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Published May 31, 2010, 12:50 PM

Bearish fundamentals pressure

The wheat market started the week sloppy and traded steady to maybe a little lower throughout most of the session. That was up until the close when the soybean complex slipped off of its highs, which resulted in selling to move into wheat. Early in the session, the wheat complex was pressured by a slightly negative export inspections report.

By: Ray Grabanski,

Wheat

The wheat market started the week sloppy and traded steady to maybe a little lower throughout most of the session. That was up until the close when the soybean complex slipped off of its highs, which resulted in selling to move into wheat. Early in the session, the wheat complex was pressured by a slightly negative export inspections report. Adding selling pressure was a stronger U.S. dollar, which also is the reason the export inspections report showed wheat shipments at a lower-than-expected pace. Fundamentals remain bearish for wheat as demand, both domestic and export, remain poor.

The May 25 session had wheat continuing to play the follower role, as wheat followed the other grains lower. Strength in the U.S. dollar helped to add selling pressure to wheat, as did continue concerns toward wheat’s plentiful supply situation, but in the end, wheat was following the other grains lower. The selling pressure was enough to push the July Chicago contract to a new low. The recent sharp declines in the euro and large increases in the U.S. dollar certainly have all but convinced any importer of wheat to go to the European Union to buy wheat.

The wheat exchanges started May 26’s session higher, struggled through midsession, but recovered to end the session with decent but small gains. The new thorn in the side of wheat has been poor demand because of the financial issues taking place in Europe. Of course, wheat has not received any help from the fact that the U.S. crop has been improving and conditions appear to be close to ideal in both the Northern and Southern Plain states. The winter wheat exchanges struggled more than spring wheat as harvest is fast approaching the winter wheat crop.

The wheat market opened higher May 27 and held onto session gains throughout the session. Early support was a result of spillover buying from a stronger overnight session as well as from position squaring ahead of end of month and ahead of the upcoming long weekend. A weaker U.S. dollar helped the wheat to hold onto its gains. Additional support came from support from a better session in the financial markets. In all, the wheat market is testing support lines, so to see a little dead cat bounce would be expected.

Corn

Corn opened 1 cent lower May 24, but firmed up right after the open and closed with 2-cent gains. The market was able to firm with the strength in the soybean market. At midday, the inspection report came out with decent numbers, at 39.9 million bushels to add additional strength. Also, we saw this market push higher at the end of last week, with the Chinese purchasing U.S. corn. Rumors are that China will be back in the market again added strength. The outside markets were mixed and did not influence the trade. Fundamentally, the corn market does not have much positive news at this time. The weather will be decent. Also, there are near a record number of acres going in the ground, which were planted early. The weather will play a part in the corn market as we move into the summer, in addition to exports.

The market opened 7 cents lower May 25 and ended there. The lower open was influenced by the outside markets, as the dollar was sharply higher and crude oil was down $3. The European stock market also was down overnight and that pressured the Dow Jones Industrial Average to trade below 10,000 and at four-month lows. The corn market was able to limit the losses at midsession, with crude oil and the DJIA firming up and the dollar losing some ground. But there was a lack of any buying interest and the market finished at the lows of the day. The May 24 planting progress report also was bearish to the market.

The corn market opened 6 cents higher May 26, with the strength in the overnight market. The corn traded firm for the session and ended 7.25 cents higher. The corn market experienced an oversold rally. The outside markets were supportive, especially the crude oil market. Rumors also continue to surface that the Chinese will be purchasing additional corn from the U.S. This year’s sales to China are the first in four years and purchases to date are the most since 2001. This is encouraging, but the sales will need to be confirmed and more sales will need to materialize to support the market higher. The weather forecast will be good for the next 10 days, with warmer temperatures and scattered showers, which does limit the upside.

