher by midday but a floundering crude oil market brought pressure that resulted in closing prices unchanged to 5 cents higher. Supportive news included a continuation of dry weather in Argentina, additional Chinese buying interest, and light farmer selling. Outside markets put pressure on soybeans with the sharply higher dollar and weakness in crude oil.

Soybean market opened higher Jan. 14 with March futures up 7.5 cents. Additional buying interest had the market sharply higher by midday, but outside market pressures resulted in mixed closing prices. The December crush figures were released at 134.8 million bushels, down from Novembers 139.4 million bushels and sharply lower than the December 2007 crush of 155.9 million bushels. Bull spreading supported the nearby contracts, but put pressure on the deferred contracts.

Soybean markets opened higher Jan. 15 with March up 2.5 cents. Strong buying interest had the market more than 50 cents higher briefly in the midday. Soybeans were unable to sustain those gains because of outside market pressures. Closing prices were up 5 to 23 cents. The weekly export sales were estimated at a whopping 50 million bushels, well above expectations of 14.7 million to 22 million bushels.

Soybeans opened higher Jan. 16 with March futures up 15.25 cents. The lower dollar was supportive as was the continued dry weather in Argentina. Additional sales to China were announced, while Informa acreage estimates of 80.8 million acres for 2009 kept a lid on the market. Position squaring and profit taking ahead of the long weekend also affected the market.

USDA estimated last week’s soybean export sales at 50 million bushels, well above the 9.8 million bushels needed to keep pace with USDA projections. This brings the year-to-date export sales total for soybeans to 817.3 million bushels compared with 805.1 million bushels for last year at this time. USDA is projecting this year’s soybean export sales pace to be 1.1 billion bushels.

The soybean cash market is firm with extremely light farmer selling and decent export demand. We are looking at soybean basis levels that are competitive vs. corn in many locations. If you are holding corn and soybeans and need to sell cash grain, soybeans would receive higher priority at this time. Cash sales could be renowned with call options.