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Published July 26, 2011, 09:18 AM

Weather puts heat on markets

Wheat opened the week lower with pressure spilling over from a lower corn market. Additional selling pressure was because of a stronger U.S. dollar.

By: Ray Grabanski, Special to Agweek

Wheat

Wheat opened the week lower with pressure spilling over from a lower corn market. Additional selling pressure was because of a stronger U.S. dollar. Wheat was able to shake off selling pressure late in the session as fears of tight supplies of high-quality wheat continue to cause traders concerns.

The July 19 session had wheat open with strong gains as all of the grains rallied higher because of support from a friendly USDA crop progress report. The report was friendly to corn and soybeans as crop condition ratings were reduced more than expected. Additional support was because of a weather forecast that called for warmer weather. This helped to push the grains higher through midsession. But all that changed with the noon weather forecast, which reduced the heat, putting the forecast back in line with July 18’s expectations. This brought the soybean complex lower, which, in turn, spilled over to cut wheat’s gains in half. Wheat was able to retain some gains because of support from the higher corn market.

Wheat opened the July 20 session with decent gains in all three of the exchanges. Support spilled over from a stronger overnight session while light support was because of weather forecasts. Weather continues to be on the minds of traders, as hot, dry conditions prevail in the Southern Plains (which should allow for good harvest progress, but might start to influence winter wheat seeding) and hot, wet, muggy conditions linger in the Northern Plains (which has traders showing concerns toward disease pressure). Light support was because of a weaker U.S. dollar.

The July 21 session started mixed but sold off soon after the opening bell. Support spilled over from a flat overnight session as well as from an uneventful export sales report. A sharply lower U.S dollar added support. But wheat took the path of least resistance soon after the opening because of technical selling and from the thought that wheat conditions will start to stabilize now that the weather is becoming more moderate. The recent hot, wet, muggy conditions have reduced the crop potential of the 2011 spring wheat crop, much won’t be known until combines begin to role.

As of July 17, spring wheat heading is estimated at 60 percent compared to 27 percent the previous week and 88 percent for the five-year average. Spring wheat’s crop condition rating was unchanged at 73 percent good to excellent, 22 percent fair and 5 percent poor or very poor. Winter wheat harvest progress is estimated at 68 percent complete compared with 63 percent the previous week and 72 percent for the five-year average.

Corn

To start the week, corn opened lower and traded with red ink for the session. The lower overnight trade and the negative outside markets pressured corn early in the session. Weather forecasts were not as threatening as at the end of the previous week, and that added to the weakness. The export inspections report also was disappointing for corn.

July 19, corn opened sharply higher and traded with green numbers for the session. Support came from the eight- to 14-day weather forecast, which calls for hotter-than-normal weather. Reports reflect damage to the corn crop because of the extremely high temperatures. Crop condition ratings also dropped 3 percent in the recent crop progress report.

The crop conditions report stated that 66 percent of the corn crop is good to excellent, down 3 percent from the prior week. The poor to very poor rating rose 2 points to 11 percent, as the situation in a number of states quickly is deteriorating.

The corn crop in Texas, a state hit by the worst drought conditions in 100 years, appears to be in a roughest shape.

Texas reported that 1.95 million acres were planted to corn this past spring. The latest crop condition report stated that 35 percent of the Texas corn crop was in very poor condition and another 30 percent was rated in poor condition. This is by far the worst performing Texas crop in the 26 years that the crop condition reports have been issued. The situation in a number of other large Midwest states also appears to be quickly deteriorating. The good to excellent rating declined six points in Indiana and Illinois, while Kansas’ good to excellent rating was down a whopping nine points compared with the previous week.

Corn opened higher July 20, but did not stay there long before moving lower. The lack of buying interest and a less threatening forecast through the weekend pressured corn. The market appears to have the current weather priced in. Yield potential is being discussed, and many traders are saying that production may be hurt with higher overnight temperatures during pollination. Traders also are saying that the recent rally of more than $1 may be slowing demand.

July 21, corn opened lower and traded with losses for the session. Weather was seen as the key factor. There was rain in parts of Nebraska and Iowa recently, and the forecast for the weekend is for cooler temperatures and a greater chance of rain through the Corn Belt. The export sales estimate came out at the low end of the estimates and had little effect on the trade.

