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Published August 24, 2010, 08:41 AM

Demand starting to increase

Wheat started the week on the defense as weather forecasts are now calling for cooler temps and rain for parts of Russia. This news started the wheat exchanges on the defense, but once wheat traded 15 cents lower, sell stops were triggered and losses accelerated to 30 to 35 cents lower.

By: Ray Grabanski,

Wheat

Wheat started the week on the defense as weather forecasts are now calling for cooler temps and rain for parts of Russia. This news started the wheat exchanges on the defense, but once wheat traded 15 cents lower, sell stops were triggered and losses accelerated to 30 to 35 cents lower.

The Aug. 17 session had wheat higher with most of the early support coming from technical buying. Aug. 16’s strong sell-off had traders thinking wheat was at a safe level to own wheat. This resulted in the small trader jumping into the wheat market and a sign the funds have been looking for as they were the group that was selling. By midsession, the small trader buying frenzy subsided, but the fund selling did not, and that resulted in the wheat exchanges to lose ground rapidly.

Wheat started the session Aug. 18 lower and extended session losses early because weather forecasts for Russia are calling for above-normal precipitation to fall in the next two weeks and for temperatures to moderate. As the wheat exchange traded to double-digit losses, buy orders started to surface helping to push the wheat market to the plus side.

The Aug. 19 session had wheat opening sharply higher and rallying to post 45-cent gains early in the session. Early support was a result of USDA’s friendly export sales report. Until now, demand has not been part of the equation, just the hope that demand for U.S. wheat would increase. The dynamics of the market will change dramatically if the rally switches from a supply-driven market to a demand-driven market.

USDA estimated last week’s wheat export shipments pace at 20.8 million bushels. This brings the year-to-date export shipments pace for wheat to 185.8 million bushels compared with 148.9 million bushels for this time last year. Last week’s wheat export sales pace was estimated at 51.9 million bushels. This brings the year-to-date export sales total for wheat to 440.2 million bushels compared with 282.2 million bushels for last year at this time. USDA is estimating wheat’s export pace for the year at 1.2 billion bushels. This is the 11th export sales report for the 2010 to ’11 marketing year.

Corn

To start the week, the corn market opened 1 to 2 cents higher and traded with positive numbers for most of the session, but with an hour to go, the market broke and ended the day down 4.5 cents. The news that China may pull back some of their corn tenders for exports, along with talk of tightening supplies in China supported the market.

The corn market opened Aug. 17 1 to 2 cents higher and traded with positive numbers for most of the session, ending the day up 7.5 cents. The outside markets were positive, and that supported the open. The condition rating for corn dropped 2 percent from last week in the good-to-excellent category, and that added additional strength. But, the maturity of the crop is running way ahead of the five-year average, as 32 percent of the crop is dented compared to a five-year average of 22 percent.

The corn market opened 1 to 2 cents lower Aug. 18, but firmed up after the lower open and ended the day 3.75 cents higher. The Pro Farmer tour is finding yields that are very close to what USDA estimated in its production report, and that pressured the market early. The market was able to bounce back on the uncertainty of this year’s crop. Excessive rain in some areas and extreme heat in others offers support. The largest supporting factor was that Egypt purchased 240,000 tons of U.S. corn. If demand for corn remains strong, we could see a tightening of an already-projected tight stock-to-use ratio.

The corn market opened 3 to 4 cents higher, but went lower in the first 15 minutes and remained there for the session, ending the session down 4.25 cents. The support at the open was from the phenomenal exports sales of 107.3 million bushels. Additional support was from the Pro Farmer tour as it estimated lower yields in Illinois and Iowa. But the corn could not hang onto its early gains and traded with negative numbers for most of the session, as profit taking entered the trade. The weakness in crude oil and the soybean complex also weighed on the market.

USDA’s export inspection report was seen as bearish for corn. There were 31.1 million bushels of corn reported and that was below the 82 million bushels needed to meet USDA’s projection of 1.95 billion bushels for 2009 to ’10. This was below the pre-report estimates of 39 million to 43 million bushels.

