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Published June 21, 2011, 03:21 PM

USDA report gives market direction

The wheat markets traded on the defense throughout the week with most of the selling pressure tied to improving weather conditions in the U.S. and Europe.

By: Ray Grabanski, Special to Agweek

Wheat

The wheat markets traded on the defense throughout the week with most of the selling pressure tied to improving weather conditions in the U.S. and Europe. For the week ending June 9. July Minneapolis wheat lost 39.75 cents, September Minneapolis wheat dropped 29 cents, July Chicago wheat lost 28.75 cents and July Kansas City wheat gave back 43 cents.

France and Germany have been experiencing dry conditions, but the first week in June, generous rains fell over much of the driest regions of Europe. To top it off, cooler weather also has moved into much of the region. This certainly will help improve wheat conditions in Europe.

U.S., weather also has improved. Warm, dry weather prevailed over the Northern Plains this past weekend and that helped a lot of producers get back into the field. Pressure also was tied to the beginning of the U.S. hard red winter wheat harvest. The Southern Plains is starting to cut wheat, and so far, many are saying they are impressed with the yields. Early harvest results have the wheat in Oklahoma averaging nearly 25 bushels per acre, about half of last year.

The June 9 session started with decent gains early with support spilling over from a sharply higher corn market, which was supported by a bullish USDA crop production report. The report was considered negative to wheat as stocks were estimated to be higher than traders were expecting. USDA’s June crop production report had a few surprises for the wheat market. Old crop wheat of 2010 to ’11 saw a 30 million-

bushel reduction in its ending stocks estimate because of a 10 million-bushel cut in imports and a 20 million-bushel increase in exports. This brought the 2010 and ’11 wheat ending stocks estimate to 809 million bushels. USDA made a few more changes to the 2011 to ’12 estimate.

Planted acres were cut 300,000 acres to 57.7 million acres, while harvested acreage was reduced 200,000 acres to 47.8 million acres.

The cut in acreage was because of wet conditions in the Northern Plains. The cut in acreage was offset by a 0.6-bushel increase in yield, now estimated at 43.1 bushels. The yield increase was because of better-than-expected harvest results for winter wheat. The change in acreage and yield resulted in a net increase in production of 15 million bushels, which was offset by a 30 million-bushel decrease in beginning stocks.

The net change put wheat’s ending stocks at 687 million bushels, a decline of 15 million bushels from May. The numbers were considered negative to wheat, as the estimates came in higher than traders had expected. As for world numbers, old crop wheat stocks increased 4.92 million metric tons to 187.12 million metric tons. New crop 2011 and ’12 world wheat stocks increased 3 million metric tons to 184.26 million metric tons.

The winter wheat crop is 79 percent headed compared with 72 percent the previous week and 85 percent for the five-year average. Ten percent of the winter wheat crop has been harvested compared with none the previous week and 6 percent for the five-year average.

Corn

The corn market ended higher this week, with July corn gaining 35 cents and December corn up 25 cents. Corn found support from June 9’s USDA crop production report. The report lowered ending stocks for both old and new crop corn, along with a reduction in planted and harvested acres.

The first three sessions of the week saw corn gain 10 cents. Early week pressure came from planting progress, while the weather forecast offered support June 7 and 8. The report stated that only 94 percent of the crop was planted. This leaves 5.53 million acres left to plant in the U.S. Ohio is just 58 percent complete, which leaves 1.55 million acres still to be planted. Indiana was 82 percent complete, which is 1.06 million acres. There also are 378,000 acres in South Dakota and 325,000 acres in North Dakota that have not been planted, as of the June 9 report. Corn also found support from weather forecasts calling for rain to return to the Corn Belt at the end of the week. Crop production concerns are on the rise as traders see more rain putting an end to the planting season and increased flooding along the Missouri river.

