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Published October 26, 2010, 08:51 AM

Soybean demand remains strong

Wheat started the week of Oct. 18 on the defense, with selling tied to weather forecasts calling for rain in much of the southern Plains.

By: Ray Grabanski,

Wheat

Wheat started the week of Oct. 18 on the defense, with selling tied to weather forecasts calling for rain in much of the southern Plains. This will be welcome, as soils are becoming parched because of recent warm, dry conditions, making it possible to move planting progress ahead. There has been enough moisture for wheat to emerge, but rain is needed for this crop to go into dormancy in good shape. An interesting point: fall conditions have little effect on winter wheat’s crop potential.

The Oct. 19 session had wheat open the overnight session higher and traded with modest gains up to the time China announced its intention to increase interest rates 25 base points. The announcement sent the U.S. dollar sharply higher, which, in turn put pressure on all the U.S. markets. Early session losses were limited by two separate wheat export sales reports of 100,000 metric tons, one to Egypt and the other to Iraq.

Wheat opened the Oct. 20 session higher with support coming from spillover strength from sharply higher corn and soybean markets. Support also was because of a sharply lower U.S. dollar, which was giving back all of the previous day’s gains. Traders felt the Oct. 19 market activity was overdone, and that put some influence on the Oct. 20 session.

The Oct 21 session started mixed, but with most contracts lower. Early support spilled over from the other grains, especially soybeans, which were supported by a friendly export sales estimate. Wheat also was supported by a decent export sales pace. A lower dollar added to the support. Once the U.S. dollar rallied, wheat started to drift. Additional selling was tied to a sloppy session in the corn market, as corn traded lower throughout the session because of a poor export sales pace.

USDA estimated the wheat export shipments pace for the week of Oct. 11 at 20.8 million bushels. This brings the year-to-date export shipments pace for wheat to 429.7 million bushels compared with 335.9 million bushels this time last year. USDA estimates the 2010 and ’11 wheat exports pace at 1.25 billion bushels. With 32 weeks left in wheat’s export marketing year, shipments need to average 25.6 million bushels, and sales need to average 17.4 million bushels to make the estimated pace.

As of Oct. 17, winter wheat planting progress is estimated at 80 percent complete, compared with 77 percent for the five year average. Winter wheat emerge-

nce is estimated at 51 percent compared with 38 percent the week of Oct. 11 and 52 percent for the five-year average.

Corn

To start the week of Oct. 18, corn opened 2 cents lower and traded with red numbers for the session, ending down 5.75 cents. The lower overnight market and negative outside markets pressured corn. The outside markets did turn around, but the corn market did not follow. Corn found no real footing, as it lacks any fresh news and buying interest. Demand has also backed off and the export inspections were below estimates again.

On Oct. 19, corn opened 7 cents lower and traded with losses for the session, ending the day down 11.25 cents. It was the fifth consecutive day that corn traded lower. The market was pressured early by negative outside markets. China raised its interest rates overnight and that caused the U.S. dollar to rally and crude to drop $3.75. Good harvest weather and disappointing exports added to the weakness.

Corn opened 11 cents higher Oct. 20 and trended higher for the session, ending up 27.5 cents. After a five day slide, corn rebounded. The outside markets offered support for the session, as the dollar was week and crude oil was up over $2. Corn traded lower into the gap and that created end user buying and fund buying as both picked up 15,000 contracts.

Thoughts that China will have to import corn because of lower-than-expected production estimates added support.

Oct. 21, corn opened 2 cents lower and ended down 9.25 cents. After the big move Oct. 20, the market took a breather. The outside markets had a negative tone and that weighed on corn. But, the big news was the export sales report, which was disappointing for corn, showing only 8.4 million bushels of sales the week of Oct. 11. Profit taking also was seen in the Oct. 21 session. Corn still has a bullish tone, but has traded in a sideways pattern the week of Oct. 18.

