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Published September 19, 2011, 08:57 AM

Markets retreat after USDA report

The wheat market struggled this week, trading lower in all sessions except for one. Wheat was pressured by a bearish USDA crop production report as well as from forecasts calling for rain in the Southern Plains.

By: Ray Grabanski, Special to Agweek


The wheat market struggled this week, trading lower in all sessions except for one. Wheat was pressured by a bearish USDA crop production report as well as from forecasts calling for rain in the Southern Plains. For the week ending Sept. 15, December Minneapolis wheat dropped 36.25 cents, December Chicago lost 33.75 cents, and December Kansas City gave back 37.25 cents.

Wheat started the week on the defense with pressure coming from a bearish USDA September crop production report. On the supply side, USDA increased wheat imports 10 million bushels, which, in turn, put wheat’s total supply estimate at 3.047 billion bushels. On the demand side, USDA cut food demand by 5 million bushels and cut exports by 75 million bushels. This resulted in an 80 million-bushel cut in use, putting total usage at 2.287 billion bushels. The net result was a 90 million-bushel increase in wheat’s ending stocks estimate, now estimated at 761 million bushels. Additional pressure was from forecasts calling for rain for parts of the Southern Plains.

The Sept. 13 session also started on the defense, with pressure coming from Sept. 12’s bearish USDA crop production report and the lack of buying interest. Funds were noted sellers. Forecasts also are calling for rain in the Southern Plains. The wheat complex also is struggling because of a slowdown in exports caused by competition from Russia and the Black Sea region.

The wheat exchanges started the Sept. 14 session lower because of technical selling. Additional pressure came from forecasts calling for rain in much of the Southern Plains and Delta regions. Another lost export sale of wheat to Russia added pressure (Egypt bought 420,000 metric tons for Russia overnight). The Chicago market broke away from the hard wheat exchanges late in the session because of short covering tied to an expiring September wheat contract.

Wheat opened the Sept. 15 session lower, with early pressure spilling over from the other grains. Corn and soybeans were under pressure from selling tied to a scaled back frost scare. By midsession, Minneapolis and Kansas City wheat found support and actually started to push higher. Chicago remained under pressure because of spillover selling from corn and soybeans.


Corn ended lower for the week, with December off 40 cents.

To start the week, corn closed with decent gains. Corn started under pressure from the weakness in the soybean and wheat markets. But the news was the monthly USDA production and supply and demand reports, and they offered support. Production came in at 12.497 billion bushels, down from 12.914 billion bushels in August. Average yield was estimated at 148.1 bushels per acre, compared with trade expectations at 148.8 bushels per acre and 153 bushels per acre in August. U.S. ending stocks for the 2011 to ’12 season were estimated at 672 million bushels and down from 714 million bushels in August, but this was up from expectations of 636 million bushels. Beginning stocks were adjusted lower by 20 million bushels. Feed usage was cut by 200 million bushels, ethanol usage was cut by 100 million bushels and exports also were cut by 100 million bushels compared with last month. Corn also found support from forecasts calling for frost for the Northern tier states. There also was an 114,300 metric-ton export sale to an unknown destination.

Sept. 13, corn struggled for the session, ending the day sharply lower. Pressure was because of the lack of commercial buying. There also was long liquidating and speculator selling, which pushed the market to double-digit losses. The weakness in the wheat complex also spilled over to the corn trade, as wheat is competing in feed rations. A 1 percent improvement in corn’s crop condition rating added pressure.

Corn opened lower Sept. 14, but ended with small gains. It was a choppy, two-sided trading session. Late session support was because of weather forecasts which are showing freezing temperatures for Nebraska, Illinois, Iowa and north. This could put an end to the growing season and damage late-planted crops.

Sept. 15, corn opened lower and remained under pressure for the session. The freezing temperatures were not as wide spread or as bad as forecast and that lead to continued speculator selling. Long position liquidating added to the weakness. Harvest pressure is pushing corn lower. The outside markets were positive and export sales were above estimates, but the corn trade ignored them.

