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Published April 12, 2011, 08:40 AM

USDA makes no changes

USDA’s April supply and demand report was seen as friendly to wheat as USDA surprised all by increasing seed demand by 4 million bushels.

By: Ray Grabanski,

Wheat

USDA’s April supply and demand report was seen as friendly to wheat as USDA surprised all by increasing seed demand by 4 million bushels. This demand increase followed through to cut wheat’s ending stocks estimate by the same amount, putting stocks at 839 million bushels. Traders were expecting wheat stocks to increase because of expectations for slower demand. As for the world estimates, USDA increased world wheat ending stocks to 182.83 million metric tons. Corn’s numbers were unchanged from March and considered bearish.

Wheat opened the week higher with support coming from a sharply higher old crop corn market as well as from continued concerns toward the conditions of the Southern Plains winter wheat crop. Temperatures in the Southern Plains were much hotter than expected over the weekend and no relief is expected the short term.

Wheat cut early losses April 5 to recover and end the session mixed. Pressure from the corn market as well as profit taking after the crop condition rating report was seen early in the session. Weather concerns stepped in to help wheat recover from earlier losses. The Chicago exchange was the weakest as stocks remain plentiful and growing conditions have been close to ideal for much of the major soft red growing regions.

The wheat exchanges took a break April 6, trading with losses throughout the session. Selling was tied to profit taking and position squaring ahead of the April 8 USDA crop production report. The report is expected to be negative wheat as USDA should increase wheat’s ending stocks estimate. The average trade estimate has wheat stocks at 861 million bushels compared with 843 million bushels for last month. World news is starting to turn negative as India is looking at entering the wheat export market after being away for three years. Also, Ukraine is expecting to resume exports in July.

The April 7 session saw wheat ending lower for the third session in a row. Pressure came from weather forecasts that are calling for rain in the Southern Plains. Rains are falling in parts of the winter wheat region and current forecasts are expecting the rain event to linger longer than first expected. That resulted in the Kansas City exchange to come under extreme selling pressure, which in turn spilled over to the other wheat exchanges. Position squaring ahead of USDA’s crop production report also was seen.

USDA reported last week’s wheat’s export inspections pace at 29.5 million bushels. This brings the year-to-date export shipments pace for wheat to 997.3 million bushels compared with 713 million bushels for last year at this time. With only eight weeks left in the marketing year, wheat shipments need to average 34.7 million bushels to make USDA’s projection of 1.275 billion bushels. Last week’s wheat export sale pace was estimated at a combined total of 26.6 million bushels with 16.9 million bushels being old crop and 9.7 million bushels being new crop. This brings the year-to-date export sales pace for wheat to 1.243 billion bushels compared with 787.4 million bushels for last year at this time. To make USDA’s projections, wheat sales need to average 3.6 million bushels.

Corn

To start the week, corn opened higher and firmed with strong double-digit gains. Traders are looking ahead to the April 8 monthly supply and demand report. Added support was crude oil, which reached 30 month highs. High corn prices are needed to ration demand, but the strength in the ethanol and livestock markets could keep demand firm.

Corn opened lower April 5, but found buying interest at midday. China raised key interest rates in an attempt to slow growth and cool inflation helped to pressure the market early in the session. USDA announced 101,600 metric tons of U.S. corn was sold to an unknown destination and that added support. Also, the U.S. Grains Council stated that China state reserves are likely 10 million to 12 million tons less than earlier thought and that China may need to import another 2 million to 3 million tons of old crop corn.

Corn opened lower April 6 and traded with red numbers throughout the session. An overbought technical condition lead to pressure was did the unwinding of corn/soybean spreads. The relationship of corn to soybeans also has tightened, and traders are saying that corn is overvalued. There was another sale of corn in the amount of 101,600 metric tons, which offered support. Ethanol production for the week ending April 1st averaged 902,000 barrels per day, down 0.11 percent vs. last week and up 8.41 percent vs. last year. Corn used in last week’s production is estimated at 94.71 million bushels. Corn use needs to average 94.6 million bushels per week to meet this crop year’s USDA estimate.