USDA’s export inspection report was seen as bearish for corn. There were 28.2 million bushels of corn reported shipped the week of Oct. 11, below the 38.3 million bushels needed to meet USDA’s projection of 2 billion bushels.

USDA’s crop progress report estimated corn harvest at 68 percent complete, with 16 percent one year ago and 39 percent for the five-year average.

The year-to-date export sales pace for corn is 755.3 million bushels compared with 666 million bushels last year. Total shipments the week of Oct. 19 were at 32.8 million bushels and below the USDA-estimated 38.3 million bushels.

Soybeans

Soybeans started the week of Oct. 18 in a tug-of-war between strong demand and rapid harvest progress.

Overnight, China bought 120,000 metric tons of soybeans. This combined with a friendly export inspections estimate to support soybeans. By midsession, soybeans ran into selling pressure from predictions that USDA’s crop progress report will show another week of rapid harvest progress.

Traders are expecting harvest progress to be 80 percent.

Soybeans opened the Oct. 19 session with large losses, as most months were 15 to 17 cents lower on the opening. Soybeans opened the overnight session higher and traded with decent gains throughout most of the session. But selling pressure was uncovered when China announced its interest rate increase. The announcement sent the U.S. dollar sharply higher and grains lower. Another interesting aspect of the interest rate hike is that USDA reported a total of 400,000 metric tons of soybean sales, with 275,000 metric tons to an unknown destination and 125,000 metric tons to China.

The Oct. 20 session opened higher with much of the early support coming from thoughts that the previous day’s losses were overdone. Strong demand helped support soybeans as another 180,000-metric-ton export sale to China was reported.

Strong demand was the main feature of the Oct. 21 session as support came from an extremely friendly export sales estimate. For the week of Oct. 11, USDA estimated the soybean sales pace at 74.1 million bushels. Soybeans are only six weeks into the 2010 marketing year and sales already are at 63 percent of expectations. Shipments, on the other hand, are at 12 percent of expectations. Small trader buying and short covering was seen early in the session. This was offset by fund long liquidation.

Once the small trader buying slowed, fund selling was what was left to drive the market. It appeared the trade had already worked in a strong export sales estimate and once early buying dried up, the market was left with fund selling.

As of Oct 17, soybean harvesting progress is estimated at 83 percetn complete compared with 67 percent the week of Oct. 11 and 62 percent for the five-year average.

Barley

No barley shipments or export sales were reported the week of Oct. 11. This brings the year-to-date export shipments pace to 3.3 million bushels compared with 1.4 million bushels last year at this time. Barley’s export sales pace for the year is 4.4 million bushels, compared with 3.1 million bushels last year at this time.

Durum

USDA estimated the export shipments pace for the week of Oct. 11 at 214,000 bushels with all of the bushels going to Belgium. The export sales pace for durum is 22.5 million bushels compared with 28.3 million bushels last year at this time.

Oct. 21 cash durum bids in Berthold, N.D., were at $6, while durum bids in Dickinson, N.D., were $6.40. The Cass County N.D. durum loan deficiency payment rate Oct. 21 was at 50 cents.

Canola

Canola futures on the Winnipeg futures closed Oct. 21 with almost $13 (Canadian) gains. The canola market struggled for part of the week of Oct. 18, with most of the selling tied to ideal weather conditions, which have allowed for harvest progress to advance at a rapid pace.

Most of the bearish weather news was offset by spillover buying from a stronger U.S. soybean market and strong demand. Export interest for all vegetable oil products has been strong, and that has helped to push both the U.S. soybean market and canola market to over two- year highs.

Cash canola bids in Velva, N.D., closed Oct 21 at $21.42, 96 cents higher.

Sunflowers

As of Oct. 17, 29 percent of the nation’s sunflower crop had been harvested, compared with 11 the previous week and 22 percent for the five-year average.

For the week ending Oct. 21, December soybean oil increased 47 cents to $48.24. Cash sunflower bids in Fargo, N.D., for the week ending Oct. 21 increased 20 cents to $19.35.

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