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Published September 07, 2010, 09:18 AM

Production concerns support grains

Wheat started the week higher to sharply higher with most of the early session strength coming from weather concerns overseas. Rain has been slowing harvest activity in Europe and now is starting to cause quality concerns. In addition, dry concerns are starting to pop up in Australia. Gains were trimmed late in the session do to technical selling.

By: Ray Grabanski,

Wheat

Wheat started the week higher to sharply higher with most of the early session strength coming from weather concerns overseas. Rain has been slowing harvest activity in Europe and now is starting to cause quality concerns. In addition, dry concerns are starting to pop up in Australia. Gains were trimmed late in the session do to technical selling.

The Aug. 31 session had wheat opening higher with most of the early support coming from news that Ukraine is going to halt all exports of all grains. This helped to support the wheat exchanges, but wheat was not able to hold onto the gains as technical selling and profit taking stepped in to bring the wheat exchanges lower. Trading was thin, so moves were slightly exaggerated. Of the six major wheat-exporting countries (EU, Canada, U.S., Argentina, Australia and Russia), five are reporting productions issues.

Wheat started the Sept. 1 session sharply higher with most of the early support coming from reports that Egypt bought 225,000 metric tons and Germany bought 20,000 metric tons of wheat overnight. By midsession, wheat had started to lose its strength as there was no follow through buying after the strong open. But wheat was able to rally to new session highs late in the session off of production estimate out of Argentina that now are calling for a crop closer to 9 million to 10.5 million metric tons than USDA’s current estimate of 12 million metric tons.

The Sept. 2 session had wheat sharply higher because of news that Russia is going to leave its wheat export ban in place until next year’s harvest. This extends the ban, which originally was expected to be lifted at the beginning of 2011. The reason Russia made this announcement now was in an attempt to stop firms in Russia from stockpiling wheat in preparation of the ban being lifted at the end of the year. By extending the ban, it will allow for the stock piled gains to return to the domestic market, and this should reduce wheat’s price.

USDA estimated last week’s wheat export shipments pace at 25.5 million bushels. This brings the year-to-date export shipments pace for wheat to 238.2 million bushels compared with 184.3 million bushels for this time last year. Last week’s wheat export sales pace was estimated at 37.6 million bushels. This brings the year-to-date export sales total for wheat to 517.5 million bushels compared with 321.1 million bushels for last year at this time.

Corn

To start the week, the corn market opened 5 to 6 cents higher and eight-month highs. The sharply higher wheat market supported corn. Also, harvest has begun in the southern U.S. and yields are coming in below estimates. The crop conditions report stated the crop still is in very good condition, with the rating in the good to excellent category staying at 70 percent. The maturity of the crop is running ahead of schedule with 73 percent dented, compared with a five-year average of 55 percent.

Corn finished down 1 cent Aug. 31. The lower overnight market was caused by the crop conditions report. The report left the rating in the good to excellent category at 70 percent, the same as last week. Production uncertainty offered support. The higher wheat market added additional strength. When the wheat market broke at the close, corn did follow to end the day with slight losses. The crude oil market also was down hard to add additional pressure.

Corn opened 6 to 7 cents higher Sept. 1 and traded very close to that for the session, finishing up 7.75 cents. Strength in the outside and wheat markets supported corn as corn traded to their highest levels since January. Early reports have yields and test weights running below estimates and those reports continue to support the market. But reports out of central Illinois have yields running the same to 10 bushels higher than last year. We expect the crop to get better as harvest works north.

Corn opened 1 cent higher Sept. 2, but quickly moved to 2 cents lower and traded there for the session, until the close when it move slightly above unchanged. The news was positive for the corn market, but buying interest stayed on the sidelines. The export sales report was bullish for corn at 60.9 million bushels and above estimates, but shipments are running behind. Egypt also recently bought 120,000 tons of U.S. corn. We have been trading corn close to resistance and at two-year highs for most of the week, and it appears that corn is looking for news to break out of this range.

