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Published November 16, 2010, 07:16 AM

Wheat and corn on top?

The wheat exchanges started the week higher because of position squaring ahead of USDA’s November crop production report.

By: Ray Grabanski,

Wheat

The wheat exchanges started the week higher because of position squaring ahead of USDA’s November crop production report. But that was the only strength wheat saw for the week. Technical selling took over to push wheat lower after testing June highs. For the week ending Nov. 11, December Minneapolis wheat dropped 20.25 cents, December Chicago wheat was 26.75 lower and December Kansas City wheat was 18 cents lower.

Wheat opened the session higher as traders continued to show concerns about U.S. wheat production, as conditions remain dry in the majority of the winter wheat growing regions of the U.S.

Rain is in the six to 10-day forecasts, but traders are taking “a believe it when I see it” attitude. Gains were kept in check by position-squaring ahead of USDA’s report.

The Nov. 9 session was report day, and wheat started higher with support spilling over from a sharply higher open in the corn and soybean complex.

USDA’s November crop production report held little news for wheat, as only minor adjustments were made. Wheat’s harvested acreage was cut 100,000 acres and yield was reduced by 0.3 bushels, resulting in a 16-million-bushel decline in production. This was offset by a 10-million-bushel increase in imports. The net result was a 5 million-bushel decrease in ending stocks, now estimated at 848 million bushels. Technical selling pushed wheat lower once contracts hit highs not seen since June. This led to profit-taking going into the close.

The selling pressure continued to control the wheat exchanges Nov. 10. Technical selling also was seen the previous day, as a technical key reversal down formation was formed — a higher high, lower low and lower close than the previous session. This is a technical signal to indicate a trend change, but it needs to be confirmed. The technical selling and profit-taking proved to be too much for wheat to overcome. Egypt was in the market recently, buying 235,000 metric tons of wheat, with the U.S. getting 135,000 metric tons of the sales. The rest was split between France and Australia.

The Nov. 11 session started higher but faded right from the opening bell. Early pressure came from weather forecasts that call for rains to move into much of the southern Plains. A stronger dollar added pressure. Wheat was able to shake both of those issues off early and tried to push higher around midsession. But that was about the time Informa released its 2011 acreage estimates, which predicts wheat acreage at 56.1 million acres, an increase of 2.5 million acres from last year. This estimation was seen as bearish, and it hit 2011 new crop wheat contracts hard.

As of Nov. 7, winter wheat planting progress was estimated at 95 percent complete, compared with 92 percent the previous week and 92 percent for the five-year average. Winter wheat emergence is estimated at 82 percent, compared with 79 percent for the five-year average. The winter wheat crop’s condition rating dropped 1 percent to 45 percent good or excellent, 38 percent fair and 17 percent poor or very poor. This compares with last year’s rating of 63 percent good or excellent, 30 percent fair and 7 percent poor or very poor.

Corn

To start the week, corn opened 2 cents lower and quickly came back to trade with 1 to 2 cent gains, but ended down 2.5 cents. The lower overnight trade and negative outside markets pressured corn on the open. The market bounced back because of commercial buying, but stayed very close to unchanged.

Nov. 9, corn opened 15 cents higher and reached 27-month highs, but ended the day down 9 cents. The market came out of the gate higher with the strength in the soybean market. But, once corn traded above the $6 resistance level, technical selling stepped in to push corn lower. USDA’s November crop production report came out about as expected.

Corn’s yield is estimated at 154.3 bushels, down 1.5 bushels from the previous report. Total production was put at 12.540 billion bushels. Ending stocks were cut by 75 million bushels to 845 million bushels, the smallest is 15 years and down from 902 million bushels last month.

To end up with that number, USDA cut production by 124 million bushels, feed and residual usage by 100 million bushels and exports by 50 million bushels, but raised ethanol usage by 100 million bushels. The stocks-to-use ratio declined to 6.2 percent.

The Nov. 10 session had corn open 7 cents lower and trade in the red for the rest of the session. Corn continued to feel pressure with follow-through selling and profit-taking. Traders are saying that the lower yield and production numbers were built into the market, and there was no fresh news to push it higher. Technically, corn made a key reversal chart formation Nov. 9, which is not positive for the corn market.

Corn opened the Nov. 11 session with modest strength, but came under selling pressure soon after the opening bell. Early support continued to come from supply concerns. Soon after the opening bell, corn came under pressure with most early selling tied to technical pressure. Additional selling was tied to Informa’s acreage estimates for 2011. Informa estimated corn acres to increase 4.8 million acres — 93.1 million next year. This resulted in selling to hit the 2011 contracts, which, in turn, spilled over to the 2010 contracts.

Soybeans

Soybeans struggled to start the week. The attention of most traders was focused on profit- taking and position-squaring ahead of USDA November crop production report. Light selling also was tied to a stronger U.S. dollar. Additional pressure was because of weather forecasts calling for rain for much of Brazil for the next several days.

The Nov. 9 session started sharply higher, with support coming from USDA’s crop production report.

The report was expected to show a slight increase in soybean yields, but instead, the soybean yield declined five bushels per acre, amounting to a 33-million-bushel cut in production. In addition, USDA increased exports 50 million bushels and cut the residual number 3 million bushels. In all, the production decrease and demand increase amounted to a cut in ending stocks of 79 million bushels, estimated now at 185 million bushels. The only bearish aspect for soybeans was a slight hike in South American production. The soybean market did give back some gains into the close as pressure spilled over from lower corn and wheat markets.

The soybean market came under pressure Nov. 10 because of profit-taking and technical selling. Selling was tied to a sloppy session in the outside markets as the U.S. dollar was higher and gold and silver struggled. Crude oil was higher, and that, along with a few export sales reports — including China buying 110,000 metric tons of soybeans — helped soybeans to recover around midsession.

But, in the end, the market could not hold onto its gains. The rest of the year’s trading direction should come from demand news as USDA will not make adjustments to production estimations until its final report in January. The soybean market also has to deal with the fund reallocation of contracts, which soon should start to become an issue at the end of the year.

The Nov. 11 session had soybeans open with strength and extend it gains throughout the session. The other grains, wheat and corn, appeared to have wanted to trade higher, but could not hold gains, especially after Informa’s report showed higher 2011 potential acreage.

That was not the case for soybeans. Informa’s 2011 soybean acreage estimate has soybean acreage declining 2 million acres to 75.8 million acres. The lower acreage estimate was enough to push the soybean complex higher and close right up against the Nov. 10 highs.

Barley

In its November crop production report, USDA made small adjustments to barley’s supply and demand numbers. The major adjustment was a 0.5-bushel decrease in yield, which is estimated at 73.1 bushels per acre. The cut followed through to be a 2-million-bushel decline in the production estimate and a 1-million-bushel decline in the ending stocks estimate, which now is 86 million bushels.

Durum

In its November supply and demand report, USDA cut durum’s production by 4 million bushels, but that was offset by a 5-million-bushel increase in imports. On the demand side, durum exports decreased 5 million bushels which, in the end, followed through to end in a 5-million-bushel increase in durum’s ending stocks estimate.

Nov. 11 cash durum bids in Berthold, N.D., were $7.25. Durum bids in Dickinson, N.D., were $7. Cass County N.D.’s durum loan deficiency payment rate was unchanged.

Canola

Canola futures on the Winnipeg futures market closed over $12.40 (Canadian) higher in the short trading week, which ending Nov. 11 in observance of Remembrance Day. The canola market started the week under pressure, with most of the early selling tied to technical pressure as traders took profits and positioned themselves ahead of the crop production report. The shortened week had canola trading higher because of a surprisingly bullish USDA crop production report, which showed cuts in soybean yields. Generally, strong demand for vegetable oil products added support.

Nov. 11 cash canola bids in Velva, N.D., were $24.06.

Sunflowers

As of Nov. 7, 79 percent of the nation’s sunflower crop has been harvested, compared with 69 percent for the five-year average.

Cash sunflower bids Nov. 11 in Fargo were at $21.25.

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