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Published April 12, 2010, 12:12 PM

Technical buying ahead of USDA report

The wheat markets put in a decent week this for the week of April 8, gaining 14- to 15-cents in the front months. Most of the strength was because of technical recovery as wheat really had nowhere to go but up, especially after Chicago traded to seven straight new lows.

By: Ray Grabanski,

Wheat

The wheat markets put in a decent week this for the week of April 8, gaining 14- to 15-cents in the front months. Most of the strength was because of technical recovery as wheat really had nowhere to go but up, especially after Chicago traded to seven straight new lows.

The wheat market started the week mixed as burdensome supplies pressured the old crop contracts while growing season concerns help to support the new crop months. The front month May Chicago contract traded to another new low. The wheat exchanges still are looking for their lows, and so far, they have not found that price. Losses were kept in check by concerns toward this year’s production season as well as from spillover strength from a stronger corn market.

The April 6 session had wheat starting with small gains with most of the early support because of carry-over support from a higher overnight session. The news that was filtering into the wheat pit was not friendly news — an export sales of wheat to Iraq where the U.S. gets 50,000 metric tons of a 500,000 metric ton sale, seven straight new lows and sharply higher dollar — so it had appeared wheat would have a sluggish session. But by midsession, a large number of fund orders hit the wheat exchanges and wheat exploded to the upside. The push forced wheat to 10- to 15-cent gains. This is where the market remained for most of the remaining session. By the close, wheat slipped off of its highs but still managed to end with good strength. Technical buying and traders trying to correct an oversold market condition was part of the reason for the strength in the wheat.

Wheat struggled a little more than usual in the early parts of the April 7 session. By midsession, wheat had started to show signs of strength, and it was evident that wheat wanted to trade higher. A large number of computer-generated buy orders was part of the reason for the jump at midsession, but what that did do was encourage others to become buyers of wheat. For the most part, the worst news already is known for wheat and the fundamental picture really cannot get much worse than it is.

The April 8 session had wheat lower and extending loss into the close. The Minneapolis exchange was the best performer as traders try to work in some sort of planting premium while good growing conditions continue to plague the winter wheat exchanges. The wheat market continues to struggle to hold gains as this market continues to be pressured by burdensome supplies. Extremely large stocks of wheat continue to weigh on the wheat market. Wheat is able to rally, but the market cannot hold those gains as any sort of strength meets selling. USDA’s export sales report showed a decent amount of wheat being sold in the previous week.

Corn

The corn market gained 2 cents for the week. Corn traded in a narrow range for the week of April 5 waiting for the April 8 USDA supply and demand report. The report increased ending stocks by 100 million bushels to 1.899 billion bushels. This is more than we have seen in the past four years. Estimates were at 1.91 bb. USDA did leave corn exports unchanged, but lowered the feed and residual use by 100 million bushels. World stocks also were increased by 4 million metric tons from last month, on top of a 6-million-metric-ton increase in the March report. It appears that our ending stocks are going to be larger as we head to the field to plant the second largest projected acreage since 1947. Weather will also give the market direction this spring as the land is prepared and planted.

Corn opened the week near unchanged and traded within a 3-cent range, ending the day up 1.25 cents. Short covering gave the corn a bounce in this oversold market. Also, crude oil hit an 18-month high and the dollar was softer to add support.

USDA’s inspection report provided little direction. The corn market still is struggling with the USDA report that stated more acres will be planted in 2010 compared with last year and the March 1 stocks are the largest we have seen since 1986 to ’87. This news will continue to keep a lid on any big upside moves. The market also will focus on the weather the next couple of weeks and monitor planting progress. The weather will have to play a role to see this market move higher. Technically, the corn market broke through support and now has resistance at the old lows of $3.50.

On April 6, the corn market closed up 0.75 cents, after starting near unchanged and trading in a 2-cent range. Corn was supported by the slightly higher crude oil market. Also, the weather forecast is for wet weather throughout the eastern Corn Belt. But the corn market still is struggling with the USDA’s recent report and the supply and demand report. The corn market will need some type of weather scare to push higher.

The corn market closed up 10 cents April 7 after starting the day near unchanged. Corn traded both sides of unchanged until noon, at which time technical buying entered the trade and pushed it 10 cents higher. Corn also is being supported by the strength in the crude oil market. The USDA supply and demand report and crop production report will provide additional information for direction in the market.

April 8, the corn market gave back everything it gained April 7, closing 8 cents lower. The market started lower with the lower overnight market. The crude oil market also was lower and the dollar higher to add additional pressure. There also was some positioning ahead of the April 9 USDA supply and demand report. Estimates for the ending stocks are at 1.91 billion bushels, up from last month’s USDA figure of 1.79 billion bushels. Also, the seven-day forecast is for good weather throughout much of the country allowing spring work to continue. The export sales report was bullish for corn but had little effect on the market April 9. The April 7 run in the market was the news that China was seeking an import license to purchase U.S. corn; this news was short lived.

Soybeans

The soybean complex had an OK week trading with close to 5-cent gains for the week. The soybean complex finally shook off the March stocks report and recovered slightly to clean up an oversold market condition. The gains were not easy as demand is slowing and Brazil is wrapping up harvest.

The soybean complex opened the week lower with much of the selling continuing to come from the effects of USDA’s bearish March stocks report. The soybean complex tried to rally slightly around midsession, but there was no follow-through buying to help keep the soybean moving higher.

The April 6 session started higher with most of the early session support coming from spillover buying strength from a stronger overnight session. The soybean complex was able to trade with modest gains throughout most of the session. By midsession technical buying from the funds stepped in to help keep the soybean complex firm. By the close, a late buying surge pushed the soybeans to new highs for the session. Soybeans have traded down to major support lines, and without further negative news, the soybean complex could not break further.

The soybean complex started the April 7 session higher but lost those gains early in the session. It had appeared soybeans might just continue to trade lower. But by midsession, the soybean complex, along with the other grains, started to firm and actually trade with decent gains. The outside markets also turned to trade in a supportive fashion to the grains, and that helped to support the grains during the second half of the session.

The April 8 session had soybeans starting lower and maintained session losses throughout the session. At one point, the soybean complex did try to cut its losses, but the best the market could muster was to get to about 1- to 2-cent losses. At that point, new selling stepped in to push the market back to its lows. After seeing a few days of gains, the soybean complex just ran out of buyers and no one was willing to go into the April 9 session with a big long position because of USDA releasing the April crop production estimates.

South American harvest is advancing and weather forecasts have been improving, which has allowed for harvest to pick up steam. The report will set the tone for soybeans in the short term as it will give traders an idea of where USDA is going to allocate the extra 60 million bushels found in the March stocks report.

Barley

USDA cut barley’s food, seed and industrial use by 5 million bushels in the April crop production report. The 5 million bushels cut followed through and ended up increasing barley’s ending stocks to 116 million bushels.

Durum

In its April Crop Production report, USDA cut durum supply by 3 million bushels (imports) and increased durum’s export sales pace by 5 million bushels to 50 million bushels. The 8 million bushels adjustment followed through to cut durum’s ending stocks estimate to 37 million bushels.

Canola

Canola futures on the Winnipeg, Manitoba, exchange closed about 50 cents lower for the week. Pressure came from carry-over selling from a lower U.S. soybean complex as well as from strength in the Canadian dollar. This was a week where most if not all of the influence on the canola market was because of either the U.S. soybean complex or the Canadian dollar. The April 8 cash canola bids in Velva, N.D. were at $16.82.

Sunflowers

The April 8 cash sunflower bids in Fargo, N.D., were $13.75.

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