Advertise in Print | Subscriptions
Published August 03, 2010, 07:40 AM

Foreign weather drives wheat markets

The wheat markets had another strong week gaining 30 to 40 cents as the drought concerns in Eastern Europe intensified.

By: Ray Grabanski,

Wheat

The wheat markets had another strong week gaining 30 to 40 cents as the drought concerns in Eastern Europe intensified.

The wheat markets started the week by opening July 26 with light losses but quickly drifted lower before holding mostly steady losses of 3 to 8 cents for the rest of the day. Outside markets were mixed, while the sharply lower trade in the row crop markets put pressure on the wheat markets. While the drought conditions in Eastern Europe continue to be a concern, wheat will not be able to continue to rally if the row crop markets slide lower on ideal weather. Reduced production from the Black Sea region certainly could result in more export business for the U.S., but the export inspections showed another disappointing total of 15.4 million bushels of wheat.

Before opening the July 27 day session, the wheat markets had strong gains overnight. The market then had choppy trade in the morning before closing with gains of 3 to 6 cents. Outside markets were mostly negative with mixed trade in the stock markets and higher trade in the dollar index, but the wheat markets continue to find support from the drought conditions in Eastern Europe. There were rumors that Russia may ban wheat exports to keep domestic food prices under control, but Moscow quickly denied those rumors. While wheat will continue to have support from those foreign issues, the softening corn and soybean markets will put pressure on the wheat markets. Crop condition ratings improved slightly again for the spring wheat crop, while winter wheat harvest is slightly behind average pace.

The wheat markets had strong gains overnight and extended those gains during the day session July 28 before closing with gains of 15 to 20 cents. Outside markets were mixed, while the lower trade in the dollar index helped to reignite the noncommercial buying interest in the wheat markets. The spring wheat tour is taking place, and the yield estimate from the first day of the tour was a strong 43 bushels per acre. This is below last year’s record 46 bushel first day yield, but still a very strong first-day estimate.

The wheat markets had strong gains again July 29 to close with gains of 12 to 15 cents. Outside markets were mostly supportive with losses in the dollar index and gains in the energy markets. Export sales were good, with a wide array of buyers for U.S. wheat. The wheat markets continue to find support from the drought conditions in eastern Europe, even though domestic supplies are plentiful. In addition, the spring wheat tour is wrapping up with participants forecasting a near-record spring wheat yield. The International Grains Council lowered the 2010 to ’11 world wheat production estimate by 13 million tons to be at 651 million tons, down from 677 million tons last year, but nowhere near anything that could be considered “tight.” Pro Ag is expecting a blow-off top in the wheat markets; when the wheat markets make the front page of your local newspaper, you will know it is time to sell.

Last week’s wheat export sales pace was well above expectations and more than double last week’s total at 30.7 million bushels.

Corn

The corn market ended the week up 19 cents. The wheat market supported the corn market this week, as both commodities are used for feed. The weather and production losses in Europe and the former Soviet Union pushed these feed grains higher this week. The nonthreatening weather forecast continues to be talked about, as the weather looks good through the pollination period, but has had little effect on the market this week. The next major report from USDA will be the crop production report Aug. 12.

To start the week, the corn market opened 4 to 5 cents lower and traded with negative numbers for the session, closing down 7.25 cents and at three-week lows. The overnight market was lower and that carried over to start the session. There was no fresh news during the weekend and that influenced the overnight session. The market then traded the weather forecast, which is nonthreatening through the first week of August. Four weeks ago, the market started to work higher with the forecast and now the forecast is driving the market lower. Besides the weather being the news maker for the day, the crop conditions report that came out this afternoon also limited the upside. Most estimates were that the crop would remain the same or possibly improve 1 percent from last week. The report stated that 72 percent of the crop is in good to excellent condition, which is the same as last week, but the excellent category went up 2 percent.

The corn market opened July 27 4 to 5 cents higher, but quickly fell off of those highs and ended the day down 1.25 cents. The market opened higher with the higher overnight trade, but the lack of any follow-through buying caused the market to turn softer. Also, the outside markets were supportive at the open and when they turned south the corn market followed. Timely rains and the lack of any stressful heat also limited the upside. The crop conditions report states that we have a very good crop, but we do not have it in the bin yet. This crop was rated at 72 percent and the 10-year average is 63 percent for the good to excellent crop rating. Also, this is the eighth-highest rated crop in the past 24 years at this time of year.

