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Published October 03, 2011, 07:23 PM

USDA report pressures grains

The wheat market traded with strength early in the week. Minneapolis wheat was the market of choice in the wheat exchanges, as early estimates for USDA’s reports had spring wheat production being cut and stocks projected to be the tightest ever.

By: Ray Grabanski,

Wheat

The wheat market traded with strength early in the week. Minneapolis wheat was the market of choice in the wheat exchanges, as early estimates for USDA’s reports had spring wheat production being cut and stocks projected to be the tightest ever. For the week ending Sept. 29 December Minneapolis wheat gained 44.5 cents, December Chicago wheat gained 13.5 cents and December Kansas City wheat was 8.75 cents higher.

Wheat started the week mixed with the winter wheat contracts sloppy, while Minneapolis wheat opened with strong gains. The Minneapolis market continues to be the wheat exchange to watch as strong buying continues to dominate the market. All of the wheat exchanges were supported by continued position squaring ahead of the Sept. 30 USDA annual small grains summary report and quarterly grains stocks estimate.

The Sept. 27 session opened with decent gains as technical buying came to the rescue. All three of the wheat exchanges are oversold and in need of a technical correction. Additional support was because of spillover support form a sharply lower U.S. dollar, which was under pressure from reports that Europe’s debt issue is being resolved.

The wheat exchanges opened the Sept 28 session on the defense and extended session losses throughout the session. Early selling pressure was tied to spillover selling pressure from the other grains as well as from technical selling. The funds returned to the market as sellers hit all of the grains hard.

Wheat opened the Sept. 29 session with decent strength as technical buying once again became the main driving force. Position squaring ahead of USDA reports also was seen. Minneapolis wheat again was the leader as concerns were that the Sept. 30 report would show a decreasing spring wheat production estimate because of the year’s disappointing growing season. Additional support came from the lack of rain in the Southern Plains. The most interesting item in wheat came in the cash market, as elevators have started to roll out December future fixed contracts to March to get away from the volatile December contract.

USDA released two major reports for wheat Sept. 30. One report is the quarterly grain stocks estimate. The report estimated wheat stocks at 2.15 billion bushels compared with trade estimates of 2.035 billion bushels, an increase of 115 million bushels. USDA also released its small grains summary report. This report estimated all wheat production at 2.008 billion bushels compared with estimates of 2.044 billion bushels, a drop of 36 million bushels. All wheat acreage was cut 180,000 acres and USDA reduced wheat’s yield 1.3 bushels per acre. Spring wheat production is estimated at 493 million bushels compared with USDA’s actual number of 462 million bushels.

Corn

Corn ended lower for the week, with December corn off 45 cents. USDA’s September quarterly grain stocks report was bearish corn. Sept. 1 corn stocks were pegged at 1.128 billion bushels, 164 million bushels above trade expectations. The next big report will be Oct. 12, in which USDA will plug the September numbers into corn’s demand numbers.

To start the week, corn traded with strength for the session. The December contract traded down to minor support but bounced because of technical buying. The positive outside markets supported corn early in the session. Corn is technically oversold, and short covering added to the positive trade.

Sept. 27, corn opened higher and traded with green numbers for the session. The market found support early from the strength in the outside markets. There also was talk that European officials are taking measures to ease debt concerns and rumors continue to fly about China buying corn, but no confirmations. South Korea did purchase 110,000 tons of corn, which was supportive.

Corn futures opened the Sept. 28 session lower and traded under pressure for the session. The outside markets were weak, and that pressured the open. The funds also liquidated a large number of long positions during the session, which pressured the market. Talk of better-than-expected yields in the Midwest and harvest pressure also added weakness.

Sept. 29, corn traded on both sides of unchanged for the session. The market found support early from the positive outside markets. There was also some short covering as trader’s positioned ahead of the Sept. 30 report.

Ethanol production for the week ending Sept. 23 averaged 841,000 barrels per day. This is down 3.44 percent the previous last week and up 1.94 percent vs. last year. Total ethanol production for the week was 5.887 million barrels. Corn used in last week’s production is estimated at 89.58 million bushels. This crop year’s cumulative corn used for ethanol production for this crop year is 303.27 million bushels. Corn use needs to average 96.132 million bushels per week to meet this crop year’s USDA estimate of 5 billion bushels.

Soybeans

For the week ending Sept. 29, November soybeans were off 28 cents while January had dropped 27.75 cents.

Soybeans started the week lower and extended session losses early. Early selling was tied to issues tied to technical selling as the funds continue to push the market to long term support levels. Additional selling was tied to harvest progress as combines start to roll over much of the major growing regions of the U.S. Late in the session, soybeans firmed to trade with small gains.

Sept. 27, soybeans started the session higher with most months trading as much as 20 cents higher. Additional support was because of technical buying as the soybean market is oversold and in need of a technical correction. But the gains were not sustainable as selling pressure was uncovered once the long term weather forecasts were released. Light trading activity was centered on position squaring ahead of the Sept. 30 quarterly grains stocks report.

Soybeans opened the Sept. 28 session lower and extended session losses throughout the day. Early selling pressure was because of pressure from fund selling as the funds returned to the market as heavy sellers as many liquidate long positions.

The soybean complex started the Sept. 29 session higher with most of the early support coming from technical buying and position squaring ahead of USDA’s reports. Additional support came from news that Germany has agreed to the expansion of the euro zone rescue fund, which basically means that Germany has agreed to help the struggling PIIGS nations — Portugal, Ireland, Italy, Greece and Spain. Gains were kept in check by good harvest progress.

The quarterly grain stocks report estimated Sept. 1 soybean stocks at 215 million bushels, which was 10 million bushels lower than expectations, which was viewed as friendly to soybeans, but the pressure from corn kept buyers away.

Barley

In the small grains summary report, USDA estimated 2011 barley production at 155 million bushels compared with USDA’s August estimate of 168 million bushels. USDA reported last week’s barley shipments at 4,000 bushels, with all of the bushels going to Mexico. Last week, no barley export sales were reported.

Cash barley bids in Minneapolis had feed barley bids at $5 and malting barley bids were $7.75.

Durum

USDA estimated durum’s 2011 production at 52 million bushels compared with estimates of 54 million bushels and 107 million bushels last year. USDA reported last week’s durum export shipments pace at 397,000 bushels. Last week, USDA reported 1.2 million bushels of durum export sales.

Sept. 29 cash bids for milling quality durum were at $12 in Berthold, N.D., while bids in Dickinson, N.D., were at $11.80.

Canola

Canola futures on the Winnipeg, Manitoba, exchange ended the week with decent gains. For the week ending Sept. 29, November canola gained $5.40 (Canadian). Support was because of thoughts that export demand for canola will start to pick up because of the recent drop in canola’s price. Additional support was because of news that EPA is going to allow Canadian canola to be used to make U.S. biodiesel. This will help increase demand for canola. Gains were kept in check by slipover pressure from a struggling U.S. soybean market.

Sept. 29 cash canola bids in Velva, N.D., were $23.23.

Dry beans

Cash bids for dry beans have stabilized since the mid-September frost, with most offers for pintos around $45 with some offers for 2012 contracts at $40. Producers should consider selling a portion of their pinto bean crop at these levels. The price has a chance of going higher because poorer-than-expected yields in the North and from severe drought conditions in Mexico.

Sunflowers

Sept. 29 cash sunflower bids in Fargo, N.D., were at $28.25.

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