USDA’s export inspection report was seen as neutral for corn. There were 45.3 million bushels of corn reported and that was below the 171.2 million bushels needed to meet USDA’s projection of 1.975 billion bushels for 2009 to ’10. This was below the pre-report estimates of 33 million to 36 million bushels.

USDA’s export sales report estimated last week’s corn export sales pace at 60.9 million bushels, bringing year to date sales to 2.065 billion bushels and above USDA’s projection of 1.975 billion bushels. This was above the range of the pre-report estimates of 39.4 million to 51.2 million bushels and bullish for corn. This brings the year-to-date export sales pace for corn to 2.066 billion bushels compared with 1.917 billion bushels one year ago. Total shipments this week were at 45 million bushels and below the 142.2 million bushels that was needed.

Soybeans

The soybean market was under pressure this week dropping 17 cents by the close of Thursday. Most of the pressure was technical in nature as soybeans still are very much range bound, trading from $10 to $10.35.

Soybeans started the week with modest strength as support spilled over from a stronger wheat exchanges. Additional support was because of thoughts that the crop is not as big as many have been promoting. Gains were kept in check from technical selling as well as from spread trading from traders who were buying corn but selling soybeans.

The Aug. 31 session had soybeans trading in a back and forth fashion. Support came from spill over strength from the corn market, which continues to get support from production concerns. Selling pressure came from the lower wheat exchanges as well as from economic concerns. Technical selling on the close hit the soybean complex hard.

The soybean market opened the Sept. 1 session with small gains, rallied slightly, but slipped to close with small losses. Support was because of spill over strength from a sharply higher wheat market. Selling was tied to production concerns as expectations are for better than expected yields this year. Soybeans seemed to be very range bound, set in a range from $10 to $10.35.

The Sept. 2 session had the soybean market open lower than expected and trade with small losses. The soybean complex started the session mixed to slightly lower with most of the early selling tied to forecasts that are calling for rain for much of the Corn Belt. Traders are expecting the cooler temps and rains will aid in finishing the soybean crop. So far early yield estimates has the soybean yield improving while the corn yield has been decreasing. Late in the session the soybean market recovered to trade with small gains.

USDA estimated last week’s soybean export shipments pace at 7.2 million bushels. This brings the year-to-date export shipments pace for soybeans to 1.449 billion bushels compared with 1.235 million bushels for last year at this time. Last week’s soybean export sales pace was estimated at 22.5 million bushels. This brings the year-to-date export sales total for soybeans to 1.517 billion bushels compared with 1.326 billion bushels for this same time last year. USDA is estimating soybean exports at 1.47 billion bushels. This was the last export sales estimate for soybeans for the 2009 to ’10 crop year.

Barley

Cash feed barely bids in Minneapolis remained unchanged for the week at $2.75. Malting barley bids remain off the board.

Durum

USDA estimated last week’s durum export shipments pace at 1.484 million bushels with 817,000 bushels going to Germany while 667,000 bushels went to Canada. Last week’s durum export sales pace was estimated at 1.1 million bushels. This brings the year-to-date export sales pace for durum to 20 million bushels compared with 14.7 million bushels for last year at this time.

Currently the Cass County, N.D., durum loan deficiency payment is at $1.85 (dropped 2 cents) for producers who are not signed up for ACRE. Progressive Ag currently recommends not taking the LDP.

Canola

Canola futures on the Winnipeg, Manitoba, futures closed the week ending Sept. 2 at 50 cents lower. The canola market traded in a back and forth fashion with decent gains only to end Sept. 2 virtually steady. Most of the week’s strength was a result of harvest delays because of rain in Canada and the Northern Plains. Weather forecast calling for a chance of frost for parts of Canada added light strength. The gains were kept in check by position squaring ahead of month end and ahead of a long U.S. weekend. The markets are preparing for a long weekend as both the U.S. and Canadian exchange will be closed Sept. 6 in observance of Labor Day.

For the week ending Sept. 2, cash canola bids in Velva, N.D., decreased 15 cents to $17.61.

Sunflowers

Cash sunflower bids in Fargo, N.D., increase 5 cents for the week ending Sept. 2 to now be at $15.45 for both old and new crop.

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