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Published June 18, 2012, 10:00 AM

USDA report pressures grains

With the exception of July Minneapolis, the wheat markets traded moderately lower for the week. For the week ending June 14, July Minneapolis gained 25 cents, September Minneapolis was down 5.75 cents, July Chicago was down 8.5 cents, September Chicago lost 7.5 cents, July Kansas City lost 10 cents and September Kansas City was down 10 cents.

By: Ray Grabanski, Agweek

Wheat: little movement with report

With the exception of July Minneapolis, the wheat markets traded moderately lower for the week. For the week ending June 14, July Minneapolis gained 25 cents, September Minneapolis was down 5.75 cents, July Chicago was down 8.5 cents, September Chicago lost 7.5 cents, July Kansas City lost 10 cents and September Kansas City was down 10 cents.

Wheat traded higher throughout the June 11 session before closing with moderate gains in spring wheat and moderate losses in winter wheat. Noncommercial short-covering ahead of the June 12 U.S. Department of Agriculture report provided support. Positive outside markets added support early in the session, but turned negative later in the day. Harvest pressure continues to put pressure on the winter wheat exchanges. The June 11 export inspections report, the first of the new marketing year, came in slightly below the amount necessary to keep pace with USDA’s projection.

Wheat traded higher June 11 before the release of USDA’s report on June 12. The report was seen as bullish as old- and new-crop ending stocks fell both domestically and globally. Production was higher than expected, though, and global stocks remain high from a historical perspective. The outside markets were positive as well. However, aggressive selling in corn and a lack of demand news led to commercial and noncommercial selling and a moderately lower close.

Wheat traded moderately higher on June 13, but slipped into the close narrowly mixed. Losses in corn and soybeans pressured, as did the continued winter wheat harvest. Support came from a belief selling on June 12 may have been overdone. Production estimates for a number of nations have been reduced, and could be reduced further if the weather doesn’t improve in the Black Sea region. The sharply lower U.S. dollar provided additional underlying support.

Wheat was higher throughout June 14 on spillover support from the corn market. Commercial and noncommercial traders were buying as concern over dry conditions in global growing areas continue, encouraging further talk of tightening global stocks. Export demand is firm as USDA announced a sale of 110,000 metric tons soft red winter wheat to China for 2012 to ’13 delivery. The June 14 weekly exports were neutral.

USDA reported wheat export inspections pace for the week ending June 8 at 21.5 million bushels. This brings the year-to-date export shipments pace for wheat to 21.5 million bushels compared with 24.9 million bushels for last year. Export sales pace for the week ending June 8 was estimated at 15.9 million bushels, below the 22.5 million bushels needed to stay on pace with the USDA’s projection of 1.15 billion bushels. Shipments were reported at 24.5 million bushels, compared with 22.5 million bushels needed to keep pace.

Corn: weather forecast, USDA report

The July corn contract remained unchanged from the week ending June 8, while December was down 24 cents as of the June 14 close. Old crop found support from tight stocks, a strong basis and cash market. USDA’s supply and demand report pressured new crop, but the dry weather limited the losses. Look for the weather forecast this week to direct the market.

Corn traded under pressure on June 11 as traders positioned ahead of the June 12 USDA report. The report on June 12 was not friendly to corn and again the market traded lower for both old and new crop. USDA left ending stocks for the 2011 to ’12 season at 851 million bushels, which was about 25 million above expectations. For the 2012 to ’13 season, ending stocks were left at 1.881 billion bushels, up from expectations of 1.74 billion. There were no changes for demand numbers and USDA left the record-high yield estimate of 166 bushels per acre alone. Last year’s yield was 147.2 bushels per acre and the 20-year trend yield is at 160.5 bushels per acre. World ending stocks for the 2011 to ’12 season were raised to 129.19 million tons as compared with 127.56 million tons last month. New-crop ending stocks were increased to 155.74 million tons and up from 152.34 million tons last month. China production was also revised higher by 2 million to 195 million tons.

Old-crop corn found buying interest later last week with the strong cash market. New crop was also able to come back from the early week losses with declining conditions and lack of rain in the eastern Corn Belt. The corn crop conditions dropped by 6 percent in the June 11 report, down to 66 percent good to excellent. The corn crop was rated at 69 percent good to excellent one year ago. The eight to 14-day forecast has turned dry and a smaller amount of rain predicted over the next six days in the eastern Corn Belt, which created buying interest. The early planted crop is entering pollination and this is a critical timeframe for rain.

