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Published April 02, 2012, 11:08 AM

USDA surprises market

Wheat traded lower in most of the session this week, except for March 30. Early selling was tied to improving conditions for the Southern Plains winter wheat crop and from position squaring ahead of the March 30 U.S. Department of Agriculture report while strength March 30 was because of a friendlier-than-expected acreage report from USDA.

By: Ray Grabanski, Agweek

Wheat: report pushes market higher

Wheat traded lower in most of the session this week, except for March 30. Early selling was tied to improving conditions for the Southern Plains winter wheat crop and from position squaring ahead of the March 30 U.S. Department of Agriculture report while strength March 30 was because of a friendlier-than-expected acreage report from USDA. For last week, May Minneapolis wheat gained 20.25 cents, Chicago May wheat gained 6.5 cents, and Kansas City May wheat gained 3 cents.

Wheat opened last week with better-than-expected gains. Support spilled over from a stronger overnight session as well as from carryover buying strength from the other grains, especially soybeans, which traded to highs not seen since September. Additional support was because of a decent export inspections report. In the end, wheat found support from a lower U.S. dollar and from news of increasing interest in U.S. wheat.

Wheat started the March 27 session lower, which foreshadowed how the rest of the day was going to be for the grains. Wheat traded with decent gains overnight, which was surprising considering reports of improving conditions in the Southern Plains. All three of the major wheat producing states — Kansas, Oklahoma and Texas — saw 5 percent increases in crop ratings. Conditions have dramatically improved in the winter wheat region as generous rains have been reported in much of the driest regions so far this year.

The March 28 session opened lower with pressure coming from improving crop condition ratings. Additional selling spilled over from a sharply lower U.S. corn exchange as corn tumbled to four-month lows. Fund selling pressured the corn as the funds lifted positions ahead of the March 30 USDA reports. Wheat also was pressured by position squaring ahead of the March 30 reports.

Wheat opened lower March 29 with early selling tied to carryover selling from a lower overnight session and from pressure from a poor export sales estimate. Wheat really did not have any news of its own other than position squaring ahead of the March 30 USDA reports. Overall, wheat took the path of least resistance, following the other grains lower.

USDA’s prospective acreage report gave wheat a nice bullish surprise March 30 as spring wheat planted acreage was cut a lot more than expected. USDA estimated spring wheat 2012 acreage at 11.98 million acres compared with expectations of 13.4 million acres and 12.4 million acres for last year. North Dakota producers are expected to cut wheat acreage 3 percent compared with last year. The only major spring wheat producing state looking at increasing acreage is Montana, at 10 percent. Winter wheat acreage is estimated at 41.71 million acres compared with expectations of 42 million acres and last year’s acreage of 40.65 million acres. All wheat acreage is estimated at 55.91 million acres compared with expectations of 57.6 million acres and 54.41 million for last year. In the quarterly grain stocks estimate, USDA estimated wheat stocks at 1.2 billion bushels compared with expectations of 1.235 billion bushels, another bullish surprise for wheat.

Corn: bullish USDA report

The corn market limited its losses on the week with a friendly USDA report March 30. Despite heavy losses early on, the May corn contract ended down only 2 cents with December down 18 cents. The market was under pressure early in last week as traders expected a bearish report. The report gave the market support March 30 as stocks were cut and corn traded near limit up in old crop months.

The early week losses were sparked as buying interest moved to the sidelines and long liquidation selling entered the market prior to the March 30 USDA report. Estimates were for 94.7 million acres to be planted and stocks of 6.2 billion bushels. Traders were expecting a higher stocks number because of lower feed usage. The early spring is also encouraging for corn planting and this is the warmest March since records began in 1871. Also, talk that early planted crops usually produce larger yields and with more planted acres there will be an increase in stocks this year. Weakness came from a weak ethanol report and stocks at record levels. Positive news on March 29 was that China bought 120,000 metric tons of U.S. corn and there was another sale of 120,000 metric tons to an unknown destination, but this news had little effect on the market.

The news that the market was waiting for came March 30, and the report was friendly for old-crop corn. USDA estimated corn planted acreage at 95.864 million acres compared with trade expectations at 94.7 million acres, which is the highest planted acreage since 1937. States that showed the largest increases were North Dakota, up 1.17 million acres, Minnesota, up 600,000 acres, Nebraska up 450,000 acres and Ohio up 400,000 acres.

