Weather rally ending?The wheat exchanges started last week with little fanfare, trading in a tight uneventful fashion. But that changed toward the end of the week as the market traded with decent gains.
By: Ray Grabanski, Agweek
Wheat: gains on limited news
The wheat exchanges started last week with little fanfare, trading in a tight uneventful fashion. But that changed toward the end of the week as the market traded with decent gains. For the week ending Aug. 9, September Minneapolis closed 14.5 cents higher, September Chicago gained 17.75 cents and September Kansas City ended with 19-cent gains.
Wheat struggled to start the week after the trend set by the corn and soybean complex. Because of the lack of new fundamental news, wheat has been following the corn and soybean complex. So goes corn, so goes wheat. The Aug. 7 session saw selling pressure from better-than-expected yield results out of the Northern Plains, as spring wheat yields are coming in much better than expected. Wheat harvest is moving at fast pace and ahead of the five-year pace. Demand for wheat remains stagnant as traders wait to see if the U.S. can capture some of Russia’s export business, as buyers look for a more reliable source. Position squaring ahead of the Aug. 10 crop production report also was noted. Early estimates are putting wheat ending stocks at 681 million bushels, compared with 664 million in July.
Wheat started off on the defense in the Aug. 8 session, with most of the early pressure coming from news that Russia was not going to be implementing any sort of ban on wheat exports this year. Russian wheat production has been in question, along with the ability to export wheat, because of drought conditions. But it appears Russia will not implement any sort of export restriction program. But wheat was able to shake off the early selling pressure once corn and soybeans rallied. The buying continued Aug. 9 with additional support coming from a decent export sales estimate. Russia’s report of no thoughts of an export restriction program was dismissed by the trade, as many traders think Russia will have to at least place tariffs on to deter export demand.
As of August 5, 88 percent of the nation’s winter wheat crop had been harvested, compared with 85 percent the previous week and 87 percent for the five-year average. Spring wheat harvest was estimated at 47 percent, compared with 28 percent the previous week and 12 percent for the five-year average. Spring wheat crop conditions were unchanged at 63 percent good to excellent, 26 percent fair and 11 percent poor to very poor. Last year at this time, the crop was rated 66 percent good to excellent.
Corn: more all-time highs
Buying interest came back into the market last week, as yield estimates continue to decline. Yields are also disappointing as the combines move north. Traders were also positioning ahead of the Aug. 10 USDA monthly supply/demand and production report. For the week ending Aug. 9, September corn gained 8 cents, while December was up 16 cents.
Corn traded lower on Aug. 6 and 7, with widespread rain over the weekend and cooler weather, which pressured the soybeans and spilled over to the corn. The central Corn Belt saw good rainfall. Additional weakness came from the export inspection report. Traders were expecting a 1 to 2 percent drop in the crop condition ratings Aug. 6 and the report came out as expected. The weekly corn conditions report showed 23 percent of the U.S. corn crop was rated good to excellent. The lowest good to excellent rating for this time of year was 18 percent in 1988. The poor to very poor rating increased 2 percent to 50 percent with Missouri at 84 percent, Illinois at 74 percent, Indiana at 73 percent, Ohio 52 percent, Iowa 49 percent and Nebraska at 37 percent.
The market rebounded late in the session Aug. 8, with December hitting a new all-time high. Many traders think demand has not slowed enough to compensate for the small U.S. corn crop. Traders positioned ahead of the Aug. 10 USDA crop production report. Trade estimates for corn yield are near 127 bushels per acre, with production just more than 11 billion bushels. December made a new all-time high at $8.2975 on Aug. 9 and closed with a new high. Additional support came from a decent export sales report. Corn sales stand at 97.2 percent of the USDA forecast for the 2011 to 2012 marketing year versus a five-year average of 100.9 percent. There is also talk of worse-than-expected yields, as harvest moves north.
Ethanol production for the week ending Aug. 3 averaged 817,000 barrels per day, which is up almost 1 percent versus the previous week, but down 10.02 percent versus last year. Total ethanol production for the week was 5.72 million barrels versus 5.66 million barrels the previous week. Corn used in production for the week ending Aug. 3 is estimated at 87.03 million bushels and needs to average 113.9 million bushels per week to meet this crop year’s USDA estimate of 5.05 billion. Stocks as of Aug. 3 were 18.651 million barrels, which is down 3.87 percent versus the previous week and suggests strong ethanol usage for the week.