Ethanol production for the week ending Sept. 9 averaged 879,000 barrels per day. This is down 1.9 percent vs. the previous week and up 0.80 percent vs. last year. Total ethanol production for the week was 6.153 million barrels, a six-week low. Corn used in the week’s production is estimated at 93.63 million bushels. Corn use needs to average 95.9 million bushels per week to meet this crop year’s USDA estimate of 5 billion bushels. Stocks as of Sept. 9 were 17.156 million barrels, up 0.43 percent from the previous week.


The soybean market was under stress all week with each session showing red numbers. Pressure was because of a bearish USDA crop production report as well as from a slowdown in U.S. soybean demand. For the week ending Sept. 15, November soybeans dropped 68 cents.

Soybeans opened the week lower. Pressure was because of a bearish USDA September crop production report. On the supply side, USDA increased soybeans’ yield 0.4 bushels per acre, or 29 million bushels. This was offset by a 5 million-bushels decrease in beginning stocks (old crop crush was increased). The net result was a 24 million-bushel increase in supply, now estimated at 3.324 billion bushels. On the demand side, USDA increased exports by 15 million bushels, decreased seed demand 2 million bushels (fewer acres in 2012), and increased residual use by 2 million bushels. The net change in use was an increase of 15 million bushels. This followed through to result in a 10 million-bushel increase in soybeans ending stocks estimate, now at 165 million bushels.

The Sept. 13 session opened mixed but ended with small losses. Pressure spilled over from a lower corn and wheat market, with additional pressure coming from the negative USDA crop production report Monday. The market firmed late because of forecasts calling for frost for much of the Northern Plains and parts of the western Corn Belt.

The soybean market closed the Sept. 14 session lower. Soybeans traded lower throughout the session, with increased harvest pressure and long position liquidating from speculators the cause of most of the pressure. Additional selling was tied to a disappointing NOPA crush estimate. Early estimates for the August NOPA crush were at 119.8 million bushels, but the actual crush estimate was closer to 118.8 million bushels. Soybeans did recover slightly from an announced export sale of 106,000 metric tons to China.

Soybeans opened the Sept. 15 session lower and traded with losses throughout the session. Pressure was from a less-severe-than-expected freeze Sept. 14. The frost hit Minnesota and parts of North Dakota hard, but was fairly mild in other areas. This brought the funds out as sellers as many took profits and liquated long positions. This forced most of the soybean contracts to support lines, which did not hold. Additional fund selling was because of news that the five major world banks have come to a compromise to help bail out Europe. This caused the Dow to rally, the dollar to drop and gold to come under extreme pressure, as many investors take their discretionary money out of the commodities and enter the stock market.


USDA made no changes to barley’s supply and demand numbers. Ending stocks still are estimated to end at 58 million bushels. USDA did drop barley’s potential price 35 cents to $5.45 to $6.55.

As of Sept 11, barley harvest was reported at 85 percent complete compared with 71 percent the previous week and 88 percent for the five-year average.


In its September crop production report, USDA made several adjustments to durum’s supply and demand numbers. On the supply side, USDA increased durum imports by 5 million bushels. On the use side, domestic use and exports both were cut by 5 million bushels. The net result was a 10 million-bushel cut in demand, which followed through to increase durum’s ending stocks estimate 15 million bushels, putting the estimate at 28 million bushels.

Sept. 15 cash bids for milling quality durum were at $12 in Berthold, N.D., while bids in Dickinson, N.D., were at $11.70.


Canola futures on the Winnipeg exchange ended with large losses for the week. For the week ending Sept. 15, November canola dropped $21.60. The canola market was under pressure throughout the session because of producer selling as well as fund selling, which was caused by spill over selling from a lower U.S. soybean complex.

Sept. 15 cash canola bids in Velva, N.D. were at $24.82.


Sept. 15’s cash old crop sunflower bids in Fargo, N.D., were $33.85 while new crop bids were $29.15.