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Published July 07, 2011, 09:31 AM

USDA reports bearish

Wheat opened the week sloppy with selling tied to pressure from a lower overnight session in Europe. Support was a result of technical buying as buy orders were triggered at support levels. Sell orders dominated the session soon after the opening bell and that forced all wheat contracts in all three exchanges to long-term support lines. The funds continue to be the major sellers of wheat.

By: Ray Grabanski, Special to Agweek

Wheat

Wheat opened the week sloppy with selling tied to pressure from a lower overnight session in Europe. Support was a result of technical buying as buy orders were triggered at support levels. Sell orders dominated the session soon after the opening bell and that forced all wheat contracts in all three exchanges to long-term support lines. The funds continue to be the major sellers of wheat.

The June 28 session had wheat higher with support coming from June 27’s friendly crop condition/crop ratings report. The report cut both winter wheat’s and spring wheat’s crop condition rating. The report also reported spring wheat plantings are not yet complete. Additional market reaction was a result of position squaring ahead of the June 30 USDA reports.

The June 29 session saw wheat trade higher with support spilling over from another strong overnight performance. The last few weeks traders have been aggressively lifting long Minneapolis/short Chicago spreads, and now they appear to be comfortable re-entering those spreads. The winter wheat months were able to firm going into the close with support coming from news of a 120,000-metric-ton sale of soft red winter wheat to an unknown destination.

June 30, report day, wheat traded sharply lower. Early selling pressure came from USDA’s bearish stocks report and planted acreage report. The stocks report estimated all wheat stocks at 861 million bushels compared with 826 million bushels for the average trade estimate. This means that wheat demand has been slower than expected, and the end result will be an increase in wheat’s ending stocks estimate. Additional pressure was a result of a bearish USDA planted acreage report. All wheat planted acreage was estimated at 56.4 million acres compared with 58 million in its March estimate and 57.7 million in the June crop production report. Winter wheat acreage was estimated at 41.1 million acres compared with 41.2 million in March’s report. The surprise came in the spring wheat acreage estimate as USDA is estimating spring wheat planted acreage at 13.6 million, 800,000 less than in March’s acreage intentions report. North Dakota’s spring wheat acreage was estimated at 6.35 million a decline of 750,000 acres from March’s report. The reports pushed the wheat exchanges lower, but it was the locked limit-down move in the corn market that resulted in the most damage. The limit-down move in corn spilled over to push the Chicago wheat to end limit down (60 cents), while the other wheat exchanges closed 50 to 55 cents lower.

Corn

The first 3 days of the week, corn traded with 28-cent gains in the July contracts while December was 18.5 cents higher. The market was pressured with the negative outside markets and continued fund long liquidation as the noncommercial traders reduced net long positions by 65,000 contracts. The weather forecast is calling for warmer and drier weather for the next 10 days for most of the country, which will promote crop growth. But, the market did find support into midweek with a reduction in crop conditions, which stated a reduction of 2 percent in the good/excellent category from the week before at 68 percent. Position squaring ahead of the June 30 quarterly stocks and acreage report also was seen.

The market driver June 30 was the USDA report. Corn opened and remained locked limit down for the session. Pressure was a result of a bearish USDA stocks and acreage report. USDA report showed higher corn stocks than expected and also showed higher than expected planted acres. Corn stocks came in at 3.67 billion bushels, which was about 370 million bushels above trade expectations and well above the range of estimates. This shows that the market has seen significant rationing of demand and will help ease old crop tightness. USDA also pegged U.S. corn planted acres at 92.282 million acres, up from trade expectations of 90.76 million acres. If we assume 970 MB beginning stocks and use the 92.282 million planted acres at the 158.7 bushels an acre trend yield, this will leave ending stocks near 1.2 billion bushels, which is up from the June USDA estimate of 695 million bushels. This will leave a stocks/use ratio of around 10 percent instead of the 5.2 percent that was seen last month. After the release of the report, USDA made a statement that because of late planting, USDA will resurvey Minnesota, Montana, North Dakota and South Dakota. USDA will release the updated estimates in its crop production report Aug. 11.

