Markets retreatThe wheat markets had losses of 15 to 26 cents last week. The winter wheat markets had the larger losses due to beneficial rains in much of the winter wheat belt and losses in the corn market. Minneapolis wheat had lighter losses due to strong export sales and lingering concerns about dry soil conditions in the Northern Plains. Markets will likely spend this week positioning ahead of the March 30 reports.
By: Ray Grabanski, Agweek
Wheat: rains fall across wheat belt
The wheat markets had losses of 15 to 26 cents last week. The winter wheat markets had the larger losses due to beneficial rains in much of the winter wheat belt and losses in the corn market. Minneapolis wheat had lighter losses due to strong export sales and lingering concerns about dry soil conditions in the Northern Plains. Markets will likely spend this week positioning ahead of the March 30 reports.
On March 19, wheat opened with single-digit losses but selling pressure intensified during the day. Rain in the winter wheat belt and projections for early spring planting in the spring wheat belt put fundamental pressure on the market. There was also technical profit taking after the previous week’s gains. Losses continued on March 20 as U.S. weather is improving prospects for 2012 wheat production. Weekly crop ratings last week put Kansas at 54 percent good to excellent, up from 53 percent the previous week and 27 percent last year. Oklahoma is now 70 percent good to excellent, up from 66 percent the previous week. Texas is 34 percent good to excellent, up from 33 percent the previous week.
On March 21, wheat opened with small losses and traded with small gains for much of the day before slipping lower again at the end of the day. Late gains in the dollar index and more rain in the hard red winter wheat belt pressured the market. Exports will likely remain slow out of Russia in the near term, but the market will need to see continued U.S. exports to confirm any positive export news. May Chicago wheat finished at the bottom of its range bound trade, looking for support.
Wheat opened with small losses March 22 and traded mixed early in the session before rallying to close the session with gains of up to 10 cents. Early pressure came from weakness in commodity markets in general. May Chicago wheat hit a new low for the move, which created renewed buying interest from both commercial and noncommercial traders. Spring planting is well under way as weather has been good. Spring wheat should hold together well in the near-term as it defends against losing acres to corn.
The U.S. Department of Agriculture reported last week’s wheat export inspections pace for the week ending March 16 at 21 million bushels. This brings the year-to-date export shipments pace for wheat to 795.6 million bushels compared with 938.7 million bushels for last year. With 11 weeks left in the marketing year, shipments need to average 18.8 million bushels to keep pace with USDA’s projections.
Corn: pressure from early spring
The corn market lost 25 cents last week in the May contract, while December was down 15 cents. The market traded lower last week with fund selling and expectations of a jump in corn acres for 2012. Also, the excellent spring weather has planters in the field early and early planted crops have a tendency to produce big yields. The March 30 USDA quarterly stocks and acreage report will be the next market mover.
Corn closed lower for the first three days of last week. Long liquidation selling entered the overbought market to start last week. Traders were also looking ahead to the March 30 USDA quarterly stocks and acreage report with estimates of 95-plus million acres of corn to be planted this year. The warm weather throughout the country, which will continue for the next this week and next week, is encouraging for planting corn. Good rain in the Central and Southern Plains is also boosting the winter wheat crop conditions and that could potentially create more feed in the U.S. By midweek of last week, talk that importers were looking to purchase corn from Argentina and Ukraine and that China bought 350,000 metric tons of feed wheat from Australia added pressure. Reports are that China is going to plant more corn acres this year. Corn used for ethanol has been dropping and stocks continue to make new record highs.
On March 22, we had the first positive close of the week. Short covering emerged at mid-session and pushed the market back into positive territory. The export sales were above estimates and that added support. The late rally on March 22 carried over to March 23. Commercial buying also entered the market as it had traded to technical support.
Ethanol production for the week ending March 16 averaged 893,000 barrels per day. This is up 0.11 percent versus the previous week and down 2.2 percent versus last year. Corn used in production for the week ending March 16 was estimated at 95.12 million bushels. Corn use needs to average 94.2 million bushels per week to meet this crop year’s USDA estimate. Stocks were 22.7 million barrels, which is up 3 percent versus the previous week and up 13.3 percent versus last year, also a new record high.
