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Published April 23, 2012, 09:55 AM

Markets retreat on favorable conditions

Wheat closed last week ending April 19 mixed, with the winter wheat contracts ending with small losses to small gains while Minneapolis lost ground. For the week ending April 19, May Minneapolis was off 15 cents, May Kansas City was 5.5 cents lower and May Chicago was 1 cent higher.

By: Ray Grabanski, Agweek

Wheat: crop rating advances

Wheat closed last week ending April 19 mixed, with the winter wheat contracts ending with small losses to small gains while Minneapolis lost ground. For the week ending April 19, May Minneapolis was off 15 cents, May Kansas City was 5.5 cents lower and May Chicago was 1 cent higher.

Wheat started last week lower in all three exchanges but most of the selling remained in the winter wheat contracts while Minneapolis saw minor gains. The winter wheat was under pressure from the expectation of another week of improving crop ratings. The losses in the winter wheat spilled over to added pressure to spring wheat, but losses there were limited by planting progress delays due to weekend rains.

Wheat opened and traded moderately higher April 17 but slipped on the close to end mixed. Talk that the market is oversold combined with bullish outside markets as wheat traded higher throughout the morning. Going into midday the market was well off the earlier highs as pressure spilled over from the corn market.

On April 18 the session had wheat in a follower role, following corn lower. Light pressure was also caused by another week of rapid planting progress as well as from another week of improving crop conditions. The higher U.S. dollar added selling pressure. Technically the winter wheat exchanges are sitting at support while Minneapolis is still above long-term support lines.

Wheat opened the April 19 session with strength and proceeded to rally to post strong gains early in the session. Wheat hit its session high early in the session and once that level was obtained, the market just seemed to stall out. The winter wheat exchanges were supported by technical buying as most of the winter wheat contracts traded down to support levels earlier last week. Additional support spilled over from a stronger corn and soybeans complex. Minneapolis struggled to start the session, mainly due to the unwinding of long Minneapolis /short winter wheat spreads. Minneapolis did make up some ground late in the session as traders in Minneapolis started to position themselves ahead of Statistics Canada’s acreage estimate report, which is due out April 24.

USDA’s weekly crop condition rating report estimated the U.S. winter wheat crop at 64 percent good to excellent, 25 percent fair and 11 percent poor to very poor compared with 61 percent good to excellent the previous week and 36 percent good to excellent last year. The major states report crop condition as: Colorado: 42 percent good to excellent, 40 percent fair and 18 percent poor to very poor, unchanged from the previous week; Kansas: 69 percent good to excellent, 24 percent fair and 7 percent poor to very, an increase of 4 percent from the previous week; Oklahoma: 77 percent good to excellent, 19 percent fair and 4 percent poor, unchanged from the previous week; and Texas: 38 percent good to excellent, 30 percent fair and 32 percent poor to very poor, unchanged from the previous week. As of April 15, 37 percent of the nation’s spring wheat had been planted compared with 21 percent the previous week and 9 percent for the five-year average.

Corn: early planting pressure

The corn market traded lower last week, with the May contract down 13 cents and December was down 3 cents. Early planting and long liquidation pressured the futures last week. The weather remains favorable for planting and crop development for the next two weeks and that is keeping buying interest on the sidelines. A late week bounce came from rumors that China was purchasing U.S. corn.

Corn traded lower for the first three days of last week and was especially pressured in the old-crop contracts. The unwinding of old versus new-crop spreads pressured the market and that also sparked additional selling in old-crop months. Traders are also looking at the early planted crop to provide for an earlier harvest and take pressure off the tight stocks situation. Widespread rain fell over the previous weekend in the U.S. and the forecast remains nonthreatening for the next two weeks, which will allow the planters back in the field with ideal conditions. The ethanol report was also disappointing on April 18, showing increasing stocks.

On April 29, the corn market closed sharply higher. Support came from talk that China was buying U.S. corn. Smaller crop estimates for Argentina and quality issues with Ukraine corn, as Japan backed out of purchases, were also positive. There was also talk that some corn in southern Illinois may have frost damage. Additional late week support came from the unwinding of short corn versus long soybean spread.