Soybeans

Soybeans started the week lower but quickly sold off as pressure from a lower wheat and corn market spilled over to pressure soybeans. By midsession, soybeans were able to recover because of short covering. Additional support was a result of news that China was in overnight and bought 132,000 metric tons of soybeans overnight. Position squaring ahead of USDA’s reports also was noted.

The June 28 session had soybean higher with support spilling over from a stronger overnight session. Additional strength spill over from a higher corn and wheat market. USDA’s crop progress report was friendly soybeans as it showed lower crop condition ratings. The report also showed planting progress now about equal to the five-year average pace.

The June 29 session saw soybeans trade sharply higher with support coming from a stronger overnight session as well as from spillover strength from the other grains. By midsession, corn and soybeans started to drift lower. Late-session pressure came from position squaring ahead of the June 30 USDA reports.

The soybean market opened June 30’s session lower with selling tied to a bearish quarterly grains stocks estimate as well as from spill over selling from a limit down move in the corn market. Losses were kept in check by a friendly planted acreage report. The quarterly grains stocks estimate confirmed what most traders have been expecting, a slowdown in soybean demand. Soybeans stocks were estimated at 619 million bushels compared with expectations of 590 million bushels. But the 29 million-bushel increase in stocks was more than offset by the lower-than-expected acreage estimate. USDA is estimating soybeans planted acreage at 75.2 million compared with March estimate of 76.6 million. The 1.4 million few acres translates to a cut in production of about 60 million bushels, much more than the expected increase in stocks. This should have been enough to help support the soybean complex, but the sharply lower corn and wheat markets spilled over to continue to keep pressure on soybeans throughout the session.

Barley

As of June 26, planting progress was at 93 percent compared with 90 percent last week, and 100 percent for the five-year average. Emergence was at 88 percent compared with 79 percent last week, and 100 percent for the five-year average. North Dakota is reporting planted progress at 79 percent complete compared with 77 percent last week. Barley’s crop condition rating improved 1 percent last week to 75 percent good/excellent, 20 percent fair and 5 percent poor.

USDA estimated barley stocks at 89.4 million bushels compared with 115.5 million bushels for last year at this time. USDA is estimating producers to plant 2.8 million acres of barley in 2011, 1.4 million less than expedited in March. North Dakota producers are expected to plant 550,000 acres, down 140,000 from the March intentions estimate.

Durum

As of June 26, 60 percent of North Dakota’s crop had been planted, compared with 44 percent last week and 100 percent for the five-year average. Emergence is estimated at 48 percent compared with 34 percent last week and 100 percent for the five-year average. North Dakota on average produces about 67 percent of the nation’s durum.

Durum stocks are estimated at 35.2 million bushels compared with 34.6 million bushels for last year at this time. Durum’s planted acreage is estimated at 1.698 million down from 2.4 million in March’s expectations. North Dakota producers are expected to plant 1 million acres of durum in 2011, 600,000 acres less than expected in March.

Canola

Canola futures on the Winnipeg, Manitoba, exchange closed sharply lower for the week. By the close of the market June 30, canola had lost close to $14.50 (Canadian). The canola market followed the U.S. soybean complex, almost mirroring soybeans’ performance. Position squaring ahead of USDA acreage report was noted early in the week. The trade expected to see a friendly report for canola, and it was, but most of the friendliness was overshadowed by how bearish the report was for the other grains. This pressured canola hard June 30, pushing it to be lower for the week.

USDA estimated the 2011 canola planted acreage at 1.14 million acres down from their March estimate of 1.6 million acres. North Dakota producers planted only 940,000 areas compared with the March estimate of 1.4 million.

Sunflowers

As of June 26, 86 percent of the nation’s sunflower crop had been planted compared with 74 percent last week and 93 percent for the five-year average. North Dakota’s sunflower planting progress was estimated at 86 percent, compared with 78 percent last week and 99 percent for the five-year average.

USDA is estimating all sunflower planted acreage at 1.86 million compared to March’s estimate of 1.8 million. Oil sunflower’s planted acreage is estimated at 1.54 million compared with 1.4 million while confection sunflower acreage is estimated at 316,000 acres compared with intentions of 405,000 acres.

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