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Published January 11, 2011, 11:57 AM

Wheat loses some of its gains

Wheat opened the week with small gains. Pressure was because of improving conditions in Australia as harvest activity again has started. Surprisingly, the quality of the grain has been better-than-expected.

By: Ray Grabanski,

Wheat opened the week with small gains. Pressure was because of improving conditions in Australia as harvest activity again has started. Surprisingly, the quality of the grain has been better-than-expected. Losses were trimmed late by spillover support from a stronger corn and soybean market. A lower U.S. dollar market helped to add strength to wheat, but in the end, profit-taking and the lack of news trimmed gains in wheat.

The Dec. 28 session opened with strong gains and rallied to post solid gains. Support was because of reports that Russia is estimating 2010 wheat production at 41.5 million metric tons, a 32.7 percent decline from 2009. Additional support was because of export demand. Egypt has been in tendering for 180,000 metric tons of wheat this week. After the close, it was announced that Argentina captured 120,000 metric tons of the sale while the U.S. was awarded 60,000 metric tons of the sale. Turkey is in tendering for 300,000 metric tons and Iraq is tendering for 100,000 metric tons. Technical buying also was seen, as most wheat contracts traded within reach of November 9 highs, and levels not seen for almost two years.

Wheat started the Dec. 29 session defensively. with selling tied to thoughts that the previous day’s gains were overdone. Additional selling was tied to lost export business. Dec. 28’s strength was based on expectation that the US would capture a majority of the wheat tenders being announced, but once the dust cleared, the U.S. was awarded a 60,000 metric-ton sale to Egypt, while 120,000 metric tons of the sale went to Argentina. It also is rumored that the 300,000 metric-ton Turkey tender all will be handled within European Union countries. By midsession, wheat was able to firm because of support from a lower U.S. dollar.

Wheat struggled throughout the Dec. 30 session, with most months hitting double-digit losses early. Selling was because of profit-taking and position squaring ahead of the New Year holiday. Additional selling was tied to a disappointing export sales estimate. Weather forecasts calling for rain and snow for much of the southern Plains added pressure to wheat. The system is not expected to bring a lot of moisture, but at this point, any moisture will help, especially if it comes in the form of snow, as that will help insulate the crop.

Corn

To start the week, corn opened mixed and traded close to unchanged for the session, ending the day 1.25 cent higher. Pressure was because of profit taking, which put minor pressure on the market. China raised interest rates recently, adding additional pressure to corn. But, the lack of selling interest helped corn firm to trade with small gains. The strength in the soybean complex and the slightly weaker dollar added support.

The Dec. 28 session had corn posting double-digits by the close. Corn traded to highs last seen in August 2008 as funds and speculators continue to buy. The hot and dry weather in Argentina continues to be the supportive news for the market as Argentina corn enters the pollinating stage. Argentina is the second-largest exporter of corn, and this could further tighten world stocks. Projected tight U.S. ending stocks, at 15 year lows, also offers support.

Corn opened 1 cent lower Dec. 29 and traded on both sides of unchanged for the session in quiet trading. By the close, corn was able to post a small gain for the tenth straight day. Corn opened with small losses as profit taking took center stage. Mexico bought 120,000 metric tons of corn, adding support.

The Dec. 30 session saw corn trading with red numbers throughout the session. After 10 straight sessions with a higher close, the market backed off, as profit-taking entered the trade. Fund long liquidation before year end added to the selling pressure. The lack of any fresh news limited upside.

This week will start pre-report estimates for the Jan. 12 USDA annual crop production report. The corn market will look to this report for direction. Downside in the market is limited right now, as traders continue to talk about tight global stocks and predict that exports will pick up into spring.

USDA’s export inspection report was seen as neutral to bearish for corn. There were 32.6 million bushels of corn reported shipped last week, below the 39 million bushels needed to meet USDA’s projection of 1.95 billion bushels. This was within the pre-report estimates of 29 million bushels to 34 million bushels.

