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Published January 16, 2012, 01:01 PM

USDA deflates bulls

Corn started last week trading with strength due to continued weather concerns in South America, primarily Argentina. But the gains were short-lived once USDA’s reports were released. USDA’s Final Crop Production report was not friendly for corn, as USDA raised 2011 U.S. corn yields and harvested acreage.

By: Ray Grabanski, Agweek

Corn

Corn started last week trading with strength due to continued weather concerns in South America, primarily Argentina. But the gains were short-lived once USDA’s reports were released. USDA’s Final Crop Production report was not friendly for corn, as USDA raised 2011 U.S. corn yields and harvested acreage. World ending stocks were also increased. For the week ending Jan. 12, corn was off 32 cents.

To start the week, corn opened higher and traded with strength for the session. Corn continued to find support from the weather in Argentina. While rain was expected to cover 85 percent of Argentina for two days last week, forecasts are calling for the weather to turn back to a dryer forecast. The average trade estimate has the U.S. corn yield dropping 0.5 bushels per acre in the Jan. 12 report to 146.2 bushels per acre for the 2011 crop.

Corn opened unchanged and closed there on Jan. 10 in a quiet trading day. Traders were positioning ahead of the USDA report as some profit-taking type trading was noted during the session. Brazil ag officials lowered their forecast for the size of the corn crop to 59.2 million tons from 60.3 million tons last month, but noted that the impact of recent dryness in the southern regions would not be taken into account until actual field surveys next month.

On Jan. 11, corn opened lower, but firmed up and traded on both sides of unchanged for the session as traders squared positions ahead of USDA’s report. There was also long liquidation selling as traders went to the sidelines and that added weakness early. Expectations are looking for USDA to cut corn’s ending stocks estimate to 749 million bushels, compared to 848 million bushels for last month.

Corn opened sharply lower Jan. 12 and quickly moved to limit down for the rest of the session. The news of the day was USDA’s Crop Production report. USDA put corn’s ending stocks for the 2011 to ’12 season at 846 million bushels, which was down just 2 million bushels from last month and well above trade expectations of a 100-million-bushel reduction. Corn’s final production estimate was at 12.358 billion bushels, up 48 million bushels from last month. The production increase was due to an increase in yield of 0.5 bushels and an increase in harvested acres of 100,000. Exports were increased by 50 million bushels, while other usage numbers were left unchanged. World ending stocks were increased to 128.14 million tons from 127.19 million tons last month and compared to expectations of 123.5 million tons. Argentina production was revised down by 3 million to 26 million tons and Brazil was left unchanged.

Ethanol production for the week ending Jan. 6 averaged 944,000 barrels per day. This is down 1.9 percent vs. the previous week and up 6.3 percent vs. last year. Total ethanol production for last week was 6.608 million barrels. Corn used in last week’s production is estimated at 100.5 million bushels as compared with 95.2 million bushels necessary each week to reach the USDA projection for the marketing year. Stocks were 18.77 million barrels, which is up 4.6 percent vs. the previous week and up 9.8 percent vs. last year.

Wheat

The wheat markets finished last week about 20 cents lower in Chicago due to a bearish USDA report and pressure from the corn market. The Minneapolis market was able to finish the week up to 10 cents higher due to the less bearish fundamentals in the spring wheat market.

Wheat opened 11 cents higher Jan. 9, mirroring the gains seen in the corn market, and had strong gains for the day. The row crop markets rallied on renewed concerns over South American production, and the lower dollar helped as well. The Minneapolis market struggled to follow along due to a lack of interest from noncommercial traders. There has also been pressure in the Minneapolis market from commercial selling as commercials try to move wheat into a market that is experiencing slow exports.

On Jan. 10, wheat opened 3.5 cents lower in Chicago and had steady losses for most of the day, despite support from the lower dollar. The grain markets felt some pressure from thoughts that the Jan. 9 gains were overdone. Traders seemed content to sit on the sidelines, awaiting weather reports from South America and the Jan. 12 USDA report.

Wheat opened 5 cents lower on Jan. 11 and was steady for most of the day before a late-session surge allowed the market to close with small gains. Outside markets put pressure on the wheat trade, but the late-session recovery showed that traders were unwilling to push this market before the Jan. 12 USDA report. Average trade guesses were for U.S. ending stocks to be lowered from 878 million bushels to 842 million bushels, with world stocks lowered slightly from 208.5 million to 207.9 million metric tons.