Ethanol production for the week ending March 23 averaged 889,000 barrels per day, which is down 0.45 percent versus the previous week and down 1.55 percent versus last year. Corn used in the week’s production is estimated at 94.7 million bushels. Corn use needs to average 94.128 million bushels per week to meet this crop year’s USDA estimate. Stocks were 22.628 million barrels, which is down 0.37 percent versus the previous week but up 12.62 percent versus last year.

Soybeans: gains on bullish report

Soybeans were up 35 to 55 cents last week. Much of the action was affected by positioning ahead of the March 30 quarterly stocks and prospective planting report from USDA. The report was bullish, reducing projected soybean stocks and lowering expected acreage.

On March 26, May soybeans opened 13.25 cents higher at $13.790 after strong gains overnight. Early support came from continued talk of disappointing yields out of South America, which could lead to additional global demand for U.S. soybeans. Export news was also supportive as China expects to remain aggressive, importing soybeans through June. The March 26 weekly export inspections report came in well above the level needed to maintain pace with USDA’s projection. Outside markets were supportive throughout the session, with metal and equity markets seeing gains while the U.S. dollar was lower. Spillover pressure from corn trimmed gains by the close, but soybeans were still able to finish with double-digit gains for the day.

May soybeans opened 5.25 cents higher March 27 and made an early attempt to reach the previous day’s highs. After failing to reach a new high, selling interest entered the market and pushed it lower for the remainder of the session. Pressure came from the inability to reach a new high, as well as talk that the market was overbought. Support came from disappointing yield numbers from South America. USDA announced a sale of 120,000 metric tons of new crop soybeans to China on March 27.

Soybeans opened higher March 28 and 29, but could not hold the gains, ending with losses both days. Commercial buying stemming from concern over tightening global stocks contributed to the higher opens, while sharp losses in the corn market spilled over to cause the lower closes. Outside markets were negative both days with weakness in metal markets and a stronger U.S. dollar. Positioning ahead of the March 30 quarterly stocks and prospective planting report was a factor as well.

USDA’s quarterly stocks and prospective planting report came out March 30. Soybeans came in at 1.37 billion bushels, slightly lower than prereport estimates of 1.38 billion bushels. Soybean acreage is projected at 73.9 million, down 1.6 million acres from the average projection of 75.5 million acres.

Barley

USDA’s prospective acreage report estimated 2012 barley planted acreage at 3.33 million acres, an increase of 30 percent from last year. North Dakota producers are by far showing the highest increase in barley acres with projections at 980,000, an increase of 145 percent from last year. Minnesota producers are looking at planting 110,000 acres.

Cash barley bids in Minneapolis dropped 5 cents on the week, putting feed barley bids at $5.30 while malting barley remains at $7.05.

Durum

According to USDA’s prospective plantings report, durum producers are expected to plant 2.22 million acres in 2012, an increase of 62 percent from last year but slightly less than expectations of 2.3 million. North Dakota producers are expected to plant 1.5 million acres. Cash bids for milling quality durum are at $8.25 in Berthold, N.D., with Dickinson, N.D., at $8.40.

Canola

Canola futures on the Winnipeg, Manitoba, exchange ended the week $24 (Canadian) higher. The canola market was supported by spillover strength from a stronger U.S. soybean complex as well as from domestic commercial demand in Canada.

Producers are expected to plant 1.56 million acres of canola in 2012 compared with 1.1 million last year. This would result in an increase of 45 percent from last year’s acreage, which was dramatically lower because of prevented planting issues. North Dakota producers are expected to plant 1.3 million acres compared with 860,000 acres last year. March 29 cash canola bids in Velva, N.D., were at $28.16.

Dry beans

Total dry bean acreage is estimated at 1.67 million, an increase of 38 percent from last year, but still sharply lower than the 2010 acreage of 1.91 million. North Dakota producers are expected to increase dry bean acres by 61 percent, while Minnesota producers are looking at increasing acreage 21 percent.

Sunflowers

All sunflower acreage was estimated at 1.81 million, an increase of 17 percent from last year, but still far below the planted acreage in 2010. North Dakota producers are expecting to plant 31 percent more sunflower acres in 2012. Non-oil sunflower acres are estimated at 271,500, an increase of only 7 percent, while oil sunflowers are estimated at 1.54 million an increase of 19 percent from 2011.

March 29 cash sunflower bids in Fargo, N.D., were at $26.40.

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

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