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Published May 10, 2010, 02:49 PM

Markets struggle as dollar rallies

The wheat market started the week on the defense, trading with modest losses throughout the session. By midsession the wheat markets started to accelerate its losses. By late in the session, the wheat exchanges were trading with double-digit losses and appearing to be heading for a train wreck. The wheat had little news of its own to give it directions. Selling pressure was a result of a sharply higher U.S. dollar. Toward the end of the session, wheat did stage an impressive rally, recovering all it is losses to end with only a minor loss.

By: Ray Grabanski,

Wheat

The wheat market started the week on the defense, trading with modest losses throughout the session. By midsession the wheat markets started to accelerate its losses. By late in the session, the wheat exchanges were trading with double-digit losses and appearing to be heading for a train wreck. The wheat had little news of its own to give it directions. Selling pressure was a result of a sharply higher U.S. dollar. Toward the end of the session, wheat did stage an impressive rally, recovering all it is losses to end with only a minor loss.

The May 4 session had wheat on the defense as early selling pressure was a result of carry-over selling from the bearish May 3 USDA crop progress report. The report showed decent planting progress for spring wheat as well as a strong crop rating for the nation’s winter wheat. Additional pressure was caused by a sharply higher move in the U.S. dollar. Late in the session, traders turned to buyers because of weather forecasts of possible frost in much of the U.S. winter wheat regions.

The wheat exchanges started the May 5 session lower with most of the early selling pressure being tied to pressure from continued strength in the U.S. dollar. The selling was a little heavier on the opening than expected. But just as was the case in the most of the grains, wheat’s performance was not to be defined by the opening bell. By midsession, most of the wheat contracts had firmed, and by the close, all of the contracts had turned higher. Gains were small, but it was impressive to see the wheat market being able to move from 7- to 9-cent losses to end with 1- to 3-cent gains. Technical buying and short covering was part of the reason for the late-session buying spurt, but some of the strength also was because of the news release from the wheat quality tour as yields are coming in lower than expected.

The May 6 session had wheat starting lower with most of the early selling pressure coming from spillover selling from a bearish USDA export sales report, which continues to show little to no interest in export demand for U.S. wheat. Additional selling pressure was a result of pressure from a sharply higher U.S. dollar. But the wheat market did try to stage a recovery around midsession as with much of the buying strength spilling over from a rallying corn market.

Corn

To start the week, the corn market opened 2 cents lower and traded with losses the entire session, ending the day down 3.5 cents. The market started lower with the lower overnight session and the stronger dollar. At midsession, USDA released its weekly export inspection report, which came in below estimates and bearish to corn. The market also was thinking about the planting progress made last week and what the report was going to say this afternoon, trade estimates were for 65 to 70 percent planted. The fastest planting year on record was 1987, in which there was 75 percent of the corn in the ground on May 3. In 2004, we reached 75 percent planted on May 6. The report showed 68 percent of the crop is planted and 19 percent is emerged.

The corn market opened May 4 6 cents lower and traded there until midsession, being influenced by the lower overnight and negative outside markets. The market was able to firm up into the close, but still ended down 2.75 cents. Crude oil traded with $3 losses and the dollar was much firmer to pressure corn. Also, commercial selling entered the market because of the record planting and emergence pace. There are a record number of acres going in the ground early, along with having a good start, and this kept pressure on the market. But, the market was able to limit losses with the weather forecast calling for cooler temperatures and the possibility of frost later in the week in the Corn Belt. This forecast supported the market into the close.

The corn market opened 4 cents lower May 5, with the lower overnight and negative outside markets. Corn did trade with 7 cents losses at midday, but firmed up into the close and finished 4.75 cents higher. The market chopped around as the bulls and bears pleaded their own cases. The early part of the session was influenced by crude oil being down $3 and a much stronger dollar. The market also felt pressure from the large number of acres that are being planted this early in the spring. The market was able to turn around at midsession as some commercial buying entered the market. In addition, there are concerns with the lower temperature forecast for the weekend in the Corn Belt that could damage the crop. Another item that supported the market was talk of China purchasing additional corn. The market continues to trade in a tight range and is searching for something solid to make it move.