Crop conditions had 23 percent of the crop rated good to excellent, 27 percent fair and 50 percent poor to very poor. Corn silking was at 98 percent, compared with 90 percent one year ago and the five-year average of 90 percent. Corn in the dough stage was 61 percent, compared with 27 percent one year ago and a five-year average of 30 percent. Corn that is dented was 26 percent, compared with 6 percent one year ago and a five-year average of 5 percent. Corn that was mature was 6 percent, compared with 2 percent one year ago and a five-year average of 2 percent.
Soybeans: demand remains strong
For the week ending Aug. 9, November soybeans were up 2.5 cents. Long-term fundamentals remain bullish for soybeans, as global stocks remain tight. Weather remains the main force in the market.
Soybeans opened the week sharply lower after beneficial rains over the weekend. The rains were better than expected, leading to fund profit taking. The forecast improved, too, with more moderate temperatures and rain expected. Adding pressure was the fact that soybeans good to average rating stayed at 29 percent (expectations had it declining 2 percent), though poor to very poor increased 2 percent. Losses were limited by USDA’s announcement of a sale of 106,000 metric tons of soybeans to China for 2012 to 2013 delivery. The Aug. 6 export inspections came in slightly above the amount needed to keep pace with USDA’s projection. The Aug. 7 session started higher, but faded because of the improving weather forecast.
Aug. 8 soybeans opened lower but traded higher later and closed near the session high. Pressure continued to come from improved weather. Profit taking ahead of the Aug. 10 USDA report was seen, as well. The longer-term outlook remains bullish because of tight ending stocks, resulting in continued commercial interest. Demand also remains strong. USDA announced a sale of 140,000 metric tons of soybeans to an undisclosed destination for 2012 to 2013 delivery. So even at record high prices, export demand for soybeans remains.
Soybeans closed sharply higher on Aug. 9 on buying from both commercial and noncommercial traders ahead of the Aug. 10 USDA report. Traders were positioning ahead of anticipated cuts in projected yield and production. Traders’ estimates for yield averaged 37.8 bushels, down from 40.5 bushels from USDA last month. Traders expected a similar drop in production, where the average estimate is 2.8 billion bushels, compared with USDA’s 3.05 billion bushels last month. USDA announced a sale of 165,000 metric tons to China for 2012 to 2013 delivery. This was the third announced sale of the week, bringing the total to 411,000 metric tons.
Cash barley bids in Minneapolis increased last week, putting feed barley bids at $5.90 per bushel, while malting barley bids increased to $7.10.
USDA reported no durum export inspections for the week ending Aug. 3. Durum export sales pace was estimated at 1.1 million bushels.
Aug. 9 cash bids for milling quality durum were at $7.75 per bushel in Berthold, N.D., while Dickinson, N.D., bids were at $7.65.
Canola futures on the Winnipeg, Manitoba, exchange closed the week ending Aug. 9 with $9 (Canadian) losses. Early selling pressure spilled over from a sharply lower U.S. soybean complex. Losses were kept in check by demand concerns, as well as from position squaring ahead of USDA’s August crop production report.
Aug. 9 cash canola bids in Velva, N.D., were at $26.44 per hundredweight.
For the week ending Aug. 5, the following states were reporting dry bean conditions: North Dakota: 46 percent good to excellent, 39 percent fair and 15 percent poor to very poor, a decrease of 4 percent from the previous week, 41 percent has set pods, compared with 10 percent for the five-year average; Minnesota: 64 percent good to excellent, 29 percent fair and 7 percent poor to very poor, a decrease of 1 percent from the previous week, 53 percent has set pods; Nebraska: 45 percent good to excellent, 45 percent fair and 10 percent poor to very poor, a decrease of 2 percent, 45 percent has set pods, compared with 43 percent for the five-year average; and Michigan: 45 percent good to excellent, 35 percent fair and 20 percent poor to very poor, an increase of 3 percent from the previous week, 65 percent has set pods, compared with 29 percent for the five-year average.
As of Aug. 5, North Dakota’s sunflower crop was 87 percent in bloom, compared with 51 percent for the previous week and 40 percent for the five-year average. North Dakota’s sunflower crop condition report estimated sunflower crop at 67 percent good to excellent, 31 percent fair and 2 percent poor, a decrease of 4 percent.
Aug. 9 cash sunflower bids in Fargo, N.D., were at $24.40 per hundredweight.