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Published March 05, 2012, 01:03 PM

Firm markets start new month

The corn market gained 8 to 10 cents in both old and new crop contracts last week. Corn found support from smaller South American production and tighter U.S. old crop ending stock estimates. The U.S. Department of Agriculture will release its next monthly crop production and supply/demand report on March 9.

By: Ray Grabanski, Agweek

Corn: Tight stocks support corn

The corn market gained 8 to 10 cents in both old and new crop contracts last week. Corn found support from smaller South American production and tighter U.S. old crop ending stock estimates. The U.S. Department of Agriculture will release its next monthly crop production and supply/demand report on March 9.

On Feb. 27 and 28, the corn futures were able to close higher. The strength in the soybean complex spilled over to support the corn market. Traders were also expecting more demand from China for old crop corn and exports have been decent the past few weeks. Mexico also bought 120,000 metric tons of corn on Feb. 28. Estimates for South American corn production continue to shrink. Traders are also starting to talk about the March 9 USDA report. Traders see higher exports and lower ending stocks for the supply/demand outlook due to South American production. If exports are raised 50 million bushels, ending stocks could dip to near 750 million bushels and a stocks/use ratio at 5.8 percent, which would be the second lowest on record. Lack of farmer selling and a firming basis also offered support.

Corn traded lower the last three days of last week. Long liquidation selling entered the market and profits were taken. Ukraine also announced that it plans to plant more corn acres in 2012. Ethanol production was good again this week, but stocks are at a record high. The market is overbought and the lack of any fresh news added additional weakness. Large production estimates and acreage for 2012 continue to weigh on the new crop contracts.

Ethanol production for the week ending Feb. 24 averaged 896,000 barrels per day. This is down 2.5 percent versus the previous week and up 1.6 percent versus last year. Total ethanol production for the week was 6.272 million barrels. Corn used in for the week ending Feb. 24 was estimated at 95.44 million bushels. Corn use needs to average 94.3 million bushels per week to meet this crop year’s USDA estimate. Stocks were 22 million barrels which is a record high and up 2.1 percent versus the previous week and up 15 percent versus last year.

Wheat: February ends strongly

The wheat markets had gains of 20 to 30 cents last week. The Minneapolis market had the largest gains as it rebounded from the previous week’s losses. Strength in the stock markets and weakness in the dollar helped to trigger noncommercial buying in the wheat markets, as did strength in the row crop markets.

To start the week on Feb. 27, wheat opened 5 cents lower and traded with losses due to pressure from the higher dollar index. On Feb. 28 wheat opened 6 cents higher and added gains during the day as the dollar slipped below support. The weakness in the dollar combined with strength in the stock markets to create a surge of noncommercial buying interest in the grain markets. The wheat markets surged to surpass the 10- and 20-day moving averages, setting up the possibility for further upside strength. The Kansas winter wheat crop is rated 52 percent good to excellent in February, up from 49 percent in January. Oklahoma is 67 percent good to excellent, up from 54 percent in January.

Feb. 28 brought choppy, mixed trade to the wheat market. The Dow Jones Index surpasses 13,000 points for the first time since May 2008, but slipped back below that level by the end of the day. Chicago wheat continued to follow the corn market. Wheat opened with light losses on March 1 and traded on both sides of unchanged before settling slightly lower in the winter wheat markets. Outside influences were mixed with small moves in the dollar and mixed trade in the corn market, leaving the wheat market with little news. Nearby Minneapolis contracts were able to post strong gains on renewed commercial buying. Ukrainian officials expect 20 percent of their winter wheat acres to be torn up and replanted to corn due to winterkill.

Trade saw additional commercial buying interest on March 2 in the Minneapolis market, pushing the market to post gains despite heavy pressure from the rallying dollar. The Minneapolis market has re-emerged as a leader in the wheat complex with the market structure showing some bullishness in the commercial traders’ mindset. The Minneapolis market looks to hold some strength ahead of the spring planting intentions report.

USDA reported wheat export inspections pace for the week ending Feb. 24 at 9.4 million bushels. This brings the year-to-date export shipments pace for wheat to 724.6 million bushels compared with 862.5 million bushels for last year. With 14 weeks left in the marketing year, shipments need to average 17.3 million bushels to keep pace with USDA projections.

