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Published March 19, 2012, 11:27 AM

Exports drive market

The corn market was up 30 cents last week in old crop, while new crop contracts gained about 10 cents. Talk of increased exports to China provided direction to the market early last week, while the possibility of an early planting season due to warm weather in the Corn Belt was talked about through the second half of last week.

By: Ray Grabanski, Agweek

Corn: higher with strong exports

The corn market was up 30 cents last week in old crop, while new crop contracts gained about 10 cents. Talk of increased exports to China provided direction to the market early last week, while the possibility of an early planting season due to warm weather in the Corn Belt was talked about through the second half of last week.

Corn opened lower on March 12 and higher on March 13, closing with gains both days. Continued talk of China buying corn was supportive. The U.S. Department of Agriculture reported a sale of 240,000 metric tons to an unknown destination on March 13, and traders think the buyer was China and expect more sales to follow. There were no confirmations of any sales to China, but rumors that China bought 600,000 metric tons of U.S. corn on March 16 persisted. South Korea purchased 65,000 metric tons on March 12. There was talk of an early planting season as temperatures across the Corn Belt are forecasted in the 70s and 80s for the next two weeks. Buying interest in new crop contracts was limited by growing acreage projections.

On March 14, corn opened 1 cent lower and lacked any buying interest. Pressure came from the negative outside markets and the warm weather throughout the country. Talk is that corn planting has started in Illinois. The lack of any confirmation that China bought corn also created selling pressure. Additional weakness came from news that the senior economist for the International Grains Council is projecting world corn production at 880 million tons for the new crop season, which is up from 864 million tons this past season. The ethanol production report was decent for corn, but bushels used each week have been trended down and stocks are at record levels.

Corn opened 4 cents higher on March 15 at $6.6275 and received support as a return of commercial interest contributed to a solid rally. Steady buying from fund traders and a surge higher in the soybean market were supportive. The market drew strength from a strong cash market for corn in China and from expectations that China will be a more active buyer of U.S. old- and new-crop corn in the near term.

On March 16, corn traded slightly higher on continued commercial buying and the expectation that China will purchase more U.S. corn in the near term. Trade was relatively quiet with somewhat mixed outside markets and a lack of news to provide direction.

Ethanol production for the week ending March 9 averaged 892,000 barrels per day. This is down 1.55 percent versus last week and down 0.34 percent versus last year. Corn used in ethanol production is estimated at 95.02 million bushes as compared with a weekly average of 94.2 million bushels per week to meet the USDA forecast. Stocks were 22.04 million barrels, which is down 0.12 percent versus the previous week and up 10.7 percent versus last year.

Wheat: follows row crop rallies

The wheat markets had gains of 15 to 25 cents last week. Strength in the row crop markets spilled over to help the wheat markets. Improving U.S. crop prospects limited gains in the wheat markets, while strong exports gave the bulls a boost. Wheat looks to be a follower until we get some fresh weather news.

On March 12, wheat opened with light losses due to widespread rain falling across the U.S., but turned higher due to support from the rallying old crop corn market. Wheat turned lower on March 13 as the dollar index rallied and corn floundered. Recent rains in much of the U.S. winter wheat belt have given a boost to production prospects in those markets. The Minneapolis market was under pressure as well. Warm temperatures and a relatively dry forecast point to early planting of the spring wheat crop.

Wheat had quiet trade March 14 to finish with single digit losses. Ukrainian officials made another lower revision to their wheat crop estimate, now at 14 million metric tons, substantially lower than the original 22 million metric ton estimate, which gave some support. Pressure is coming from improving U.S. winter wheat conditions. Kansas is rated 53 percent good to excellent last week, up from 50 percent the previous week and 26 percent last year. Oklahoma is rated 66 percent good to excellent, up from 63 percent from the previous week and 27 percent last year. Texas remains at 33 percent good to excellent. On March 15, wheat had strength later in the day as the dollar index weakened and row crop markets rallied. Corn and soybean markets made new 2012 highs, which sparked buying interest in all of the grain markets. We finally saw a strong export shipments report for wheat as the end of the marketing year is now approaching.

