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Published July 06, 2010, 10:04 AM

USDA report game changer for corn?

The wheat exchanges started the week of June 28 lower with most of the selling tied to concerns that the Crop Progress report will show an improving crop condition rating.

By: Ray Grabanski,

Wheat

The wheat exchanges started the week of June 28 lower with most of the selling tied to concerns that the Crop Progress report will show an improving crop condition rating. USDA’s export inspections report did help to limit session losses early in the session, but it seemed to be a nonevent late in the session. Weather forecasts are calling for improving weather for much of the soft red and hard red winter wheat regions. This will allow for harvest activity to gear back up again. Technical selling was also a feature seen in the market once the wheat exchanges traded below support lines and into sell stops, which only accelerated the move to the down side. The June 29 session also had wheat lower. Early selling was tied to spill over selling pressure from the other grains as well as from pressure from a stronger U.S. dollar. The dollar rallied higher as economic concerns re-entered the market. Additional selling was tied to weather forecasts that are calling for ideal weather conditions for much of the Northern Plains and Southern Plains. This will allow for harvest activity to gear back up again in Kansas. The latest harvest reports is showing improving quality. Selling also was tied to position squaring ahead of USDA’s reports.

The June 30 session had wheat opening sharply higher and closing with decent strength. All of the strength spilled over to limit up movement in the corn market. USDA’s reports were bearish to wheat but bullish for corn. USDA estimated all wheat acres at 54.3 million compared with 53.8 million (500,000 more than expected) in the March report and 59.1 million (decrease of 4.8 million) for last year. Spring wheat acres were expected to decline slightly but instead acres were estimated at 54.3 million acres, which was in line with the March 31 estimate and 640,000 acres higher than last year. In addition the Quarterly Stocks report was bearish as it showed 33 million bushels more wheat in the bins than what was expected. The increase in stocks will follow through to result in USDA decreasing wheat’s demand numbers in the next Monthly Supply and Demand estimate.

Wheat again ignored its own negative fundamental picture July 1 and opened with strength and rallied to end the session with strong double-digit gains. All of the strength was because of spill over buying from a stronger U.S. corn market. It took the corn market a little time to warm up, while wheat started off higher right out of the gate. Early strength also was because of spill over strength from a sharply lower U.S. dollar. The U.S. dollar came under extreme selling pressure from continued economic concerns. Short covering and fund buying was evident as many try to even up positions ahead of the long July 4 weekend. The biggest reason of the rally was because of wheat needing to stay in line with corn as wheat does not want to become a major feed ingredient.

Corn

To start the week, corn opened down 4 cents and traded with losses for the session, ending the day down 6.75 cents. Ideal weather for the Corn Belt pressured the market for the sixth straight day. The outside markets had a negative tone and the export inspection report was bearish to the market. The crop conditions report stated 73 percent of the crop is in good to excellent condition, down 2 percent from last week.

The corn market opened down 4 cents June 29 and traded with losses for the session, ending the day down 8.75 cents. The lower overnight market carried over to the day session, marketing the seven consecutive lower session and nine-month lows in the front month. Strong pressure also was felt from the weaker outside markets. As the day went along, corn continued to slip and closed at the lows of the session. There also was some positioning ahead of USDA’s planted acreage report.

The corn market opened sharply higher to limit up June 30 and closed near limit up with 29.25-cent gains. The only thing that we need to talk about is USDA June Acreage and Stocks report, as no other news mattered. The reports were very bullish to the corn market, as the acreage and stocks came in below estimates. The planted acreage was 87.9 million acres, with the estimates at 89.30, down 1.3 million. Stocks were at 4,310 billion bushels, with estimates of 4,613 billion bushels, 288 million bushels less than expected. As we compare these numbers to 2009, the acreage is up 2 percent and the stocks are up 1 percent. The big surprise came in the acres as most analysts expected an increase.

The July 1 session had corn up 1 cent, but shortly after the open, the market went 3 to 4 cents lower, with a disappointing export number, a lower crude oil market and a Dow Jones Industrial Average that was down hard, pressuring the corn lower. The market did firm up as buying interest re-entered the market as traders continue to digest USDA’s bullish report. Corn did push up to resistance levels and closed near the highs of the day, up 11.25 cents.

