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Published September 27, 2011, 02:25 PM

Markets collapse

The wheat exchanges traded on the defense for most of the week. Most of the selling pressure was tied to technical pressure as well as from better-than-expected rains in the Southern Plains.

By: Ray Grabanski,

Wheat

The wheat exchanges traded on the defense for most of the week. Most of the selling pressure was tied to technical pressure as well as from better-than-expected rains in the Southern Plains. For the week ending Sept. 22, December Minneapolis wheat was 36.25 cents lower, December Chicago wheat was off 44.5 cents and December Kansas City wheat dropped 63 cents.

Wheat started the session lower with selling tied a lower overnight session and stronger U.S. dollar. The dollar continued to rally with strength coming from concerns Greece will default on its debt. Losses were limited by concerns toward the Southern Plains drought, as that region has not received enough rain to break out of the drought. Weather forecasts are calling for rain across parts of the U.S. to start the week, followed by a warming trend with above-normal temperatures.

The Sept. 20 session opened higher with support from the other grains as well as from technical buying. Additional support was because of an improving outlook to the world financial crisis. Wheat later faded as corn slipped lower. Additional selling was tied to the Sept. 19 crop progress report that is showing spring wheat harvest even with the five-year average.

Wheat opened the Sept. 21 session flat and never traded with much enthusiasm. Early support was because of weather reports calling for the weather to warm up and rain to end. The 14-day forecast is calling for warmer-than-normal weather and no rain for much of the U.S., and that certainly will result in some issues for the newly seeded winter wheat. Technically, Minneapolis December wheat traded down to minor support lines. If the market trades and closes below $8.40, the market could test the $8 level.

The wheat exchanges all opened Sept. 22 session with large losses, with pressure coming from the lack of confidence in the U.S. economy. The net result was mass exodus out of all commodity positions, except the U.S. dollar, which was sharply higher. Another blow came from news that Egypt bought 240,000 metric tons of wheat from Russia. Technically, wheat traded through its $8.40 support line and now is on track to test support at $8 December Minneapolis wheat.

USDA reported last week’s wheat’s export inspections pace at 33.3 million bushels. This brings the year-to-date export shipments pace for wheat to 349.6 million bushels compared with 329.8 million bushels for last year at this time. Last week’s wheat export sales pace was estimated at 25 million bushels. This brings the year-to-date export sales pace for wheat to 507.3 million bushels compared with 604.9 million bushels last year. With 37 weeks left in wheat’s marketing year, shipments need to average 17.8 million bushels and sales need to average 14 million bushels to make USDA 1.025 billion bushels projection.

Corn

Corn dropped hard this week with losses of more than 45 cents losses in December corn. Fears of global deflation and the prospect of slow growth caused by economic actions in Europe and the U.S. remain as a perceived threat has sparked the selling trend.

To start the week, corn traded in a mixed fashion. Negative outside markets sparked selling early in the session. Increased harvest pressure and talk of better-than-expected yields in the western Corn Belt added to the weakness. Rumors of buying interest from China for U.S. or Argentina corn supported a recovery off of lows and into the close.

Sept. 20, corn started off with good strength, as technical buying stepped in to support corn. Additional support was because of a lower-than-expected crop condition rating. This helped give traders the confidence to buy corn after the market broke almost 80 to 90 cents from its highs. Once the small trader buying slowed down, fund selling stepped in to bring the corn market off of its highs. Technical support helped corn from completely collapsing. Most of the selling was tied to the funds.

Corn opened Sept. 21 higher with support coming from small trader buying. The battle cry for corn in the past year to year and a half has been to buy on breaks, and that is exactly what the small trader has been trying to do. But technical selling and fund selling has made this a dangerous game the past few weeks. Technically, corn still has some room to move before hitting support.

Sept. 22, corn opened sharply lower and traded that way for the session. Global economic concerns reached a high overnight sparking an aggressive long liquidation selling spree in all commodity markets. The Fed also stated that the U.S. economy is facing more downside risk. This news pressured the outside markets and spilled over to the grains.