Corn opened higher April 7, but quickly moved to trade lower. The market broke after news of another earthquake in Japan. Corn firmed by midday as traders anticipated a bullish report April 8. The market did back off at the close with some profit taking as traders headed to the sidelines. Early estimates for the report has ending stocks at 595 million bushels, down from 675 million bushels. World ending stocks also are expected to decline to 121 million metric tons, down from 123.1 million metric tons last month.

Soybeans

USDA made some surprising adjustments to U.S. soybean numbers. In its April supply and demand report, USDA cut crush 5 million bushels, exports by 10 million bushels and seed demand by 2 million bushels. Those cuts were all by offset by a 17 million bushels increase in the residual estimate. In the end, the U.S. soybean ending stocks estimate was unchanged at 140 million bushels. World soybean stocks were viewed as negative, increasing 2 million metric tons to 60.94 million metric tons. The increase in stocks was virtually a result of an increase of the same amount in Brazil’s soybean production, now estimated at 72 million metric tons.

To start the week, soybeans traded with losses in the old crop months while new crop bounced back and forth around steady money. The old crop months were under pressure from reports of an advancing harvest in South America. Traders are expecting to a majority of China’s demand to switch over to South America now that Brazil’s harvest is winding down and Argentina’s is picking up. New crop bids were lackluster on the thought that the cold, wet spring will force some corn acreage to soybeans.

The April 5 session had soybeans trading with losses throughout the session. Continued selling came from thoughts that China is starting to get their needs met by South America. New crop soybeans were pressured by thoughts that the added corn and wheat acreage in North Dakota might not be available to be planted as intended and will be switched to soybeans. Spring is coming slowly, but once here, is does not take long to plant.

The soybean market opened the April 6 session with strong gains as traders started the unwinding long corn/short soybean spreads. Traders have been aggressively buying corn because of tight stocks and selling soybeans as U.S. export demand starts to lose ground to South America. The old crop contracts have been under pressure from thoughts that USDA will push Brazil’s soybean production to 72.2 million metric tons compared with earlier estimates of 70.3 million metric tons. There is even talk that with the slowdown in old crop soybean demand, USDA might cut old crop demand slightly and that soybeans stocks might show a slight uptick. The average trade guess for soybean stocks is at 137 million bushels compared with 140 million bushels in March.

The April 7 session started on the defense and came under extreme pressure late from selling tied to position squaring ahead of USDA’s reports. A lighter than expected export sales estimate did not help support the soybean market as it gives proof to the idea that demand is moving south. Additional selling pressure came from the news that another major earthquake hit the same area in Japan. This caused traders to take shelter as many now are questioning demand needs from that region of the world.

Barley

USDA made no changes to barley’s supply and demand estimates. USDA reported no barley shipments or export sales for last week. Cash barley bids in Minneapolis remained unchanged with feed barley bids at $5.10 and malting barley bids at $6.20.

Durum

USDA cut durum’s ending stock 2 million bushels in its April supply and demand report. The cut was a result of a decrease in durum imports. USDA estimated last week’s durum shipments pace at 10,000 bushels. There was no durum export sales reported for last week. The April 7 cash bids for milling quality durum were unchanged at $8.25 in Berthold, N.D., while bids in Dickinson, N.D.., increased 10 cents to $8.40.

Canola

Canola futures on the Winnipeg, Manitoba, exchange closed the week ending April 7 almost $9 (Canadian) lower. Canola started the week with small gains but then slipped lower for the rest of the week. Canola was supported early in the session by concerns that the cold wet spring might prevent some acres to get planted. Late in the week, canola came under selling pressure from spillover pressure from a sloppy U.S. soybean market, which was under pressure from position squaring ahead of USDA’s April crop production report. Additional selling was tied to news that China increased interest rates 0.25 points. Reports of another earthquake in the same region of Japan added pressure. This has traders concern about future canola demand. April 7 cash canola bids in Velva, N.D., are at $26.55 while new crop bids are at $24.99.

Sunflowers

April 7 cash sunflower bids in Fargo, N.D., were at $30.40 while new crop remained at $26.85.

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