Soybeans

The soybean market opened the week higher with most of the months starting with 1- to 2-cent gains. Early support was because of thoughts that soybeans crop conditions would decline in the week’s report because of the heavy rains that have been falling in much of the Corn Belt. The unwinding of bull spreads added selling pressure to the old crop contracts late in the session. Traders also are starting to position themselves ahead of the acreage report and stocks estimate, which was due out June 30.

The June 29 session had soybeans on the defense with selling pressure coming from economic concerns. The stock market was under pressure and sold off hard with much of the pressure coming from a big drop in the consumer confidence index. This sent the Dow below the 10,000 level and that resulted in carry-over selling pressure to hit the soybean complex. Weather forecasts continue to be favorable and that added to the session losses. Positions squaring ahead of first notice day, end of month and end of quarter also were seen.

The soybean market opened the June 30 session higher to sharply higher. Most of the early strength was because of USDA’s reports as well as from spillover buying from a sharply higher to limit up move in corn. The reports were neutral to the soybean market, or at least they should have canceled each other out. The acreage estimate was bearish, estimating soybeans planted acreage at 78.87 million acres, compared with 78.1 million (increase of 770,000 acres) in the March 31 estimate and 77.5 million (increase of 1.3 million) from last year. The potential increase in productions (1.3 million acres times 42.9 yield, 55.8 million bushels) was offset slightly by a 23 million-bushel cut in soybeans stocks. The front months were the best performers as tight old crop supplies continued to help support.

July 1’s session had soybeans continuing to trade in the same fashion, higher old crop and lower new crop. The old crop soybean contracts were supported by a friendly export sales estimate, while the new crop continued to see pressure from improving growing conditions as well as from the slightly negative USDA Acreage report. The soybean complex was able to rally late in the session as buying support spilled over from a rallying corn market. Light support was because of a sharply lower U.S. dollar. Light position squaring was seen as traders work to even up positions ahead of the long weekend. U.S. markets will be closed July 5 in observance of Independence Day.

Barley

USDA estimated barley’s 2010 planted acreage at 2.97 million acres compared with 3.57 million acres for last year, a reduction of 16.7 percent. Of the three largest barley acreage states North Dakota planted 360,000 less acres, Montana 170,000 less acres and Idaho planted 30,000 less acres.

Durum

U.S. durum planted acreage is estimated at 2.675 million acres, an increase of 4.7 percent from last year. The states that reported the largest increase in acreage are North Dakota (150,000-acre increase) and Montana (70,000 acres).

Dry beans

USDA estimated total dry bean acres at 1.742 million, up from 1.538 from last year, an increase of 13.3 percent. North Dakota producers planted 700,000 acres of dry beans, an increase of 15 percent while Michigan producers planted 220,000 acres, an increase of 10 percent.

Canola

Canola futures on the Winnipeg, Manitoba, futures closed $3.70 (Canadian) lower for the week ending June 30 (closed July 1 because of Canadian holiday). Selling pressure was because of pressure from a stronger Canadian dollar while support spilled over from a stronger U.S. soybean market. Additional selling pressure came from profit taking ahead of first notice day, end of month end of quarter and USDA’s Planted Acreage report. Additional selling was tied to traders evening up positions ahead of the long weekend (Canada markets were closed July 1, while U.S. markets will be closed July 5). USDA estimate the U.S. canola planted acreage at 1.524 million acres compared with 827,000 for last year, an increase of almost 84 percent.

Sunflowers

As of June 27, 94 percent of the nation’s sunflower crop was planted compared with 82 percent last week and 94 percent for the five-year average.

USDA estimated oil sunflower planted acreage at 1.65 million acres, a decrease of 3 percent from last year. Nonoil sunflower acres are expected to increase to 441,000 acres, an increase of 32.8 percent from last year. Total sunflower acreage is estimated at 2.093 million acres, an increase of 3 percent from last year.

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