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Published September 17, 2012, 11:01 AM

Sharply lower dollar supportive

Weak dollar supports wheat market; corn stocks up in USDA report.

By: Ray Grabanski, Agweek

Wheat: weak dollar supports market

Wheat started off the week ending Sept. 14 on the defense, but was able to gain significant ground late in the week. Early pressure was from spillover selling from the other grains, while late week gains were a result of support from a sharply lower U.S. dollar. For the week ending Sept. 13, December Minneapolis was up 4.5 cents, December Chicago was off 3 cents and December Kansas City was unchanged.

Wheat started the week lower. Early selling was tied to carryover selling for the lower corn and soybean complex. Corn and soybeans traded in a lackluster fashion early, but late in the session selling accelerated in the row crops and that spilled over to advance the selling pressure in wheat. Concerns about Russia and the uncertainty of when it will slow exports helped support wheat early in the session.

The Sept. 11 session had wheat slightly higher early, but slipping to trade both sides of unchanged before closing with small losses. Spillover selling from corn and soybeans put pressure on wheat. Winter wheat planting is under way, but slower than usual because of poor soil moisture. Australia is very dry as well, and the Australian Bureau of Agricultural and Resource Economics cut its production estimate from 24.1 million metric tons in June to 22.5 million metric tons.

Wheat traded both sides of unchanged Sept. 12, as strong soybeans and weak corn both exerted spillover influence on the market. The initial reaction to the U.S. Department of Agriculture report was negative, as domestic numbers were unchanged and world ending stocks were only cut to 176.71 million metric tons, as opposed to the expected 174.5 million. Russian wheat production was reduced to 39 million metric tons, which was within expectations.

The Sept. 13 session had wheat higher throughout the day. Support was tied to tightening global supplies and growing international demand. Expectations that drought will hurt production in both Australia and Russia are supportive. Beneficial rainfall in the Southern Plains of the U.S. should help, as winter wheat planting is ongoing. The outside markets were supportive as well, as the U.S. dollar experienced a sharp sell-off.

Corn: stocks up in USDA report

The corn market lost ground last week (for the week ending Sept. 13, December corn dropped 15 cents) with a USDA report that came in above estimates. Trade estimates were for a lower yield and production number, in addition to smaller stocks. USDA did lower its estimates from last month, but not as much as expected and world stocks showed a slight increase. Demand also continues to struggle at these price levels and harvest yields have been better than expected in many areas.

Corn started the week under pressure and ended 16 cents lower in December. Selling was tied to positioning ahead of the Sept. 12 USDA crop production report. Corn’s crop condition rating remained unchanged, which was expected. Trade Sept. 11 was again softer, with December down 5 cents. There was some profit taking as traders went to the sidelines ahead of the report. The weather also is being watched in South America, as the northern half of Brazil is dry and Argentina has flooding because of excess rainfall. Traders expected the Sept. 12 USDA report to show a yield near 120 bushels per acre and production near 10.4 billion bushels, down about 400 million bushels from last month. Estimates for world ending stocks are 120.62 million metric tons.

Corn traded under pressure Sept. 12, hitting a new seven-week low on the heels of a negative USDA report. USDA estimated the average U.S. corn yield at 122.8 bushels per acre, versus expectations of 120.59 and last month’s estimate of 123.4 bushels per acre. Production was lowered to 10.727 billion bushels, versus expectations of 10.38 billion and August estimate of 10.779 billion. Exports were cut by 50 million bushels to 1.25 billion to offset some of the decline in supply. Old crop corn ending stocks were increased by 160 million bushels with a drop in feed use. The net result of the report was an increase of 83 million bushels for the 2012 to 2013 ending stocks number to 733 million. World stocks also showed a slight increase from 123.33 million metric tons to 123.95 million.

Corn traded firm Sept. 13, closing with 4-cent gains. Strength in the wheat market spilled over to support corn. Talk that yield estimates were lower in the Sept. 12 report and thoughts that they are lower than what USDA stated offered some support. Harvest pressure is limiting the upside. As of Sept. 6, corn sales were at 32 percent of USDA’s estimate for 2012 to 2013, versus a five-year average of 35 percent.

Ethanol production for the week ending Sept. 7 averaged 816,000 barrels per day, which is down 7.2 percent from last year. Total ethanol production for the week was 5.71 million barrels, which was down 9 million barrels from the previous week. Corn used in production is estimated at 86.92 million bushels. Corn use needs to average 86.29 million bushels per week to meet this crop year’s USDA estimate of 4.5 billion.

