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Published August 16, 2011, 11:10 AM

USDA report bullish

The wheat exchanges started the week sharply lower. Most, if not all, of the pressure in wheat was because of pressure from the outside markets, which also were under extreme pressure from a downgrade in the U.S. credit rating.

By: Ray Grabanski, Special to Agweek

Wheat

The wheat exchanges started the week sharply lower. Most, if not all, of the pressure in wheat was because of pressure from the outside markets, which also were under extreme pressure from a downgrade in the U.S. credit rating. Additional selling was tied to improving weather conditions, as the Southern Plains are expected to cool off slightly and also are forecast to get rain.

The Aug. 9 and 10 sessions had wheat trading higher with support coming from a calmer session in the outside markets. Technical buying was the main feature, as many traders felt Aug. 8’s losses were overdone. The spring wheat market was able to start pulling away from the other exchanges because of another week of declining crop conditions. The wheat market also was able to get support from an announcement from the Federal Reserve that it plans to leave interest rates unchanged for at least another two years, and that it plans to take further steps, if necessary, to help spur the economy. Additional support was because of position squaring ahead of USDA’s August crop production report, which was released Aug. 10. The report was expected to be friendly to wheat as USDA announced new planted acreage estimated for North Dakota, South Dakota, Minnesota and Montana.

Report day had wheat opening higher. Wheat’s strength was not because of news of its own, but because of spillover support from a sharply higher corn exchange. USDA only made minor adjustments to the 2010 to ’11 crop year estimates, but in the end, no change was made in the ending stocks estimate. As for the 2011 to ’12 crop year, USDA cut planted acreage 1.2 million acres and harvested acreage dropped 1.3 million acres. The acreage reduction was primarily because of the resurveying result from spring wheat country. The cut in acreage was almost offset by a slight per bushel increase in yields. In the end, production was cut 30 million bushels but that was offset by a 20 million-bushel increase in feed demand and 50 million-bushel cut in exports. The net result was no change in 2011 to ’12 ending stocks. The world wheat numbers were negative, as world wheat stocks increased to 188.87 million metric tons, an increase of 6.68 million metric tons from July, mainly because of an increase in production from the Black Sea Region. The report was disappointing, as most were expecting USDA to make larger cuts in spring wheat’s planted acreage estimate.

Corn

To start the week, corn traded lower. The outside markets influenced the grain commodities and triggered fund long liquidation. The collapse in the stock market pressured the grains markets. Crude oil also was down more than $3.50, while gold and silver traded with strength. The main reason for the negative outside markets was the down grading of the U.S. debt rating by the S&P 500. Nervousness about the economy has traders on edge and money is heading to the sidelines. The weather also appears to be non-threatening and is limiting any upside movement.

Aug 9, corn opened higher and traded with green numbers for the session. The market found support from less volatility in the outside markets and yield concerns. The weekly crop progress report showed the ninth-lowest rating for corn in 25 years. Nebraska’s conditions were up 2 percent, but Iowa was down 2 percent, Illinois was down 3 percent, Missouri was down 3 percent and Ohio down 4 percent. There still is a dry region in central Illinois. Brazil also lowered its corn production forecast for the 2010 to ’11 season to 56.3 million tons compared with 57.1 million in July’s estimate.

Corn futures opened higher, but traded on both sides of unchanged for the session Aug. 10. The market did trade higher into midday, at which time selling pressure took out those early gains. The market then traded close to unchanged into the close because of position squaring ahead of the Aug. 11 USDA report.

Aug. 11, corn opened close to limit up, but slipped slightly to end with strong gains. The market was led by a bullish USDA report. Production came in at 12.914 billion bushels, which was 168 million bushels below trade expectations and down 556 million bushels from July. Yield came in at 153 bushels per acre, compared with trade expectations at 155.5 bushels per acre and July’s USDA estimate of 158.7 bushels per acre.

While planted acres were left unchanged, harvested acres were revised down 500,000, acres mainly because of flood damage. U.S. ending stocks for the 2011 to ’12 season were estimated at 714 million bushels; 37 million bushels below trade expectations and down 156 million bushels from July’s USDA estimate. This leaves the stocks-to-use ratio at 5.4 percent, which is the second-lowest on record. Beginning stocks were adjusted higher by 60 million bushels, in which USDA lowered feed usage by 150 million bushels, ethanol usage by 50 million bushels and exports by 150 million bushels. World ending stocks were adjusted lower to 114.53 million metric tons and down from 115.66 million metric tons in July., which already was a five-year low, and down from 122.93 million metric tons last year. The world stocks-to-use is just 13.2 percent and the lowest since 1973.