Ethanol production for the week ending July 15 averaged 873,000 barrels per day. This is up 0.11 percent from the previous week and up 4.43 percent from last year. Corn used in recent production is estimated at 91.665 million bushels. Stocks were 19.145 million barrels, which is up 1.97 percent on the week.

USDA’s weekly crop progress report estimated corn’s crop condition rating at 66 percent good to excellent, down 3 percent from the previous week and 72 percent one year ago. Corn silking is at 35 percent, compared with 62 percent one year ago and 47 percent for the five-year average.

Soybeans

Soybeans opened the week lower with selling pressure tied to pressure from a lower wheat and corn market as well as from spillover selling from a stronger U.S. dollar. Soybeans, like wheat, is an export-dependent market, which means the U.S. has to export somewhere between a third to a half of the crop raised. A strong dollar is considered to be negative, as it makes the value of the soybeans higher and less attractive to buyers.

The July 19 session had soybeans open with decent strength. Early support was because of a larger-than-expected decline in soybean’s crop condition rating. Additional support was because of a change in the weather forecast overnight. The July 18 weather forecast lowered the temps of the higher pressure ridge. This helped soybeans rally early in the session, but a bearish noon weather forecast changed that.

The noon forecasts reduced the heat of the high pressure ridge, which, in turn, pressured soybeans, pushing the crop into negative territory. Technical pressure also was noted as soybeans traded up to the $14 resistance level. Traders need to hold a weather premium in soybeans, but it appears that traders think $14 offers enough of a premium.

Soybeans started the July 20 session higher, with support coming from the overnight session. Overnight market strength was because of weather concerns, as the recent weather forecasts are calling for above-normal temperatures to continue through the week, moderate slightly for the weekend, then ramp up again this week. This has traders concerned that conditions likely will decline again. New demand reports added support as news that China was in overnight and bought 220,000 metric tons of soybeans. A weaker U.S. dollar added strength.

July 21, soybeans struggled on the opening bell with pressure spilling over from a lackluster export sales report as well as from spillover pressure from a lower corn market. Weather forecasts are starting to show a slight cool down in the weather and call for rain through the weekend. This certainly will help stop any decline in crop conditions.

Long term weather forecasts still calling for the heat to return, and that helped to keep the soybean complex firm. August is the most critical month for soybeans and that would be about the time frame for the ramp-up in temps. Another lower session in the U.S. dollar helped to support soybeans as well.

As of July 17, soybean blooming is estimated at 40 percent compared with 21 percent the previous week and 52 percent for the five-year average. The soybean crop condition rating dropped 2 percent to 64 percent good to excellent, 26 percent fair and 10 percent poor to very poor.

Barley

USDA reported last week’s barley export inspections pace at 28,000 bushels, with all of the bushels going to Mexico. There was no barley export sales reported for the previous week.

As of July 17, barley headed is reported at 62 percent compared with 25 percent the previous week and 83 percent for the five-year average. Barley’s crop condition was unchanged at 76 percent good to excellent, 20 percent fair and 4 percent poor.

Durum

As of July 17, 18 percent of North Dakota’s durum crop was headed, compared with none the previous week, and 69 percent for the five-year average. North Dakota’s durum crop condition rating was estimated at 73 percent good to excellent, 24 percent fair and 3 percent poor. North Dakota, on average, produces about 67 percent of the nation’s durum.

Cash bids for milling quality durum were at $13.50 in Berthold, N.D. Bids in Dickinson, N.D., were $13.30.

Canola

Canola futures on the Winnipeg, Manitoba, exchange closed the week ending July 21 with almost $15 (Canadian) losses. The canola market was pressured by a stronger Canadian dollar. Additional pressure was because of beneficial rains in major canola growing regions of Canada.

July 21 cash canola old crop bids in Velva, N.D., were at $26.38 with new crop September bids at $26.14.

Sunflowers

As of July 17, 2 percent of North Dakota’s sunflower crop was in bloom compared with none the previous week and 9 percent for the five-year average. The North Dakota sunflower crop is rated 76 percent good to excellent, 21 percent fair and 3 percent poor.

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