Ethanol production for the week ending June 8 averaged 920,000 barrels per day. This is up 1.8 percent versus the previous week and up 4.5 percent versus last year. Total ethanol production for the week was 6.44 million barrels which is the highest weekly total since Feb. 10. Corn used in production for the week ending June 8 was estimated at 98 million bushels as compared with 97.1 million bushels necessary each week to reach the new USDA projection for the year. Stocks as of June 8 were 20.66 million barrels, down 2.5 percent versus the previous week and up 4.7 percent versus last year.

USDA’s export inspection report was bearish for corn. There were 17 million bushels of corn reported shipped, below the 36.9 million bushels needed to meet USDA’s projection of 1.7 billion bushels. This was also below the pre-report estimates of 25 million to 31 million bushels. The export sales report for corn was 6.7 million bushels, of which 3.6 million bushels were old crop and below 10.4 million bushels needed to meet USDA’s projection of 1.65 billion bushels. This was below the estimates of 13.8 million to 29.5 million bushels and bearish for corn. Total shipments last week were at 17 million bushels and below the 33.8 million needed last week.

Soybeans: losses despite report

As of the June 14 close, July soybeans were down 40.25 cents on the week and the November contract was down 23.75 cents.

Soybeans traded higher overnight, but slipped throughout the day June 11 to close with small losses. The outside markets were supportive early in the session, but turned more negative as the U.S. dollar rallied well off the daily lows. Support continues to come from strong export demand, primarily from China, as well as the tightening of global stocks. The June 11 export inspections were bullish, coming in at expectations.

The June 12 session had soybeans higher overnight and surged even higher with the release of USDA’s crop production report. Spillover weakness from corn caused soybeans to give back some of the gains, leading to a moderately higher close. Domestic ending stock numbers were below expectations for both old and new crop while global stocks increased slightly from last month. Cooler weather and more moisture in the forecast pressured new-crop contracts.

Soybeans traded lower on June 13 and 14 due to technical selling and weather issues. A belief that the previous week’s gains were enough to handle the June 12 bullish report led to some profit taking on June 13. On June 13, sharp losses led to follow-through selling on June 14. Weather continues to affect soybeans with hot and dry weather expected for the next week or so, followed by more moisture and cooler weather. The June 14 export sales report was above expectations.

USDA reported soybean export inspections pace for the week ending June 8 at 14.2 million bushels. This brings the year-to-date export shipments pace for soybeans to 1.181 billion bushels compared with 1.41 billion bushels for last year at this time. Soybean export sales pace for the week ending June 8 was estimated at 15.6 million bushels. This brings the year-to-date export sales pace for soybeans to 1.352 billion bushels compared to 1.538 billion bushels last year at this time. With 12 weeks left in soybean’s marketing year, shipments need to average 11.2 million bushels and sales have exceeded USDA’s 1.315 billion bushels projection.

Barley

USDA reported barley export inspections for the week ending June 8 at 36,000 bushels. This brings barley’s year-to-date export shipments pace to 36,000 bushels compared to 120,000 bushels last year.

As of the June 14 close, cash barley bids in Minneapolis decreased slightly last week putting feed barley bids at $5.10 per bushel, while malting barley bids remained unchanged at $7.05.

Canola

Canola futures were lower last week in large part due to sharp losses in the U.S. soybean futures market on June 13 and 14. Global economic concerns continued to pressure commodities, as well.

As of the June 14 close, July canola lost $5.80 (Canadian) and new-crop canola lost $6.60 (Canadian). Cash canola old-crop bids in Velva, N.D., were $1.04 lower at $27.44 per hundredweight, while new crop bids were 83 cents lower at $23.48.

Durum

Durum export sales pace for the week ending June 8 was estimated at 400,00 million bushels.

As of the June 14 close, cash bids for milling quality durum were unchanged for the week at $7 per bushel in Berthold, N.D., while Dickinson, N.D.’s bid was 30 cents higher at $7.05.

Sunflowers

As of June 10, 96 percent of North Dakota’s sunflower crop was planted compared to 80 percent the previous week and 78 percent for the five-year average.

Soybean oil export sales pace for the week ending June 8 was estimated at 6.8 trillion metric tons, bringing the year-to-date total to 453.1 trillion metric tons, compared with last year’s 1,227.6 trillion metric tons.

As of the June 14 close, July soybean oil was $1.46 lower for the week. Cash sunflower old-crop bids in Fargo, N.D., lost 80 cents to $24.60 per hundredweight, while new crop lost 80 cents to $22.50.

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

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