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Published October 31, 2011, 05:15 AM

EU debt issue drives markets

Wheat started the week higher with support coming from what appeared to be an overall fund buying frenzy. With the EU debt issue soon to be a memory, traders are starting to return to the market. Additional support for the winter wheat exchanges came from weather forecasts that still are calling for warm dry conditions for much of the Southern Plain states. The Minneapolis market was under pressure late in the session as traders took profits on long Minneapolis short Chicago spreads.

By: Ray Grabanski, Special to Agweek

Wheat

Wheat started the week higher with support coming from what appeared to be an overall fund buying frenzy. With the EU debt issue soon to be a memory, traders are starting to return to the market. Additional support for the winter wheat exchanges came from weather forecasts that still are calling for warm dry conditions for much of the Southern Plain states. The Minneapolis market was under pressure late in the session as traders took profits on long Minneapolis short Chicago spreads.

The Oct. 25 session opened weaker than expected as early selling pressure came from concerns that the current EU Summit would not yield an acceptable plan to end the current EU debit crisis. But wheat was able to shake off the early selling pressure and gained some ground around midsession as small trader buying stepped into the grains. Additional support came from support from concerns toward the Southern Plain winter wheat. Selling returned late in the session because of pressure from a selloff in the U.S. stock market and firming U.S. dollar.

The Oct. 26 session had wheat trade in a firm tone early because of spillover buying from a higher overnight session and from dry weather issues for winter wheat crops in the U.S. and Ukraine. But weakness in outside markets pressured wheat to trade sharply lower into the close. The unknown solution to the debt crisis in Europe pressured the outside markets. Egypt also purchased another 120,000 metric tons of wheat from Russia.

The wheat market opened and traded sloppy during the Oct. 26 night session because of concerns toward the outcome of the EU Economic Summit. It appeared Germany was not in step with all of the stipulations of the agreement. But early Oct. 27, a compromise was reached and a plan was put in place to end the EU debt crises. Once that news broke, wheat rallied and held onto gains all the way through the day session. The strength was enough that traders virtually ignored a bearish export sales report. Weather forecasts continue to be supportive to wheat as warm dry condition will prevail.

USDA reported last week’s wheat’s export inspections pace at 17.4 million bushels. This brings the year-to-date export shipments pace for wheat to 440.9 million bushels compared with 454.8 million bushels for last year at this time. Last week’s wheat export sales pace was estimated at 11.6 million bushels. This brings the year-to-date export sales pace for wheat to 583 million bushels compared with 714.7 million bushels last year. With 32 weeks left in wheat’s marketing year, shipments need to average 16.7 million bushels and sales need to average 12.3 million bushels to make USDA’s 975 million-bushel projection.

Corn

To start the week, corn ended with small gains. Strength in the overnight session and positive outside markets supported the open. Rainfall in the eastern Corn Belt is delaying harvest, and the lack of farmer selling offered additional support. Talk that China corn prices continue to creep higher continues to enforce trader’s expectations of stronger China demand soon.

Oct. 25’s session had corn firming by midsession and end close to unchanged. The outside markets were supportive in the overnight, but turned sour and pressured the open. The market found support at midday from continued talk that U.S. production could be lowered in the USDA monthly report in November. Also, the China National Grain and Oils Information Center thinks China will import 5 metric tons of corn this year, four times larger than last year. This compares with the USDA current projection of 2 metric tons.

The corn futures opened 1 cent lower Oct. 26 and were under pressure for the session. The morning call was higher, but the outside markets turned negative because of the unknown solution to the European debt crises. This sparked a round of speculator long liquidating and drove the market lower to double digit losses. South America weather is ideal and traders are expecting more corn acres. Japan also bought Ukraine corn for the first time in over a year. But there was a reported sale of 100,000 metric tons of U.S. corn to an unknown destination.

Corn opened and closed Oct. 27 with good gains. The EU agreement for Greece’s debt issue supported the outside markets and created buying interest in the grain complex. Corn did trade close to unchanged at midsession because of a disappointing export sales report. But buying support re-emerged and the market worked back to double-digit gains by the close.