Soybeans were unchanged to down 20 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 early corn planting, putting soybean acres at risk.
May soybeans opened lower on March 19 and 20 and fell 29 cents over two days. The market was extremely overbought technically after rallying more than $2 since January, and a correction was necessary. Additional pressure came from the progressing harvest in Argentina, where yields are expected to be better than Brazil’s, as well as from a weaker basis in Brazil. Outside markets were generally negative on March 19 and 20 also. On March 19, the weekly export inspections came in well above the pace needed to make USDA’s projection, but well below trade expectations, which pressured the market.
On March 21, soybeans opened 1.25 cents lower and experienced choppy trade early. Rumors of increased Chinese interest in U.S. soybeans helped the market to turn around to the positive side. New-crop beans were able to regain some losses versus corn, and the market expects soybeans will need further gains in order to secure acreage. There were reports that China is planting more corn acreage at the expense of soybeans as well. Recent estimates indicate the USDA may still be overstating South American production. Outside markets were mixed with energy, metal, and the U.S. dollar higher while the Dow Jones was lower.
Soybeans opened 11.5 cents lower on March 22 as bearish manufacturing news out of China prompted noncommercial long-liquidation early in the session. Talk of the technically overbought condition of the market continued to pressure also. Outside markets were negative with the Dow Jones lower and sharp losses in crude oil. Argentina’s Agricultural Ministry lowered production estimates to 44 million metric tons significantly lower than the USDA’s 46.5 million metric ton estimate. Weekly export sales came in above the pace needed to match USDA’s projection, but below the trade expectations.
Soybeans opened higher on March 23 after double-digit gains overnight. Price pressure earlier last week sparked renewed buying interest from both sides of the market on March 22.
USDA reported soybean export inspections pace for the week ending March 16 at 23.7 million bushels. This brings the year-to-date export shipments pace for soybeans to 958.5 million bushels compared with 1,244.8 million bushels for last year at this time. The soybean export sales pace for the week ending March 16 was estimated at 13.1 million bushels. This brings the year-to-date export sales pace for soybeans to 1,133.2 million bushels compared with 1.478 billion bushels last year at this time. With 24 weeks left in soybean’s marketing year, shipments need to average 14.2 million bushels and sales need to average 7 million bushels to make USDA’s projection of 1.3 billion bushels.
USDA reported no new export inspections for 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 $5.35 for feed and $7.0725 for malting barley.
USDA estimated durum export sales pace for the week ending March 16 at 400,000 bushels. This brings the year-to-date export sales pace for durum to 16.3 million bushels compared with 33 million bushels for last year at this time. Cash bids for milling quality durum are at $8.25 in Berthold, N.D., with Dickinson, N.D., at $8.40.
Canola futures on the Winnipeg, Manitoba, exchange lost $8 to $11 (Canadian) per ton for the week as the market set back for the first week since the middle of January. The market has had an impressive run and has been due for a technical correction. Other grain markets had a similar correction last week, which spilled over into the canola market. Strong demand for canola and a need for the large 2012 acreage projections should support this market again going forward. Cash canola bids on March 22 Velva, N.D., were at $27.12.
The soybean oil export sales pace for the week ending March 16 was estimated at a stronger 38.1 trillion metric tons, bringing the year-to-date total to 331.3 trillion metric tons, down from last year’s record 1,122.2 trillion metric tons. Cash sunflower bids on March 23 in Fargo, N.D., were at $26.25.
USDA is reporting steady bids of $48 for pintos and $45 for navies in the North Dakota/Minnesota region. Bids for black turtles have become spotty due to imports of Chinese black beans into Mexico.
Grabanski is president of Progressive Ag, a Fargo, N.D.-based hedge brokerage firm. Reach Grabanski at (800) 450-1404.