The corn market opened 4 to 5 cents higher July 28 and quickly moved to double-digit gains, closing 13.5 cents higher. The strength in the overnight and day traded wheat market supported the corn today, as it lacks any fresh news of its own. Corn production in Europe and the former Soviet Union also is starting to surface in conversations. Their stocks may be tight or even fall short of their domestic use, and that added strength to the trade. The corn market also is keeping in mind USDA’s stocks-to-use ratio, which is estimated at 11.1 percent for this year and 10.3 percent for next year. A number below 10 percent leaves supplies very tight. On the other hand, the weather remains good and nothing stress related through the middle of August, along with a very good crop conditions rating at the time that this crop is pollinating.

The corn market opened 6 to 7 cents higher July 29 and quickly moved to double-digit gains, but backed off of those highs to close up 3 cents. The higher overnight market carried over to start the day. The outside markets also were supportive. The corn did back off to trade with slight losses at the noon-hour time frame as the Dow Jones Industrial Average traded 100 points lower, but quickly moved back to the positive side of the board. The exports sales report also was friendly for the corn market. There also was spillover support from the wheat market and production cuts in Europe and the former Soviet Union. Europe also announced that it is backing off on its ban of genetically modified corn, which may mean it is setting itself up to import U.S. corn.

Soybeans

The soybean market started the week by opening 2 to 3 cents lower July 26 and continued to move lower throughout the day, closing with 15 to 19 cent losses. Outside markets were mostly negative with losses in the energy markets. Weather forecasts had improved since the previous week’s close, and traders were looking for improved crop condition ratings in the afternoons crop report. Favorable weather conditions weighed heavily on the soybean and corn markets with traders taking some weather premium out of the market. Export inspections were poor this week for soybeans with only 6.6 million bushels reported.

The soybean market started July 27 with gains but slipped lower from there to close narrowly mixed. Outside markets mostly were negative with losses in the energy markets, gains in the dollar index, and mixed trade in the stock markets. Crop condition ratings held mostly steady this week with some improvement in the excellent category. In addition, crop progress is ahead of the five-year average, leaving less time for adverse weather to affect the crop size. That being said, we still need to get through August without severe heat or drought, so traders seem willing to keep some weather support in this market. Technically the soybean market is looking to test support levels with the 20-day moving average just a few cents below the day’s close.

The soybean market opened the July 28 session with 8- to 9-cent gains and added to those gains during the day before closing with gains of 11 to 12 cents. Outside markets were mostly negative with losses in the energy markets and stock markets, while the dollar index did have losses. After testing support levels in yesterday’s session, all of the grain markets moved higher overnight and into the day on renewed noncommercial buying interest and short covering. Wheat was the leader, but corn and soybeans followed with November soybeans closing above the 10-day moving average. China bought another 120,000 tons of soybeans, reminding traders that demand is still strong.

The soybean market opened July 29 with 8- to 9-cent gains and had continued strength before closing with gains of 7 to 16 cents. Outside markets were mostly supportive with gains in the energy markets, while the stock markets did turn lower in the midday. The grain markets continued yesterday’s rally on renewed noncommercial buying interest and short covering. Wheat continues to be the leader, but the soybean complex did quite well as well with strength in the energy markets and uncertainty about August weather. Weather has been good, but we still need to get through August without severe heat or drought, so traders seem willing to keep some weather support in this market. The U.S. census bureau pegged June soy oil stocks at 3.555 billion pounds, up from 3.465 billion pounds in May, while usage was also slightly higher. Export sales were strong again, illustrating the positive demand situation that soybeans continue to have.

Last week’s soybean export sales pace showed another active week with a combined total of 49.4 million bushels with 11.3 million bushels being old crop and 38.1 million bushels being new crop. With 6 weeks left in the soybean export marketing year (starts Sept. 1), soybean’s export sales pace is over USDA projections.

Tags: