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Published November 22, 2010, 09:27 AM

China’s economy concerns market

Wheat started the week higher with most of the early support spilling over from a strong corn and soybean complex. Light buying was a result of thoughts that Nov. 15’s losses were overdone.

By: Ray Grabanski,

Wheat

Wheat started the week higher with most of the early support spilling over from a strong corn and soybean complex. Light buying was a result of thoughts that Nov. 15’s losses were overdone. Additional strength was a result of continued concerns toward dry conditions in much of the soft red winter wheat and hard red winter wheat regions of the U.S. Gains were limited by another week of poor shipments.

The Nov. 16 session started on the defense with much of the early pressure cause by reports that China is going to implement plans to slow down inflation and attempt to lower food costs. China also is going to step in and prevent hoarding and speculation in food products by limiting the amount grain or raw products that companies can hold in inventory. Additional selling pressure was a result of fund liquidation as the funds dumped 12,000 to 14,000 contracts.

The wheat exchanges opened the Nov. 17 session higher and rallied to post strong gains by midsession. Early support was a result of technical strength as wheat traded down to support line Nov. 16 and those levels held. The December Minneapolis market tested the $7 support before bouncing higher. Additional support was because of concerns toward the soft red and hard red winter wheat crops. Both are going into dormancy in very poor conditions and the lowest rating since 1991.

The Nov. 18 session started higher with support coming from another bullish week of export sales. USDA estimated last week’s export sales pace at 34.7 million bushels, which is well over the amount of bushels needed to meet USDA’s projected pace. Light support also was a result of a weaker U.S. dollar as the dollar retreated after news of IMF bailout of Ireland. Egypt’s tendered for 55,000 metric tons of wheat Nov. 14 turned into a sale of 175,000 metric tons. Technical buying also was a feature as traders try to correct an oversold market condition.

USDA estimated last week’s wheat export shipments pace at 15.3 million bushels. This brings the year-to-date export shipments pace for wheat to 506.8 million bushels compared with 396.2 million bushels for this time last year. Last week’s wheat export sales pace was estimated at 36.3 million bushels with 34.7 million bushels being old crop and 1.6 million bushels being new crop. This brings the year-to-date export sales total for wheat to 800.7 million bushels compared with 515.7 million bushels for last year at this time. USDA is estimating the 2010 to ’11 wheat exports pace at 1.25 billion bushels. With 28 weeks left in wheat’s export marketing year, shipments need to average 26.5 million bushels and sales need to average 16 million bushels to make USDA estimated pace.

Corn

To start the week, corn opened higher and traded with decent gains for the session, ending up 21.5 cents. The market recovered from the Nov. 12 selloff and even traded 30 cents higher at one point. Rumors that China was buying Argentina corn supported the market. This was supportive even though it was not U.S. corn, as other countries that buy corn from Argentina may now come to the U.S. Additional support came from a sale of corn to Egypt and South Korea.

The Nov. 16 session had corn opened lower and then trade to near limit down levels by the close. Corn felt pressure from the negative outside markets, where the dollar was very strong and the crude oil, Dow Jones Industrial Average, gold and silver markets were lower. Talk continues to circulate about China making some changes to their monetary policies and this certainly affected our dollar and pressured the grain commodities. China also may try to implement domestic food controls and the quantities of grain and feed that can be kept on farms. Fund selling also was a noted feature.

Corn opened higher Nov. 17 and traded with green numbers for most of the session before ending the day slightly lower. Pressure came from the negative outside markets, the possible monetary changes in China and fund liquidating their long positions (40,000 contracts the last three days). Concerns over the European economy add weakness. Commercial buying entered the market, but when that dried up corn was content to follow soybeans.

The corn market opened higher Nov. 18 and traded with double-digit gains for the session. The overnight market traded with big numbers and that carried over to start the session. Buying interest resurfaced with the positive outside markets. Talk of an EU bailout for Ireland drove the overseas stock markets higher and pushed the U.S. dollar lower. The market is due for a bounce after dropping 80 cents to three-month lows.

USDA’s export inspection report was seen as bearish for corn. There were 25.9 million bushels of corn reported shipped last week, below the 38.1 million bushels needed to meet USDA’s projection of 2 billion bushels. This was below the pre-report estimates of 29 million to 31 million bushels.

USDA’s export sales report estimated last week’s corn export sales pace at 21 million bushels, which is below the 26.3 million bushels that was needed to meet USDA projection of 1.95 billion bushels. This was at the low end of the range of the pre-report estimates of 19.7 million to 27.6 million bushels and bearish for corn. This brings the year-to-date export sales pace for corn to 838 million bushels compared with 735.8 million bushels one year ago. Total shipments this week were at 30.7 million bushels and below the 37.9 million bushels needed this week.

Soybeans

Soybeans started the week higher with support coming from traders who thought the Nov. 9 losses were overdone. Additional support was a result of a stronger-than-expected NOPA crush estimate as well as continued strong shipments. The NOPA crush estimate was estimated at 151.9 million bushels compared with estimates of 147.5 million bushels. A small soybean export sale of 105,000 metric tons was reported last night to an unknown destination.

Soybeans came under attack Nov. 16 from fund liquidation (funds sold 12000 contracts) as well as from news China is going to take steps to slow its economy and halt speculation by limiting the amount of raw products companies can hold in inventory. Selling pressure was a result of reports that Argentina and China are in negotiations for China to import corn/soybeans from Argentina. An unknown destination has come in again to buy 119,000 metric tons of soybeans. By the close, fund selling and technical pressure won out, pressuring soybeans to more than $1 losses in just a few days.

The Nov. 17 session had soybeans lower because of continued concerns toward China’s intentions to slow down their economy. The market was able to shake the China news off because of spillover strength from the other grains. By midsession, soybeans ran out of buyers, and the only feature left was fund selling. The recent decline has pushed the soybean market through the $13 resistance levels and now is testing the $12 resistance level. A couple closes below that level certainly would result in further pressure. Technically, a recovery is in order as the market is oversold.

Buying returned to the soybean complex Nov. 18 as soybeans opened sharply higher. Support spilling over from another bullish export sales report. What is impressive: After only seven weeks, soybean export sales already at 72 percent of expectations. Adding light support was a weaker U.S. dollar, which is under pressure from news that the IMF bailed out Ireland. Technical buying helped to add to the session strength as traders try to correct an oversold market condition. Argentina’s six- to 10-day weather forecast is for warm dry conditions, and that helped to bring some premium back to the U.S. soybean complex.

USDA estimated last week’s soybean export shipments pace at 55.5 million bushels. This brings the year-to-date export shipments pace for soybeans to 443.9 million bushels compared with 356.1 million bushels for last year at this time. Last week’s soybean export sales pace was estimated at 42.2 million bushels with 37 million bushels being old crop and 6.2 million bushels being new crop. This brings the year-to-date export sales total for soybeans to 1.13 billion bushels compared with 949.4 million bushels for this same time last year. USDA is estimating soybean exports at 1.57 billion bushels. With 43 weeks left in soybeans marketing year, shipments will have to average 26.9 million bushels and sales will have to average 10.2 million bushels to make USDA’s projection.

Barley

Cash feed barley bids in Minneapolis remained unchanged at $3.60. Malting barley bids remained unchanged at $4.70.

Durum

USDA estimated last week’s durum export sales pace at 100,000 bushels, which brings the year-to-date export sales pace to 24.6 million bushels compared with 30.9 million bushels for last year.

Cash durum bids in Berthold, N.D., decreased 25 cents this week to $7, while bids in Dickinson, N.D., dropped 20 cents to $6.80.

Canola

Canola futures on the Winnipeg, Manitoba, futures exchange closed almost $2 (Canadian) higher for the week ending Nov. 18. Canola started the week higher because of crusher buying as well as from fund buying. Adding support was spillover buying from a stronger U.S. soybean complex. Gains were kept in check by reports that China has indicated that they are going to make adjustments to slow their economy down.

Cash canola bids in Velva, N.D., were $22.55.

Sunflowers

The Nov. 18 cash sunflower bids in Fargo, N.D., were $20.25.

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