The trade was quiet on March 16 with mixed trade in the wheat markets. Outside markets were positive, but there was a lack of fresh news, and the row crop markets were mixed as well. Wheat has been range-bound, and rallied off of the bottom end of that range again this week. If the row crops continue to rally, wheat should test the upside of its recent range.

USDA reported wheat export inspections pace for the week ending March 9 at 31.6 million bushels. This brings the year-to-date export shipments pace for wheat to 774.6 million bushels compared with 912.7 million bushels for last year. With 12 weeks left in the marketing year, shipments need to average 19.8 million bushels to keep pace with USDA’s revised projections.

Soybeans: Lower yields in Brazil

Soybeans were up 20 to 40 cents last week. Expect new crop soybeans to remain firm relative to corn to try to prevent loss of acreage for the 2012 growing season. Warm weather through the Corn Belt could lead to an early corn planting season, putting soybean acres at risk.

Soybeans opened lower at $13.3425 on March 12. Weak action late last week led to some technical selling while concern continued due to the technically overbought condition of the market. Some unwinding of bean/corn bull spreads placed pressure on the market. Outside markets were slightly negative with the U.S. dollar, crude oil, and metal markets all down.

Soybeans opened higher and closed with gains on March 13 and 14. Reports of disappointing Brazilian yields provided support as U.S. exports are expected to remain competitive in the near-term. March 13 saw positive outside markets with strong energy and equity markets. The outside markets were more negative March 14 with a collapse in gold and strength in the U.S. dollar. Additional pressure came from weakness in corn and wheat on March 14. The market remained technically overbought, but continued strong commercial interest combined with renewed noncommercial buying to prevent a sell-off from occurring on March 13 or 14. March soybeans expired on March 14 at a premium to the May contract at $13.560.

On March 15, soybeans opened 9.75 cents higher at $13.60 and reached yet another new contract high on strong commercial interest. New crop soy continues to gain relative to corn in order to avoid losing acres to a potential early planting for corn. A weaker U.S. dollar provided support to the market. Though the market grows progressively more overbought technically, the increasingly bullish global supply and demand outlook dominates the market. Strong export sales to China continue to bolster the market. The March 15 export sales report was well above expectations and well ahead of the pace necessary to meet USDA’s projections.

Soybeans opened lower on March 16 and traded moderately higher on continued commercial interest. Trade was fairly quiet due to mixed outside markets and a lack of news.

Barley

USDA reported export inspections of 44,000 bushels of barley. The total pace is at 6 million bushels compared with 5.2 million bushels for last year at this time. USDA reported no new export sales. Cash bids in Minneapolis were at $5.40 for feed and $7.05 for malting barley.

Durum

USDA reported export sales of 700,000 bushels of durum last week, with shipments of 100,000 bushels. Cash bids for milling quality durum are in the $8.25 to $8.50 range in North Dakota.

Canola

Canola futures on the Winnipeg, Manitoba, exchange gained $13 to $15 (Canadian) per ton for last week as the market continued to push higher. Strong demand from both the export and domestic crush sectors has traders talking about the need to ration canola supplies. There is also talk that record canola acres for 2012 may not be able to rebuild stocks to comfortable levels if the dry pattern continues in the northern prairies. The soybean complex has continued its strong rally as well, which has lent support to canola. Cash canola bids on March 15 in Velva, N.D., were at $27.99.

Sunflowers

Soybean oil export sales pace for the week ending March 9 was estimated at 5.1 trillion metric tons, bringing the year-to-date total to 293.2 trillion metric tons, down from last year’s record 1,132 trillion metric tons. Cash sunflower bids on March 15 in Fargo, N.D., were at $26.35.

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

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