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Published February 15, 2011, 11:17 AM

USDA report drives corn market higher

The wheat market opened the session sharply higher Feb. 7 with most of the early support coming from an increase in wheat export demand. Over the weekend, Egypt purchased 170,000 metric tons of wheat from the U.S., Argentina, and Australia.

By: Ray Grabanski,

Wheat

The wheat market opened the session sharply higher Feb. 7 with most of the early support coming from an increase in wheat export demand. Over the weekend, Egypt purchased 170,000 metric tons of wheat from the U.S., Argentina, and Australia. This was a big surprise to traders and that brought a lot of buyers off the sidelines. Additional support was a result of a large number of new tenders. Wheat tenders were coming in from Turkey, Iraq and Bangladesh, for a combined total of more than 450,000 metric tons.

Wheat opened higher Feb. 8 with much of the early support coming from the long list of export tenders. Rumors had Jordan buying 100,000 metric tons and Japan buying 165,000 metric tons of U.S. wheat overnight. Fundamentally, wheat really does not need to rally too much higher with ample ending stocks, but perception has potential production problems on the horizon, and that is helping to push wheat. The U.S. winter wheat crop currently is rated at the lowest level since 1990, but the condition of the wheat crop really does not matter until it starts coming out of dormancy.

Wheat opened the Feb. 9 session higher with early support spilling over from a sharply higher corn market. USDA’s February crop production report was bullish for corn but only neutral to wheat. Wheat’s supply and demand numbers were left unchanged and that should have brought some pressure to wheat, but the bullishness of the corn estimate and concerns toward world wheat production helped to push wheat higher.

The wheat markets opened Feb. 10 with losses of up to 5 cents but slipped to have steep losses by the end of the day, with closing prices down 12 to 23 cents. The dollar had sharp gains and selling pressure stepped in to most of the commodities. The wheat markets were due for a breather, and there was a lack of positive news. Export sales were only slightly bearish, but the cancellation of 8.7 million bushels to unknown destinations added to the bearish tone. There are reports that more than 17 million acres of wheat are suffering from drought in China, but the Chinese government announced it would increase irrigation subsidies by $1 billion to try to protect its production.

Corn

To start the week, the corn futures opened 2 cents higher and traded on both sides of unchanged for the session before ending down 3.75 cents. The market found support at the open with expected tight ending stocks and an increase in demand from China, but buying interest did not materialize and the market worked lower into the end of the day. There is some support for the corn market with strong demand from the ethanol industry. Export inspections came out at the high end of the estimates, but behind what USDA is projecting. The corn market consolidated after Friday’s big move.

Corn futures opened 3 cents lower Feb. 8 and traded on both sides of unchanged for the session with very little movement. The overnight market traded lower as China raised its interest rates for the third time since October, and that carried over to pressure the open. The market did not move much as traders squared up for the USDA supply and demand report.

The corn futures opened 20 cents higher Feb. 9 and traded with strength for the session, ending with 24.25-cent gains. The USDA supply and demand report was bullish and supported the corn market. U.S. ending stocks were revised lower to 675 million bushels, as compared with the 745 million bushels last month. The total usage numbers were revised higher, with a 50 million-bushes increase in ethanol usage and another 20 million bushels in industrial usage for a total of 13.5 billion bushels. This is up 70 million bushels from last month and up 434 million bushels from last year. The stocks-to-use ratio of 5 percent matches the record low set in 1995 to ’96. World ending stocks came in at 122.5 million tons, compared with 127 metric tons last month and 145.16 metric tonslast year. Argentina production was revised lower to 22 metric tons, down 1.5 metric tons from last month.

Corn futures opened down 1 cent Feb. 10, but turned around and traded with small gains for most of the session, ending up a half-cent. Follow-through buying after Feb. 9’s bullish USDA ending stocks news plus strong weekly export sales helped support the corn market. Export sales came in above estimates, but shipments continue to be slow and below USDA’s projection. The market also finds support from ethanol production. For the week ending Feb. 4, ethanol averaged 900,000 barrels per day. This is down 0.88 percent vs. last week, but up 8.04 percent vs. last year. The weakness in the outside markets and the other grain markets limited the upside.