Wheat export sales pace for the week ending Feb. 24 was estimated at 15.2 million bushels. This brings the year-to-date export sales pace for wheat to 878.2 million bushels compared with 1,146.8 million bushels last year. With 14 weeks left in wheat’s marketing year, export sales need to average only 6.9 million bushels to make USDA’s projection of 975 million bushels.

Soybeans: Another week of gains

Soybeans gained 20 to 45 cents last week. Commercial traders remain bullish with nearby contracts experiencing larger gains on the week than the deferred. Expect new crop soybeans to remain firm relative to corn due to the need to secure acreage for the 2012 growing season.

Soybeans opened last week lower but quickly grew positive and reached new contract highs on both Feb. 27 and 28. The U.S. dollar was stronger on Feb. 27 and weaker on Feb. 28, with lower crude oil prices providing additional support on Feb. 28. This push higher early last week was due mostly to continued strong export demand, as well as concerns about South American production. Rain fell in Argentina and Brazil, but traders believed it was too late to help the crops.

Soybeans posted solid gains again on Feb. 29. The negative outside markets were unable to prevent soybeans from moving higher, with the November contract even reaching a new high at $12.54. Support came from concerns over the slow export movement in Brazil, which should help keep demand for U.S. soybeans strong. USDA announced a sale of 275,000 metric tons to China, with 175,000 for 2011 to 2012 delivery and the remaining 100,000 for 2012 to 2013 delivery.

On March 1, soybeans opened lower and traded somewhat mixed on sluggish trade. Concerns that China’s demand may decrease in the near-term while South America’s supply increases pressured the market. The impact was limited by another export sales report that exceeded expectations, as well as reports that early yields in Brazil are lower than expected. Soybeans continue to have positive momentum, but are technically overbought and could be susceptible to a sell-off in the near future. Soybeans opened lower on March 2 due to pressure from negative outside market. The market was able to quickly move into positive territory with support from the USDA announcing a sale of 285,000 metric tons to an undisclosed destination.

USDA reported soybean export inspections pace for the week ending Feb. 24 at 37 million bushels. This brings the year-to-date export shipments pace for soybeans to 870.4 million bushels compared with 1,152.4 million bushels for last year at this time. Soybean export sales pace for the week ending Feb. 24 was estimated at 20.2 million bushels. This brings the year-to-date export sales pace for soybeans to 1,063.1 million bushels compared with 1.448 billion bushels last year at this time. With 27 weeks left in soybean’s marketing year, shipments need to average 15.9 million bushels and sales need to average 8.8 million bushels to make USDA’s 1.3 billion bushel projection.

Barley

USDA reported export inspections of 20,000 bushels of barley. The total pace is at 5.9 million bushels compared with 5.1 million bushels for last year at this time. USDA reported export sales of 100,000 bushels of barley, with shipments of 9,000 bushels. Cash bids in Minneapolis were at $5.40 for feed and $7.05 for malting barley.

Durum

USDA reported no new export sales or shipments for durum last week. Cash bids for milling quality durum are in the $8 to $8.60 range in North Dakota.

Canola

Canola futures on the Winnipeg, Manitoba, exchange gained $6 (Canadian) per ton for the week in the May contract and $4 (Canadian) per ton in the November contract. The canola market has continued to push higher due to strong export demand and support from gains in the soybean market. Private estimates have put 2012 canola acres in Canada at a record 19.4 million to 21 million acres, up from last year’s record 18.65 million acres, which limited gains in the new crop market. Canola had an extremely impressive run throughout February, but contracts slipped a little with profit taking to start the month of March. Cash canola bids in Velva, N.D., on March 1 were at $27.11.

Sunflowers

Soybean oil export sales pace for the week ending Feb. 24 was estimated at 4.8 trillion metric tons, bringing the year-to-date total to 272.6 trillion metric tons, down from last year’s torrid 1,115.8 trillion metric tons. Cash sunflower bids in Fargo on March 1 were at $25.90.

Dry beans

USDA is reporting cash bids steady at $48 for pintos and $45 for navies and blacks in the North Dakota/Minnesota region. As stated in the previous week’s comments, producers should take advantage of these strong bids for pricing their old crop dry beans.

Grabanski is president of Progressive Ag, a Fargo, N.D.-based hedge brokerage firm. Reach Grabanski at (800) 450-1404.

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