Ethanol production for the week ending Sept. 16 averaged 871,000 barrels per day. This is down 0.91 percent vs. the previous week and up 2.47 percent vs. last year. Total ethanol production for the week was 6.097 million barrels, which is the lowest weekly total since May 6. Corn used in last week’s production is estimated at 92.78 million bushels compared with 96 million bushels as an average per week to meet this crop year’s USDA estimate. Stocks were 17.088 million barrels, down 0.40 percent for the week.

USDA’s export inspection report was seen as bearish for corn. There were 22.4 MB of corn reported shipped, below the 33.9 million bushels needed to meet USDA’s projection of 1.65 billion bushels. This was below the pre-report estimates of 25 million to 29 million bushels. Last week’s export sales report for corn was 23.5 million bushels, which was above what was needed to meet USDA projection of 1.65 billion bushels. This was at the low end of the estimates at 21.7 million bushels to 31.5 million bushels and neutral for corn. Total shipments this week were at 24.7 million bushels, below the 31.9 million bushels needed for the week.

Soybeans

The soybean market traded lower every day this week because of fund long liquidation and technical pressure. For the week ending Sept. 22, November soybeans dropped 72.5 cents.

Soybeans opened the week lower and extended losses throughout the session. Selling was tied to pressure from a stronger U.S. dollar as well as from long liquidation. The funds continue to be aggressive sellers of commodities as many try to shore up problems in other markets. Losses were limited by thoughts that the recent frost did more damage to the Northern U.S. soybean crop than expected, but on the negative side, it should speed the start of harvest.

The Sept. 20 session followed the trend set by the other grains, opening with decent strength as technical buying combined forces with a friendly crop progress report. Technically, soybeans have traded down to support, and after breaking close to $1, was due for a corrective bounce. That was spurred on by a lower crop condition rating than expected. Additional support was because of an announcement that China bought 120,000 metric tons of soybeans from the U.S. But, as was the case in the other grains, soybeans fell prey to fund selling once the small trader buying slow at midsession.

The soybean market opened Sept. 21 session on the defense with most of the early selling tied to the upcoming harvest. The soybean market was able to recover and trade with strength as spillover support came from a stronger corn and wheat market but the selling pressure from fund long liquidation proved to be too much to overcome. News that Lloyds of London was liquidating some of its European Bank holdings threw fuel on the fire of continued concerns about Europe’s debt issues.

The Sept. 22 session saw soybeans opening sharply lower and extending session losses early. Pressure was because of the Federal Reserve announcement warning that significant risks still are possible in the U.S. economy. That news was enough to send all commodities sharply lower and the U.S. dollar sharply higher. Fundamental news meant little to the market as it appeared most of the activity was all about capital preservation.

USDA reported last week’s soybean export inspections pace at 10 million bushels. This brings the year-to-date export shipments pace for soybeans to 23.9 million bushels compared with 23.5 million bushels for last year at this time. Last week’s soybean export sales pace was estimated at 14.9 million bushels. This brings the year-to-date export sales pace for soybeans to 554.1 million bushels compared with 717.9 million bushels last year at this time. With 50 weeks left in soybeans’ marketing year, shipments need to average 27.8 million bushels and sales need to average 17.2 million bushels to make USDA 1.415 billion bushels projection.

Barley

USDA reported no barley shipments for last week.

Cash barley bids in Minneapolis had feed barley bids at $5.10 while malting barley bids were $7.60.

Durum

USDA reported last week’s durum export shipments pace at 815,000 bushels. Last week, no durum export sales were reported.

Sept. 22 cash bids for milling quality durum were at $11.50 in Berthold, N.D., while bids in Dickinson, N.D., were $11.80.

Canola

Canola futures on the Winnipeg, Manitoba, exchange ended at more than $10 (Canadian) lower for the week. The canola market was on the defense throughout the week, with selling pressure coming from harvest pressure and spillover selling from a lower U.S. soybean complex. Selling was tied to concerns that commodities are becoming risky assets to own, at least according to the Federal Reserve.

Sept. 22 cash canola bids in Velva, N.D. were at $23.44.

Sunflowers

Sept. 22 cash old crop sunflower bids in Fargo, N.D. were $33.10 while new crop bids were $28.55.

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