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Published May 17, 2010, 03:44 PM

USDA report friendly to corn

The May 10 session was expected to open with small gains. Instead, it started mixed and then it turned ugly as the market dropped to end sharply lowe

By: Ray Grabanski,

Wheat

The May 10 session was expected to open with small gains. Instead, it started mixed and then it turned ugly as the market dropped to end sharply lower. The wheat just seemed to collapse early in the day as fund selling dominated the session. The past few weeks, the wheat exchanges have traded with decent to impressive gains as funds liquidated short positions. Pressure was a result of the lack of any frost damage reports from over the weekend. Weather forecasts were calling for a potential cold weather event to move into parts of the northern winter wheat regions with a chance of a few areas getting cold enough to cause frost damage. Temperatures dropped, but not to the level cold enough to result in severe damage. This caused trades to start to remove some of the weather premium that was built into the market. USDA’s export inspections report was neutral to wheat and really did not influence the session.

The wheat market started the May 11 session sloppy with most of the early selling pressure coming from USDA’s crop production report. The report continued to show just what everyone has known for some time: Demand for wheat is not good. In all, USDA made no adjustments to the 2009 crop year estimates. The bearishness came in the 2010 numbers. The lack of demand continues to be evident as exports remain low while ending stocks increase 47 million bushels to 997 million bushels, a 23-year high. In all, the report was bearish to wheat, but corn’s estimate was friendly and that seemed to help support wheat. Traders also were thinking that the big losses May 10 helped to work in the bearish report.

The May 13 session had wheat starting higher with most of the early support coming from strength from a stronger overnight session. Most of the early support in the wheat exchange spilled over from a stronger corn exchange as corn started the session higher off of news that China was in looking to buy six more cargos of U.S. corn. This helped to support the wheat exchanges early in the session, but it did not take long for the novelty of the export news to wear off and traders turn their attention back to trading wheat’s own news. Producers who still are sitting on 2009 wheat and who have sold little 2010 wheat, might want to consider selling the carry-in wheat. The futures market is paying almost $1 to hold wheat to 2011 and another $1 if you are willing to hold it to 2012 ($2 total). With low-protein wheat and poor demand, it might be an option worth pursuing.

The May 13 session had wheat opening on the defensive side with much of the pressure coming from a bearish export sales report. The wheat market seems to be stuck in a rut and looking for something to help give it direction. Fundamentals are bearish as stocks remain plentiful and they appear to be remaining plentiful through the 2010 crop year, according to USDA’s May crop production report.

Technical wheat still is above resistance levels, but it does appear that they are going to try and test the recent lows. Wheat is playing a follower, and right now, it is trying to keep up with corn. Hopefully, the corn market can muster up more strength out of the China export news to help push wheat to sellable levels. Currently, the only appealing way to sell wheat right now is to sell the carry-in Chicago July 11 and store the wheat until then.

Corn

To start the week, the corn market opened 3 cents higher with the strength in the outside markets. But traders went to the sidelines early looking ahead to the USDA reports. This forced the corn market to end down 3 cents. The market traded both sides of unchanged as the bears and bulls pleaded their case. On the bull side, the outside markets were very strong, exports have been good the past month and ending stocks are estimated to come in lower May 11. There also is continued talk of China buying additional corn, but has not been confirmed. The bears are stating that more acres of corn are being planted than earlier estimated and at a very fast pace.

Corn opened 2 cents higher May 11 and then quickly moved to 4 to 5 cents higher. Corn traded in positive territory for the day and ended at session highs up 6.75 cents. The main news came from USDA’s supply and demand report. The report was seen as friendly to the corn market.