Ethanol production for the week ending April 13 averaged 884,000 barrels per day, which is down 1.3 percent versus the previous week and up 3.3 percent versus last year. Corn used in for the week ending April 13 was estimated at 94.17 million bushels. Corn use needs to average 94.117 million bushels per week to meet this crop year’s USDA estimate of 5 billion bushels. Stocks were 21.9 million barrels, which is up 0.9 percent versus the previous week and up 9.3 percent versus last year

Planting progress as of April 15 had 17 percent of the U.S. corn crop planted, up from 7 percent the previous week and above the five-year average of 5 percent.

Soybeans: up and down week

Soybeans fell 10 to 20 cents last week. Chinese demand is expected to stay strong in the near-term, though some question how long the pace can be maintained.

Soybeans opened lower April 16 and traded with double-digit losses throughout most of the session. Bearish outside markets and weakness in the other grains sparked selling from both commercial and noncommercial traders. The April 16 export inspections came in above the amount needed to keep pace with USDA’s projection.

On April 17, soybeans opened higher and traded with strong gains before slipping back to close with moderate gains. Renewed noncommercial buying and positive outside markets supported the market. Spillover selling from corn caused soybeans to close well off the daily high. USDA announced a sale of 110,000 metric tons of old crop and 115,000 metric tons of new crop to an undisclosed destination.

Soybeans opened lower April 18 as the market experienced a sharp sell-off. Noncommercial long liquidation from traders holding a record-long futures position sparked the selling. Continued talk of the overbought condition of the market combined with negative outside markets to exert additional pressure. USDA announced a sale of 120,000 metric tons to China for 2012 to 2013 delivery.

The April 19 session opened higher and reached levels of more than 20 cents higher early in the day. Those gains could not be sustained, and the market traded with small losses briefly before closing with moderate gains. A surge higher in corn as a result of rumors of a large sale to China provided spillover support to soybeans. The unwinding of short corn long soybean positions was also noted. USDA announced a sale of 110,000 metric tons of old-crop soybeans to China.

Barley

USDA estimated no barley export shipments for the week ending April 13. This brings barley’s year-to-date export shipments pace to 6.35 million bushels compared with 5.3 million bushels last year. There were no reported barley export sales for the week ending April 13. This brings the year-to-date export sales pace for barley to 3.9 million bushels compared with 4.6 million bushels for last year at this time.

As of April 15, 33 percent of the nation’s barley had been planted compared with 15 percent the previous week and 17 percent for the five-year average.

Cash barley bids in Minneapolis were at feed barley bids at $5.15 while malting barley bids remained at $7.

Durum

USDA estimated durum export inspections pace for the week ending April 13 at 1.78 million bushels, with 386,000 bushels going to Belgium. Durum export sales pace for the week ending April 13 was estimated at 500,000 bushels. This brings the year-to-date export sales pace for durum to 17 million bushels compared with 34.8 million bushels for last year at this time.

As of April 15, 16 percent of North Dakota’s durum crop was planted compared with 8 percent the previous week and 1 percent for the five-year average.

Cash bids for milling quality durum on April 19 were at $8.25 in Berthold, N.D., with Dickinson, N.D., bids at $8.05.

Canola

Canola futures on the Winnipeg, Manitoba, exchange ended the session dropped over $10 (Canadian) for the week ending April 19. Canola traded on the defense during a couple sessions last week as fund selling combined forces with spillover selling from a lower U.S. soybean complex. Additional selling was caused by follow through pressure from the other vegetable oil products, which were also on the defense last week.

As of April 15, 2 percent of North Dakota’s canola crop had been planted compared with 1 percent the previous week and zero for the five-year average.

Cash canola bids in Velva on April 19 were at $28.35.

Sunflowers

Soybean oil export sales pace for the week ending April 13 were estimated at 23.9 trillion metric tons, bringing the year-to-date total to 357.2 trillion metric tons, down from last year’s record 1,144.6 trillion metric tons.

Cash sunflower bids in Fargo, N.D., on April 19 were at $26.90.

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

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