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Published October 17, 2011, 05:25 AM

USDA report mixed

Wheat opened and traded with decent gains to start the week. Support came from a sharply lower U.S. dollar market as the dollar dropped more than a full cent. Additional support came from technical buying as traders try and correct an oversold market condition. Wheat trimmed its gains late in the session on reports of good rains over much of the Southern Plain states.

By: Ray Grabanski, Special to Agweek

Wheat

Wheat opened and traded with decent gains to start the week. Support came from a sharply lower U.S. dollar market as the dollar dropped more than a full cent. Additional support came from technical buying as traders try and correct an oversold market condition. Wheat trimmed its gains late in the session on reports of good rains over much of the Southern Plain states.

The Oct. 11 session had wheat opening higher with support coming from the other grains. It is hard to come up with a reason for the rally, especially on the eve of an important USDA report. The funds and small traders decided it was the day to buy the grains so the market reflected that by rallying sharply higher. Sellers were sparse and that added to the push as the market was pushed into buy stops, accelerating the session’s gains.

Oct. 12 — report day — opened lower and extended losses throughout the session. Selling was tied to the bearish USDA report. USDA’s October supply and demand report was not expected to be a big mover for wheat, but instead USDA’s numbers turned out to be very bearish to wheat. USDA cut planted acreage 800,000 acres, harvested were cut by 200,000 acres and yield was cut by 1.3 bushels per acre. The net result was a decrease in wheat production of 69.0 million bushels. This was partly offset by a 10 million-bushel increase in imports. On the demand side, USDA cut seed demand 4 million bushels, cut feed demand 80 million bushels and exports 50 million bushels for a total cut in demand of 134 million bushels. The net result, ending stocks increasing 76 million to 837 million bushels compared with early expectations of 733 million bushels. World wheat stocks now are estimated at 202.37 million metric tons compared with September estimate of 194.59 million metric tons.

Wheat opened the Oct. 13 session on the defense and traded that way throughout the session. Pressure continued to come from the bearish USDA crop production report. Wheat recovered late in the session as spillover buying from a lower U.S. dollar market combined forces with a sharply higher soybean complex.

Corn

To start the week, corn ended with small gains. Corn found support from the strong outside markets. The sharply lower U.S. dollar, along with the strength in metals and energy markets offered support. There also was some positioning ahead of the USDA crop production and supply/demand report.

Corn opened higher Oct. 11 and picked up steam by midday to trade limit up. It was a bullish day as massive buying from fund traders took place. Ideas that the market already has priced in a bearish yield estimate for the report helped to support the strong gains. News that Mexico bought 261,200 metric of U.S. corn added strength.

Corn opened lower Oct. 12 and traded under pressure for the session. The pressure came from the USDA October production report. The report was considered slightly negative, led by weaker demand and a jump in world ending stocks for corn. The positive news was a smaller-than-expected crop for 2011. Production came in at 12.433 billion bushels as compared with 12.497 billion bushels last month, which was 60 million bushels below trade expectations. However, exports were revised lower by 50 million bushels to 1.6 billion bushels and at a nine-year low. As a result, ending stocks came in at 866 million bushels, which was 60 million bushels above trade expectations and up from 672 million bushels last month. Harvested acres were revised down to 83.9 million and U.S. yield was unchanged at 148.1 bushels an acre. World ending stocks were adjusted higher to 123.2 metric tons and up from 117.5 metric tons last month (last year was 129.7 MT). China production was revised higher to 182 metric tons and up from 178 metric tons last month. This was a surprise to traders who were looking for lower production after a smaller estimate from the U.S. Grains Council. South America production was left unchanged, it is still 9 metric tons above last year and traders see the possibility of even higher production if weather cooperates.

Corn opened lower Oct. 14 and traded with red ink for the session. The lower overnight trade and the negative outside markets pressured the market. The negative USDA report continued to pressure the market during the session. But the market did firm up later in the session from the strength in the soybeans.

Soybeans

Soybeans started the week with strong gains with most of the support spilling over from a sharply lower U.S. dollar. Light support came from general buying of commodities after France and Germany agreed to terms to contain the euro zone crises. Technical buying added support as traders tried to correct an oversold market condition.