On Jan. 12, wheat opened 29 cents lower in Chicago and held steep losses for the rest of the day. The January USDA report was bearish for the grain markets in general with most numbers coming in more bearish than expected. U.S. wheat ending stocks were cut by only 8 million bushels to 870 million bushels. Cuts to domestic feed and milling usage were offset by a 25 million bushel increase in export projections. Global ending stocks increased more than expected as well to be at 210.02 million metric tons, up from 199.94 million metric tons in 2011. U.S. winter wheat acreage for 2012 was higher than expected at 41.95 million acres, up from 40.7 million in 2011. The Minneapolis wheat market was able to escape with lighter losses since the quality wheat does not compete with corn for feed use, and unlike winter wheat, the spring wheat crop is not in the ground yet.

Soybeans

Soybeans lost 5 to 15 cents last week. A strong weather rally at the beginning of the week was wiped away when rains fell in South America and USDA released its January report. The report was generally bearish for oilseeds.

Soybeans opened 12.75 cents higher on Jan. 9 and climbed to sharply higher gains. There were continued South American weather concerns with hot and dry weather over the weekend. There was good rain forecasted for the coming days in Argentina and southern Brazil, but traders were willing to push the market higher without rain confirmation.

On Jan. 10, soybeans opened with light losses and had losses of up to 10 cents during the morning before recovering to close near unchanged. Outside markets were supportive, but there was a feeling that the Jan. 9 gains of more than 30 cents were overdone. Traders were waiting for more concrete weather news out of South America, and many were sitting on the sidelines ahead of the USDA report due out Jan. 12.

Soybeans opened 14 cents lower on Jan. 11 and continued to come under pressure during the day from heavy noncommercial selling. Rainfall in Argentina and southern Brazil sparked long liquidation in soybeans, taking some weather premium back out of the market. Traders seemed unwilling to hold long positions into the USDA report as well. Average expectations were for a very small increase in U.S. ending stocks and a small decrease in global ending stocks. Many traders have been looking for a cut in South American production estimates, but it may be too early in the growing season for USDA to make any significant cuts to southern hemisphere production.

On Jan. 12, soybeans opened 36 cents lower and traded as much as 53 cents down after the release of the USDA report. The report was bearish, raising the forecast for U.S. 2011 to ’12 soybean production and ending stocks above previous levels. Soy trading volume was up roughly 30 percent over the prior 30-day average. The production forecasts for Brazil and Argentina were both lowered, providing some support to soy and preventing it from falling as far as corn and wheat. Ongoing concern about potential weather damage to South American soy crops also provided some support.

Barley

USDA increased barley feed use by 10 million bushels, bringing the projected ending stocks down to 45 million bushels. USDA reported export inspections of 8,000 bushels for barley last week. The year-to-date export shipments pace for barley is now at 5.6 million bushels compared to 4.5 million bushels for last year at this time. Year-to-date export sales for barley are at 3.8 million bushels compared to 4.1 million bushels for last year at this time. Cash bids in Minneapolis were at $5.20 for feed and $7.20 for malting barley.

Durum

USDA cut the durum supply by 3 million bushels, so the stocks/use ratio now stands at 21.9 percent, the tightest of all the wheat classes. USDA reported no export inspections or export sales for durum last week. Durum’s export sales pace is at 15.2 million bushels compared to 28.9 million bushels for last year at this time. Cash bids for milling quality durum are at $7.50 in Berthold, N.D., with Dickinson, N.D., at $8.15.

Canola

Canola futures on the Winnipeg, Manitoba, exchange lost around $2 (Canadian) per ton last week. Canola followed the soybean market closely with daily weather reports from South America and a big USDA report on Jan. 12. The Jan. 12 cash canola bids in Velva, N.D., were at $23.65.

Sunflowers

Global sunflower production estimates were increased in the USDA report due to record crops in Russia and the Ukraine. Last week’s soybean oil export sales pace was estimated at 1.1 trillion metric tons. This brings the year-to-date export sales pace for soybean oil to 171.5 trillion metric tons compared to 967.3 trillion metric tons for last year at this time. The Jan. 12 cash sunflower bids in Fargo, N.D., were at $28.30.

Dry beans

Dry bean markets have started 2012 at relatively steady levels, with Mexico showing continued interest in pintos and growers holding inventories relatively tight. Prices are steady at $43 to $45 for pintos and $45 for navies and blacks.

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