The corn market opened May 27 up 1 cent and basically traded there for the day, closing 1.75 cents higher. The outside markets were very supportive, as crude oil was up $3, the Dow Jones industrial average up more than 200 points, and the dollar was weak. The export sales report also was bullish for corn and that added strength. But the corn market was unable to follow the strength in the soybean and wheat markets. The news that limited the upside was that China canceled some U.S. corn purchases. Also, the weather forecast will be good for the next few days, with warmer temperatures and scattered showers, which does limit the upside. Along with that, there is a lot of optimism about this year’s crop potential. The corn market will be watched closely the next few trading days, as is trading at the high end of the range and at resistance.

Soybeans

The soybean complex started the week higher, trading with double digit gains at one point during the session. Early support was a result of spillover buying from a stronger overnight session and from technical buying as most of the soybean contracts sit at or near support lines. Gains were trimmed from a bearish export inspections report as well as from pressure from a stronger U.S. dollar. Gains also are being limited by traders concern toward the world economy. A late buying spurt helped the soybeans to push back to end the session close to session highs.

The May 25 session was expected to start with large losses as traders continue to show concern toward the current global economic issues. Soybeans are considered to be more of a speculator market and with the current financial issues; many traders are taking their money to more safe havens, not highly volatile markets. Besides seeing the exodus of speculator traders, the soybean complex also was pressured by a stronger U.S. dollar. Crop conditions continue to be close to ideal, but so far, soybeans only are experiencing average planting progress and emergence.

The soybean market started May 26’s session higher and gained ground early in the session. A light sell-off around noon did bring the soybean contracts off of their highs, but buying returned late in the session to push the soybean complex back to the higher end of its trading range. Technical buying and thoughts that May 25’s losses were overdone helped the soybean complex trade higher. Technically, it appears that the soybean complex is having a tough time trading to the $9 level. Weather forecasts continue to be negative as they continue to show weather that is conducive for planting progress to expand and for the crop to develop rapidly.

The soybean market opened May 27 with good strength and traded higher throughout most of the session. It appeared that cooler and calmer heads came into the all of the market as not only did the grains, meats and energies all trade higher, so did the financials. This encouraged traders to return to the long side of the market. In all, soybeans were supported by spillover strength from a lower U.S. dollar as well as from spillover strength from a higher crude oil market. The Census Crush estimate for May showed a few less soybeans being crushed than expected, but the market seemed to disregard this report and concentrate on positions squaring ahead of the long weekend.

Barley

USDA reported no barley shipments for last week. This brings the year to date export sales pace for barley to 3.3 million bushels compared with 11.3 million bushels for last year at this time. USDA reported no barley export sales for last week. This brings the year-to-date export sales total for barley to 4.3 million bushels compared with 11 million bushels for last year at this time. USDA is estimating the 2009 barley export sales pace at 5 million bushels. There is one week left in barley’s marketing year.

Durum

USDA reported last week’s durum shipments pace at 1.44 million bushels with 703,000 bushels going to Algeria and 736,000 bushels going to Italy. USDA estimated last week’s durum export sales pace at a negative (cancellation) 100,000 bushels. This brings the year-to-date export sales pace for durum to 38.1 million bushels compared with 16.9 million bushels for last year at this time. USDA is estimating the 2009 durum export sales pace at 40 million bushels. There is one week left in durum’s marketing year.

As of May 24, 69 percent of North Dakota’s durum crop was planted compared with 37 percent for last week and 76 percent for the five-year average.

Dry beans

North Dakota producers had 45 percent of the state’s dry beans planted by May 16, compared with 8 percent for last week and 31 percent for the five-year average. Minnesota producers are reporting progress at 50 percent complete compared with 5 percent last week and 45 percent for the five-year average.

Canola

Canola futures on the Winnipeg, Manitoba, futures lost close to $4 (Canadian) for the week ending May 27. The canola market was pressured all week from spillover pressure from a stronger Canadian dollar as well as from improving crop growing conditions. Planting progress is close to complete and the recent warm weather has helped the crop advance in crop development. Losses were limited by the U.S. soybean complex, which traded mostly higher for the week.

Sunflowers

As of May 16, 15 percent of the nations sunflower crop was planted compared with zero last week and 24 percent for the five-year average.

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