The Oct. 11 session had soybeans opening higher with support coming from USDA’s export inspections report. The report indicated the return of China to the U.S. soybean market as some of last week’s soybean shipments were sent to China. This had traders thinking China soon will be returning to the U.S. soybean market to cover needs. There even were unconfirmed rumors that China was in overnight and bought 6 to 8 cargoes of U.S. soybeans. The buying was enough to help push soybeans into buy stops, which in turn only accelerated session gains.

The Oct. 12 session had soybeans trading on both sides of the fence. USDA’s October supply and demand report was friendly to soybeans, but the bearishness of the report for corn and wheat overshadowed the friendliness to soybeans for most of the day. The soybean market was able to shake the bearishness off and recover to end the day with small gains. The report was helped out by a sharply lower U.S. dollar. In its October report, USDA cut soybean supply 35 million bushels by decreasing harvested acreage by 100,000 acres and yield by 0.3 bushel (25 million bushels) and by lowering beginning stocks 10 million bushels (September’s Quarterly Grains Stocks report). Use was adjusted by increasing residual 9 million bushels and reducing exports 40 million bushels for a net change in demand of 31 million bushels. Ending stocks ended up at 160 million bushels compared with 165 million bushels last month and from the average trade estimate of 181 million bushels.

The Oct. 13 session saw soybeans trade with good gains. Support came from spillover support from USDA’s bullish crop production report. Additional support came from an announcement that China was in overnight and bought 110,000 metric tons of soybeans. Soybean supplies are tight, and if China returns to the market with the buying power it had a few months ago, soybeans likely will trade higher. Technically, soybeans are up against resistance.

Barley

USDA reported no barley shipments for last week. Last week, no barley export sales were reported.

USDA cut barley’s 2011 ending stocks estimate 4 million to 54 million bushels. The cut came from a reduction in planted acreage, harvest acreage and yield. The net change in supply was a reduction of 14 million bushels. This was offset by a 10 million-bushel reduction in feed demand.

Cash barley bids in Minneapolis improved to $5.20 for feed barley, while malting barley bids are at $7.65.

Durum

USDA reported last week’s durum export shipments pace at 297,000 bushels with all of the bushels going to Italy. Last week’s durum export sales pace was estimated at 300,000 bushels.

USDA cut durum production 5 million bushels to 52 million bushels (decline of 51 percent from last year), but that was completely offset by an increase in imports. The net result was no change in durum’s ending stocks estimate, now at 28 million bushels. North Dakota produces roughly 66 percent of the nation’s durum. This should be supportive to durum. Producers should continue to hold off on selling durum.

The Oct. 13 cash bids for milling-quality durum were at $12.25 in Berthold, N.D., while bids in Dickinson, N.D., were $12.

Canola

Canola futures on the Winnipeg, Manitoba, exchange ended the week Oct. 13 $16.70 (Canadian) higher. The canola market was supported throughout the week by spillover support from a higher U.S. soybean complex. Additional buying came from thoughts that China is back in the veg oil buying business.

U.S. canola production is expected to decline 37.5 percent this year compared witih last year. North Dakota, which produces close to 81 percent of the nation’s canola, is expected to see a 43.2 percent production cut compared witih last year.

Oct. 13 cash canola bids in Velva, N.D., were $24.40.

Dry beans

According to USDA’s October crop production report, total dry bean production will be 38.4 percent lower this year than last year. The following states, which produce 66 percent of the nation’s dry beans, are estimating the following production declines compared with last year: North Dakota: 50 percent decline from last year; Minnesota: 26.1 percent decline from last year; Nebraska: 34.5 percent decline from last year; and Michigan: 29.8 percent decline from last year. This should help to support dry bean prices. Most buyers have pulled bids off the board, but when they return, prices should be higher.

Sunflowers

USDA is estimating all sunflower production to be 23.5 percent lower than last year. The two largest-producing sunflower states in the nation (which produce about 76 percent of the nation’s sunflowers) are North Dakota (which is expecting production to drop 40 percent this year) and South Dakota (which is projecting a production increase of 8.6 percent).

The Oct. 13 cash sunflower bids in Fargo, N.D., were at $26.85.

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