The corn market opened 2 cents lower May 6 with the softer overnight market. But after a lower open, the market firmed up with the bullish export sales report as the market pushed to 6 week highs. Then as we moved into the close, the corn moved lower being pressured by the losses in the soybean market. The corn was being pulled from sides, good exports and negative outside markets. The exports were phenomenal for the corn market at 74 million bushels and much higher than the estimates. But the weakness in the financial markets limited any upside potential. The dollar continues to move higher, along with the crude market down more than $3 a barrel and the Dow Jones Industrial Average freefall. The DJIA traded at a more than 900-point losses at one point.

Soybeans

The soybean complex started the week lower in all months. Soybeans were expected to start steady to slightly lower, but the weakness was a little more than expected because of fund selling. Most of the selling pressure is a result of concerns that U.S. export demand is starting to slow down as China starts to move purchasing to South America. The slowdown was evident in USDA’s export inspections report, which was bearish to soybeans. Light selling also was because of thoughts that USDA’s crop progress/crop conditions ratings report would show a decent start to soybeans planting progress.

The soybean complex started the May 4 session lower with much of the early selling pressure coming from spillover selling pressure from a sharply higher U.S. dollar. But the soybean complex was not to stay in lower territory. Buying support came from short covering. This lead trader’s to lift short old crop contracts, but new crop pressure remained, keeping the new crop contracts lower. Bull spreading was noted again, the buying of the front month contracts while selling deferred contracts.

The May 5 session opened sharply lower and lower than expected with much of the selling tied to fund selling. Additional selling pressure was a result of a sharply higher U.S. dollar and sharply lower crude oil market. The soybean complex was not content with holding those losses though. The recovery was tied to spill over support from the wheat exchanges, as they also started the session lower and recovered to actually trade higher by the close. Additional support for the soybean complex continues to come from tight old crop supplies. Even though South America is projected to harvest a record crop, demand has remained in the U.S. and there are even signs that domestic crush demand for soybeans is better than expected. A late round of selling did bring the soybean complex back to the low end it its trading range.

The soybean complex started the May 6 session lower and traded with modest losses throughout most of the session. Early pressure continues to come from the rallying U.S. dollar, which was trading sharply higher most of the week. USDA’s export sales report was friendly to the soybeans as it continues to show decent demand. But the strength in the dollar just proved to be too much for the soybean complex to handle. The losses were exaggerated going into the close as additional selling pressure hit the soybean complex hard. The late session sell-off was tied to a major sell-off that was starting to occur in the financial markets.

Barley

USDA reported last week’s barley export shipments pace at 32,000 bushels with all of the bushels going to Mexico. This brings the year-to-date export shipments total for barley to 3.2 million bushels compared with 11.3 million bushels for last year at this time. There was no barley export sales reported for last week. This brings the year-to-date export sales pace for barley to 3.3 million bushels compared with 9.7 million bushels for last year at this time. It appears unlikely that barley will make USDA’s 2009 export sales projection of 5 million bushels.

Durum

There was no durum shipments reported for last week. USDA estimated last week’s durum export sales pace at 100,000 bushels. This brings the year-to-date export sales pace for durum to 36.6 million bushels compared with 16.5 million bushels for last year at this time. Just as is the case in barley, it appears unlikely that durum will reach USDA’s 2009 export projection of 50 million bushels.

Canola

Canola futures on the Winnipeg, Manitoba, futures closed close to $1 lower. The canola market started the week off higher with much of the early support coming from a stronger performance in the foreign oil seed markets (palm oil and rapeseed). But the canola market was not able to hold those gains once the U.S. soybean complex broke lower. For the rest of the week, the canola market was in a tug of war between a lower Canadian dollar (which helped support the canola market) and lower U.S. soybean complex (which pressured the canola market). The May 6 cash canola bids in Velva, N.D., for old crop canola is at $16.34 while new crop bids are at $15.36.

Sunflowers

The May 6 cash sunflower bids in Fargo, N.D., were $13.60.

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