Soybeans

Soybeans started the week with strong gains. Support was because of weather forecasts calling for for hot and dry conditions to return to Argentina. The next few days have a slight chance for rain, but once this system passes, forecasts are calling for an extended hot dry spell. Buenos Aires Grains cut Argentina’s soybean acreage to 18.5 million hectares, a 1 percent decline. Gains were limited early by news that China increased interest rates. By the close, soybeans were at 28-month highs.

The Dec. 28 session started higher with buying spilling over from the previous day’s strong session. Soybeans were supported by Argentina weather forecasts. The early buying was enough to push soybean’s to new contract highs and levels not seen since September 2008. Soybeans were unable to hold gains throughout the session because of an updated Argentina weather forecast calling for more rain. By the close, 2011 new crop contracts were under major pressure because of thoughts that rain in Argentina will be beneficial while the old crop months continue to hold some strength because of strong demand.

The soybean market ended Dec. 29 lower, with most of the early selling tied to position- squaring and profit-taking as traders tried to even up positions ahead of the month and year end. Additional selling was tied to the current Argentina weather forecast. The soybean market tried to stage a recovery on a 120,000-metric-ton export sale of soybeans to China, but with no follow-through buying, the recovery was short-lived, as technical selling and profit- taking stepped in to push the soybean market back to session lows.

The Dec. 30 session saw soybeans trade back and forth as technical selling combined with profit taking/positions squaring to pressure soybeans. Adding pressure was weather forecasts that are calling for continued chances of rains in parts of Argentina for the next few days and possibly even into early next week. But the soybean market was not to go quietly as buying surges kept showing up during the session. Support was due to a lower US dollar as well as from a friendly export sales report.

USDA estimated last week’s soybean export shipments pace at 23.3 million bushels. This brings the year-to-date export shipments pace for soybeans to 756.9 million bushels compared with 712.9 million bushels last year at this time. Last week’s soybean export sales pace was estimated at a combined total of 34.9 million bushels with 24.4 million bushels being old crop and 10.5 million bushels new crop. This brings the year-to-date export sales total for soybeans to 1.2851 billion bushels compared with 1.1567 billion bushels at this time in 2009. USDA is estimating soybean exports at 1.59 billion bushels. With 37 weeks left in the soybean marketing year, shipments will have to average 22.5 million bushels and sales will have to average 8.2 million bushels to make USDA’s projection.

Barley

USDA’s estimated no barley export shipments or sales last week. This brings the year-to- date export shipments pace to 4.45 million bushels compared with 2.97 million bushels at this time in 2009. Barley’s export sales pace now is estimated at 4.1 million bushels compared with 3.6 million bushels at this time in 2009.

Durum

USDA estimated last week’s durum shipments pace at 838,000 bushels with 66,000 bushels going to Panama while Italy took 772,000 bushels. Last week’s durum export sales pace was estimated at 1.4 million bushels. This brings the year-to-date export sales estimate for durum to 29.1 million bushels compared with 32.5 million bushels at this time in 2009. Dec, 30 cash durum bids in Berthold, N.D., were at $8 while Dickinson, N.D., bids were at $7.65.

Canola

Canola futures on the Winnipeg exchange closed the week ending Dec. 30 with less than $1 (Canadian) losses. Early in the week, canola traded higher with most of the early support because of spillover support from a strong U.S. soybean complex. Additional support was because of continued concerns of dry conditions in Argentina. Strong export demand and domestic crush demand added to the strength.

After rallying for seven straight sessions and trading to 28-month highs, canola took a break and slipped lower late in the week. Selling spilled over from the lower U.S. soybean complex, while additional selling was tied to a steady performance in the Canadian dollar. Position-squaring and profit-taking ahead of year end also was noted. Dec. 30 cash bids for December delivery in Velva, N.D. are at $23.80.

Sunflowers

USDA estimated last week’s soybean oil export sales pace at 1.6 trillion metric tons old crop and 1.5 trillion metric tons new crop. This brings the year-to-date export sales pace for soybean oil to 946.9 trillion metric tons compared with 785.4 trillion metric tons at this time in 2009. Cash NuSun bid for December delivery in Fargo, N.D., are at $22.45.

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