June 9, the market was driven by USDA’s crop production report. Corn opened 27 cents higher and ended with 21.5-cent gains, making a new contract. The USDA report was bullish for corn. U.S. ending stocks for old crop corn were left unchanged at 730 million bushels. But new crop ending stocks were at 695 million bushels, down from 900 million bushels in May and below estimates of 770 million bushels. This leaves corn with a stocks-to-use ratio of 5.2 percent, which would be the second tightest on record.

Yield was left unchanged at 158.7 bushels per acre, but planted acres were revised down — 1.5 million acres down to 90.7 million acres — and harvested acres were reduced by 1.9 million acres to 83.2 million acres.

As a result, production is expected at 13.2 billion bushels, which is down 305 million bushels from May. Feed usage was revised lower by 100 million bushels for new crop, while food and ethanol were left unchanged. World ending stocks for 2011 to ’12 came in at just 111.89 million tons, which is down from 129.14 million tons in May and 117.44 million tons last year. This leaves a world stocks to use ratio of 12.8 percent, which is the third-tightest on record and the tightest since 1973.

Ethanol production for the week ending June 3 averaged 915,000 barrels per day. That is up 0.66 percent from the previous week and up 9.06 percent from last year. Total ethanol production for the week was 6.405 million barrels, the highest weekly total since January 21.

Corn used in last week’s production is estimated at 96.07 million bushels. Corn use needs to average 103.3 million bushels per week to meet this crop year’s USDA estimate of 5 billion bushels. Stocks as of June 3 were 19.644 million bushels. That is down 2.88 percent vs. last week and it pushes up implied weekly demand to near highs for the year. USDA’s report was expected to give direction for the market until the June 30th planted acreage and grain stocks report.

Soybeans

The soybean market struggled last week with most contracts, ending with modest losses. For the week ending June 9, July soybeans dropped 20.75 cents while November soybeans declined 10.25 cents.

The soybean market lost ground June 6 and June 9 but was able to recover some losses in the middle of the week. Pressure was because of improving weather forecasts.

Weather was close to ideal over the past weekend as hot, dry conditions prevailed over much of the eastern Corn Belt until rain showers later moved back into the area. Adding pressure was a weaker U.S. crude oil market and higher U.S. dollar.

Losses were limited by continued concerns of delayed planting progress because of flooding in the Mississippi River and Ohio River Valley. Weather forecasts are calling for warm, dry conditions for the eastern Corn Belt, and that will help push planting progress this week. So far, producers have been concentrating more on getting corn planted, and once that task is complete, planters will roll on soybeans,

Just as was the case in the wheat market, soybeans started the June 9 session higher with most of the early strength spilling over from a sharply higher corn market (which was supported by a bullish USDA crop production report). The numbers for soybeans were not as friendly, though, as USDA increased both old crop and new crop stocks. USDA’s June Crop Production report was bearish soybeans. USDA increased old crop 2010 to ’11 soybean stocks by 10 million bushels to 180 million bushels because of a 10 million-bushel cut in exports.

USDA also followed through, cutting the 2011 to ’12 soybean export pace by 20 million bushels. The 30 million-bushel adjustment moved right on through to show up as a 30 million-bushel increase in soybeans’ 2011 to ’12 ending stocks estimate, now estimated at 190 million bushels.

Barley

Cash bids in Minneapolis for feed barley were $5.15 and malting barley bids were at $7.50.

Durum

June 9 cash bids for milling quality durum were at $14 in Berthold, N.D., while bids in Dickinson, N.D., were at $13.60.

Canola

Canola futures on the Winnipeg, Manitoba, exchange closed $4.30 (Canadian) lower for the week ending June 9. The canola market was under pressure from improving weather in the Northern Plains. Additional pressure was because of a strong Canadian dollar and from spillover selling from a weaker EU rapeseed market. Losses were kept in check by slow planting progress.

Dry beans

As of June 5, North Dakota was 28 percent planted compared with 10 percent the previous week and 81 percent for the five-year average Minnesota was 62 percent planted compared with 41 percent the previous week and 87 percent for the five-year average.

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