Soybeans

The soybean market started the week Monday on the defensive, with much of the concern coming from updated weather forecasts in Argentina. Forecasts called for rains to continue and temps to remain moderate. The recent improvement in Argentina’s weather had many traders thinking USDA might not make any adjustments to South America’s soybean production estimate in the Feb. 9 report. Profit taking and technical selling pressure pushed the soybean market lower throughout the session.

The soybean market opened lower again Feb. 8 as technical selling and profit taking continued to drive market direction. Recent rains have helped to improve the outlook for Argentina soybeans but many still think some damage has been done. Late in the session the soybean market was able to break away from corn and actually recover to trade with small to modest gains and to close with impressive gains.

Feb. 9, the soybean market started the session with good strength after the release of the monthly supply and demand report. The trade had been waiting to see how USDA was going to handle the South American production estimates but that came out as a non event as USDA increased Brazil’s production by the same amount that they decreased Argentina’s production. There were no adjustments made to the US stocks either. In the end USDA did lower the world ending stock for soybeans slightly. The big push in corn slipped over to support the soybean market as both need to stay close to each other as we near the race for acres.

Feb. 10, soybeans opened with losses of 4 to 5 cents and finished with losses of 12 to 18 cents. All of Wednesday’s gains were given back because of a lack of outside market support and disappointing export news. Export sales of old crop hit a marketing year low, and cancellations of 17.1 million bushels added to the negative tone. Weather forecasts continue to look good for Brazil, while a return to dry weather is forecast for Argentina, so that bears watching.

USDA made no changes to the U.S. soybean supply and demand estimates in its February report. U.S. soybean ending stocks were left unchanged at 140 million bushels. USDA cut Argentina’s soybean production 1 million metric tons to 49.5 million metric tons and increased Brazil’s production 1 million metric tons to 68.5 million metric tons. There were other minor adjustments made to world soybean demand, which resulted in a .07 million-metric-ton cut in soybeans world ending stocks estimate which is now at 58.21 million metric tons.

USDA estimated last week’s soybean export shipments pace at 41.3 million bushels. This brings the year-to-date export shipments pace for soybeans to 1.019 billion bushels compared with 989.9 million bushels for last year at this time. With 30 weeks left in the marketing year, soybean shipments need to average 19 million bushels to make USDA’s projections.

Barley

USDA estimated last week’s barley shipments at 12,000 bushels with all of the bushels going to Mexico. This brings the year-to-date export shipments pace for barley to 4.5 million bushels compared with 3.2 million bushels for last year at this time. USDA cut U.S. barley feed demand 5 million to 205 million bushels. This resulted in an increase in barley’s ending stocks estimate, which now is estimated at 91 million bushels. USDA reported export sales of 138,000 bushels of barley. Minneapolis feed barley bids were at $4.70 Feb. 11 with malting at $6.

Durum

USDA estimated last week’s durum shipments pace at 549,000 bushels with a majority of the bushels (413,000) going to Italy. USDA made no changes to durum ending stocks in its Februrary crop production report. USDA reported export sales of 400,000 bushels of durum. Cash bids for milling quality durum gained from 25 to 40 cents on the week to be in the $10.50 to $10.65 range Feb. 10.

Canola

Canola futures on the Winnipeg, Manitoba, exchange had losses of $3 to $4 (Canadian) a ton for the week. Canola did trade to new contract highs during the week but backed off again later in the week as the soybean complex came under pressure. New crop futures had support from concerns about possible spring flooding and planting delays but came under pressure later in the week from an increase in commercial hedging. Cash bids had little change for the week, with small losses in old crop bids and small gains for new crop. Cash bids Feb. 10 in Velva, N.D., were $26.11 for old crop and $24.99 for new crop.

Sunflowers

Soybean oil futures had small losses for the week. Cash bids for NuSun sunflower gained 70 cents on the week with the Feb. 10 bid at $29.90 in Fargo, N.D.

Dry beans

USDA is reporting another increase in bids for old crop edible beans in the North Dakota/Minnesota region, with pintos at $23 to $25, navies $25 to $26 and blacks $25 to $30.

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