Ethanol production for the week ending Oct. 21 averaged 909,000 barrels a day, which is up 0.11 percent vs. last week and up 3.3 percent vs. last year. Total ethanol production for the week was 6.363 million barrels which is the highest weekly total since June 3. Corn used in last week’s production is estimated at 96.8 million bushels. Corn use needs to average 96.3 million bushels a week to meet this crop year’s USDA estimate. Stocks were 17.29 million barrels, which is up 1.4 percent vs. last week and up 6 percent vs. last year.

Soybeans

Soybeans opened the week with decent gains. Support came from a sigh of relief in regards to the EU debt issues. The entire investment world has been sitting on their hands waiting for some sort of conclusion to the EU debt issues and now it appears that it is close. Additional support for the soybeans came from news that China’s manufacturing sector experienced a slight expansion, breaking the three-month retraction phase.

Oct. 25’s session opened lower than expected as overnight buying ran into technical selling. Soybeans were able to find strength from the gold and crude oil markets as both were sharply higher. This helped to keep soybeans strong into the mid-hour time frame, but that is when the market hit a brick wall. The initial sell-off was spurred on by concerns that nothing helpful will come out of the current EU Summit. The uncertainty on the meeting outcome helped to push the U.S. dollar higher, which in turn pressured soybeans.

The soybean complex opened higher Oct. 26, but slipped to end near session lows. The sharp break in the energy and equity markets sparked a significant push lower after the open. Long positioned traders appear to be stepping aside because of more volatile trade in financial markets as a result of the EU debt crises.

The soybean complex followed lock step with most of the other markets Oct. 27, trading sloppy in the overnight session up until the EU debt issues plan was released at 4 a.m. Once the debt plan was agreed upon, all of the grains rallied ending the overnight session with strong gains. The soybeans did struggle early in the day session because of a bearish export sales report, but that setback was short-lived as a lot of money that has been sitting on the sidelines found its way into the market. The main supporting factor was a result of spillover support form a sharply lower U.S. dollar. Thw Oct. 27 session was all about the flow of money, and with the debt crises plan in place, investors felt safe returning to the market.

USDA reported last week’s soybean export inspections pace at 41.2 million bushels. This brings the year-to-date export shipments pace for soybeans to 155.7 million bushels compared with 257.1 million bushels for last year at this time. Last week’s soybean export sales pace was estimated at a combined total of 9.4 million bushels with 8.4 million bushels being old crop and 1 million bushels being new crop. This brings the year-to-date export sales pace for soybeans to 672.8 million bushels compared with 1.005 billion bushels last year at this time. With 45 weeks left in soybean’s marketing year, shipments need to average 27.1 million bushels and sales need to average 15.6 million bushels to make USDA 1.375 billion bushels projection.

Barley

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

Durum

USDA reported no durum export shipments for last week. Last week, no durum export sales were reported. Oct. 27’s 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 closed the week ending Oct. 27 with $8.40 (Canadian) gains. The canola market started the week on the defense. Canola tried to keep up with the U.S. soybean complex, but in the end, the stronger Canadian dollar and light trading volume resulted in the canola market to trade sloppy. But late in the week, canola traded with gains with support coming from the deal being completed for the EU debt crises. Additional support spilled over from the higher U.S. soybean complex. The Oct. 27 cash canola bids in Velva, N.D., were $25.17.

Dry beans

These states are reporting dry bean crop progress: North Dakota: harvest completed; Minnesota: harvest completed; Nebraska: harvest completed; and Michigan: 95 percent harvested compared with 91 percent last week and 94 percent for the five-year average. Bids are off the board in many locations. Do not consider selling dry beans at this time. Consider 2012 forward contracts as acres are bound to increase sharply next year.

Sunflowers

The Oct. 27 cash sunflower bids in Fargo, N.D., were at $26.85. Hold off on selling 2011 crop.

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