Soybeans

All of the grains, as well as most other commodities, dropped hard to start the week, as traders took money off the table in the wake of what could be the beginning of a double-dip recession. Additional selling was tied to improving weather conditions as weather forecasts are calling for temperatures to moderate greatly for much of the major growing region of the U.S. and for rains to move into the dry areas. This is a time when soybeans are approaching their most critical crop development stage.

The Aug. 9 session had soybeans on the defense throughout the session. Pressure was because of a 1 percent improvement in soybeans’ crop condition rating. Additional selling was tied to weather forecasts that have pulled heat out of the forecast and put more moderate or normal temperatures in the outlook.

The soybean market traded on both sides of the fence Aug. 10, but managed to rally on the close to end with small gains. Early selling was because of favorable weather forecasts. Weather has turned to be almost ideal for soybeans, as the crop enters its most critical crop development stage. Late session strength was because of position squaring ahead of USDA’s crop production report. Traders are expecting USDA to cut soybean harvested acreage because of the adverse spring weather, but some of that will be offset by a decrease in soybean demand. Light support late was because of a hint of a return of heat in the long term weather forecasts.

The soybean market traded the Aug. 11 session sharply higher. The soybean market did slip off of its highs late in the session, but still managed to end with strong double-digit gains. All of the support came from USDA’s crop production report. For the 2010 to ’11 crop year, USDA cut the crush rate 5 million bushels and exports 25 million bushels for a total decrease in demand of 30 million bushels. This followed through to increase the ending stocks estimate. For the 2011 to ’12 crop year, USDA cut planted acreage 200,000 acres and harvested acreage 500,000 acres. The surprise came in a two-bushel cut in yield. The net change in supply was a decrease of 139 million bushels. This mostly was offset by a decrease of 20 million bushels in crush and 95-million-bushel cut in exports. The net result was a 20 million-bushel cut in stocks, now estimated at 155 million bushels. The world estimates were friendly, with world stocks dropping 1.02 million metric tons to 60.95 million metric tons.

Barley

USDA only made minor changes to the barley supply and demand numbers. Planted and harvested acreage was dropped 100,000 acres, but barley’s yield was increased slightly. This resulted in a 5 million-bushel cut in production, which followed all the way through to show up as a cut in ending stocks now estimated at 58 million bushels.

Durum

USDA is estimating U.S. durum production at 57.1 million bushels, down more than 46.7 percent from last year. Durum’s harvested acreage is projected to be 1.35 million acres (a decline of more than 46 percent from last year). Compared with July, this is a 7 million-bushel decline in production. To offset the decline in production, USDA cut durum exports 5 million bushels. The net result was a 2 million-bushel decline in durum’s ending stocks estimate, now estimated at 13 million bushels.

Aug. 11 cash bids for milling quality durum were $10.25 in Berthold, N.D., while bids in Dickinson, N.D., were $11.

Canola

Canola futures on the Winnipeg, Manitoba, exchange ended the week ending Aug. 11 with nearly $7.50 (Canadian) losses. Pressure came from a slowdown in the world economy as well as from weather forecasts that are calling for ideal growing conditions for Canada. Additional selling was tied to spillover selling from a lower U.S. soybean complex.

Aug 11’s cash canola old crop bids in Velva, N.D., were $25.12 while new crop September bids were $24.89.

Dry beans

In its August report, USDA estimated total dry bean production at 20.45 million per hundredweight. Acreage is estimated at 1.19 million acres, a decline of 35 percent from last year. Total pinto bean acreage is estimated at 403.500 acres, a decline of 52 percent from last year. Navy bean acres are estimated at 194,000 acres, a decline of 30.6 percent from last year. Black bean acreage is estimated at 212,500 acres, a decline of 25.25 percent from last year.

Sunflowers

Aug. 11’s cash old crop sunflower bids in Fargo, N.D., were $33.05 while new crop bids were $28.25.

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