The corn market opened 6 cents higher May 12 and then worked slightly higher in the first minutes of the trade. Corn did back off after making nine weeks highs and ended the day mixed. The corn market traded higher overnight with the news that China may have purchased an additional 6 cargos of U.S. corn. This news carried over to start the day, but buying interest slowed down after the open. There also are some weather concerns in the Northeastern part of the country and that added some support. But the lack of buying interest brought the market down off of the highs early in the session. The recent run that we have had in the market also has increased farmer selling and that limits the upside movements. The outside markets also had a negative tone and that did not add any strength. Though we had bullish news, the market does feel the pressure of the upcoming crop.

Corn opened 2 cents lower May 12 with the softer overnight trade and the negative tone in the outside markets. Corn traded 2 cents lower for much of the session before selling off at the close to end the day down 5.25 cents. Export sales were OK for corn, but were down 56 percent from the week before and below estimates. Corn also traded lower with hedge pressure and farmer selling, as cash bids in Minneapolis dropped more than 15 cents. The improving weather forecast also pressured the market. The weather will be warmer and dryer the week of May 17 for much of the country and the tractors will roll. There was confirmation that China did purchase 360,000 tons of U.S. corn, but had little effect on the market. Just as the saying goes, buy the rumor and sell the fact.

Soybeans

The soybean complex started the week higher with much of the early support coming from news that the European Union has pledged $1 trillion to help cure the financial issues in Greece and other countries. This helped to support the U.S. energy complex as well as delivering pressure to an overbought U.S. dollar. But traders were looking past this report to the crop progress report was well as the May 11 crop production report. The crop progress report was expected to show a decent amount of soybeans planted in the U.S. and the production report is expected to show a slowdown in old crop demand and a slight increase in new crop supplies (mainly because of early planting progress). A late round of buying at the close helped push the soybean complex to positive territory.

The May 11 session started lower with most of the pressure coming from USDA’s crop production report. The report was neutral to the 2009 crop year as it resulted in a no net change in the ending stocks (only minor adjusting between categories). The 2010 crop year estimates were bearish to the soybeans as USDA showed stocks increasing to 365 million bushels. The biggest questions for the 2010 numbers, why is the crush estimate and the export estimate close to 100 million bushels (each) lower than the 2009 estimates.

The soybean complex started the May 12 session higher than expected as many of the front month contracts trade as much as 10 cents higher in the first few minutes of the session. By midsession, the soybeans market had started to show its true colors, slipping back to be mostly steady. By late in the session, most of the soybean contracts were showing negative numbers. A late round of buying on the close stepped in to help the soybean complex firm to end with minor changes. Early support for the soybean complex was a result of spillover buying from the corn market (a result of China buying six cargoes of corn). Once the initial news of the potential sales wore off, buying dried up and all of the grains retreated. Additional selling was tied to carry-over pressure from a stronger U.S. dollar as well as from a weaker crude oil market.

The May 13 session started sloppy with much of the support coming from spillover support from what was expected to be a stronger opening in the corn exchange. The friendliness from the corn market was just not enough to help the soybeans though.

The path of least resistance is lower and that is exactly the direction the soybeans have been migrating. The bright side, the soybean complex still is very much range bound with the July contract trading between a high of $9.80 to $10 with the low at $9.20 to $9.40.

Barley

USDA is projecting the 2009 barley export sales pace at 5 million bushels.

Durum

USDA is estimating the 2009 durum export sales pace at 40 million bushels (declined 10 million bushels in USDA’s May crop production report).

Canola

Canola futures on the Winnipeg, Manitoba, futures closed the week ending May 13 with close to $10 (Canadian) losses. The canola market started the week off lower with selling tied to an upswing in the Canadian dollar while additional selling pressure was a result of carry-over selling from a mostly lower U.S. soybean complex. Statistics Canada stocks report had no bearing on today’s session. The trade also noticed that growing conditions are improving across much of the Northern Plains. Losses were kept in check by thoughts that canola demand should start to pick up now that canola is trading at new lows.

Dry beans

Producers should consider selling old crop pinto beans if bids are above $21.

Sunflowers

The May 13 cash sunflower bids in Fargo, N.D., were $13.65.

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