USDA’s export sales report estimated last week’s corn export sales pace at 107.3 million bushels, bringing year-to-date sales to 2.06 billion bushels and above USDA’s projection of 1.975 billion bushels. This was above the range of the pre-report estimates of 51.2 million to 66.9 million bushels and bullish for corn. This brings the year-to-date export sales pace for corn to 2.1 billion bushels compared with 1.91 billion bushels one year ago. Total shipments this week were at 18.3 million bushels and below the 21.8 million bushels that was needed this week.

Soybeans

Soybean’s started the week mixed with support coming from thoughts that the crop progress report will show a slight decline in crop ratings. As the session advanced, pressure from a sloppy wheat market spilled over to erode the gains in the soybean market. A decent export shipments report tried to help the soybean market hold its gains, but late in the session when wheat was trading 30 cents lower, soybeans retreated.

The Aug. 17 session had the soybean market trading higher with early support coming from spillover strength from the higher corn market, which found strength from a 2 percent decline in crop ratings. Early session gains were limited from the better-than-expected crop condition rating for soybeans, as conditions were left unchanged. By midsession, buyers were more aggressive because of continued strong export demand, as well as strong domestic demand, for soybeans.

The soybean market opened the Aug. 18 session on the defense with most of the early selling tied to technical pressure. Traders were set on removing the weather premium that has been worked into the soybean complex, and that pressured the market for most of the session. A well-known crop tour has been finding a vastly improved crop as higher pod counts are consistently being found and that added to the pressure.

Thursday’s session had soybeans opening higher with support spilling over from a sharply higher U.S. wheat complex. Light support also was a result of an impressive export sales report. This was the second week in a row where soybean exports have been above 80 million bushels. But soybeans were not able to hold its gains as once contracts traded to the $10.40 level, technical selling stepped in and pressured the soybean lower.

USDA estimated last week’s soybean export shipments pace at 13.5 million bushels. This brings the year-to-date export shipments pace for soybeans to 1.426 billion bushels compared with 1.206 million bushels for last year at this time. Last week’s soybean export sales pace was estimated at a combined total of 82 million bushels with 6.7 million bushels being old crop and 75.3 million bushels being new crop. This brings the year-to-date export sales total for soybeans to 1.511 billion bushels compared with 1.325 billion bushels for this same time last year. USDA is estimating soybean exports at 1.47 billion bushels.

Barley

USDA estimated last week’s export shipments pace at 8,000 bushels with all of the bushels going to Mexico. Last week’s export sales pace for barley was estimated at 800,000 bushels. The primary destinations were to unknown for 10,000 metric tons, Japan for 7,700 metric tons and the Philippines for 300 metric tons. This brings the year-to-date export sales pace for barley to 2.8 million bushels compared with 1.7 million for last year at this time.

Durum

USDA estimated last week’s durum export shipments pace at 799,000 bushels with all of them going to Italy. Last week’s durum export sales pace was estimated at 3.1 million bushels. This brings the year-to-date export sales pace for durum to 18.9 million bushels compared with 12.9 million bushels for this time last year.

The current durum LPD is at $1.84 for producers who are not signed up for SURE. Progressive Ag is recommending not taking the LDP yet.

Canola

Canola futures on the Winnipeg, Manitoba, market closed the week ending Aug. 19 with about $15 (Canadian) losses. The canola market started the week with minor gains as commercial buying stepped in to help push the canola market higher. Additional support was a result of rain, which is delaying harvest. But that was the only strength canola was going to see for the week. The rest of the week saw pressure coming into the canola market with pressure coming from harvest progress as combines returned to the fields. Additional selling was tied to spillover pressure from a lower U.S. soybean complex. There also was position squaring ahead of the Aug. 20 Statistics Canada Crop Production report. The report is expected to show larger production estimates than first thought because of a better-than-expected late growing season.

The Aug. 19 cash canola bids in Velva, N.D., were $18.18.

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