Soybeans: Gains on neutral report

A mostly neutral USDA crop production report helped push soybeans higher for the week ending Sept. 14. The main supporting factor of the report came from thoughts that USDA now has cut soybean demand to bare-bone minimum and that if production continues to decline, it will result in a tightening of ending stocks. For the week ending Sept. 13, November soybeans were up 10.75 cents.

Soybeans were higher Sept. 10, but slipped lower midday and closed sharply lower. Sept. 11 saw a sharply lower close as well, as traders positioned ahead of the Sept. 12 USDA report. The Sept. 10 crop progress report showed the soybean harvest at 4 percent complete, compared with the five-year average of 1 percent. The harvest is expected to progress well, as weather should be beneficial. A 2 percent increase in good to excellent crop ratings limited upside on Sept. 11. The Sept. 12 export inspections were seen as bearish.

The Sept. 12 session had soybeans sharply higher, recovering losses from earlier in the week. The Sept. 12 USDA report was seen as neutral to bullish. USDA reduced the soybean yield to 35.3 bushels per acre, compared with 36.1 bushels per acre last month and the 35.8 bushels per acre expected by traders. Production fell further than expected as well, coming in at 2.634 billion bushels, compared with 2.692 billion last month and expectations of 2.657 billion. Additional support came from ideas that planting in Brazil will be delayed by dry weather and expectations that demand will remain strong. A sharply lower dollar added to soybeans strength.

Soybeans traded lower throughout much of the day Sept. 13 before spillover buying from wheat sparked a small rally. Pressure was attributed in part to a belief that the Sept. 12 rally may have been overdone. Harvest pressure played a role as well, as weather looks ideal for harvest in the eastern Corn Belt and the Southeast. Sept. 13 export sales were considered slightly bearish.

Barley

USDA reported barley export inspections (shipments) pace for the week ending Sept. 7 at 706,000 bushels, with all of the bushels going to Japan. There were no reported barley export sales for the week.

As of Sept. 9, 95 percent of the nation’s barley crop had been harvested, compared with 89 percent the previous week and 82 percent for the five-year average.

Cash feed barley bids in Minneapolis were at $5.55 per bushel and malting barley is at $6.85.

Durum

USDA reported durum export inspections (shipments) pace for the week ending Sept. 7 at 401,000 bushels with all of the durum going to Germany. There were no reported durum export sales for the week.

Cash bids for milling quality durum were at $8 per bushel in Berthold, N.D., while Dickinson, N.D., bids were at $8.05.

Canola

Canola futures on the Winnipeg, Manitoba, exchange closed the week ending Sept. 13 with $5.50 (Canadian) gains. Canola started the week on the defense, with pressure spilling over from a sloppy U.S. soybean complex. Losses were kept in check by an improvement in export demand, as countries look for a cheaper alternative to soybeans. Late session strength came from lower-than-expected yield reports from this year’s harvest.

Sept. 13 cash canola bids in Velva, N.D., were at $29.46 per hundredweight.

Dry beans

For the week ending Sept 9., the following states were reporting dry bean conditions: North Dakota: 48 percent good to excellent, 36 percent fair and 16 percent poor to very poor, a decrease of 3 percent from the previous week, 41 percent was harvested, compared with 6 percent for the five-year average; Minnesota: 65 percent good to excellent, 28 percent fair and 7 percent poor to very poor, a 1 percent decrease from the previous week, 49 percent was harvested, compared with 16 percent for the five-year average; Nebraska: 41 percent good to excellent, 50 percent fair and 9 percent poor to very poor, a decrease of 4 percent, 5 percent was harvested, compared with 10 percent for the five-year average; Idaho: 31 percent harvested, compared with 39 percent for the five-year average; and Michigan: 51 percent good to excellent, 29 percent fair and 20 percent poor to very poor, an increase of 3 percent from the previous week, 1 percent was harvested, compared with 13 percent for the five-year average.

Sunflowers

As of Sept. 9, North Dakota’s sunflower crop had 27 percent bracts turning brown, compared with 16 percent for the previous week and 10 percent for the five-year average. North Dakota’s sunflower crop condition report estimated the crop at 65 percent good to excellent, 31 percent fair and 4 percent poor, an increase of 1 percent.

Sept. 13 cash sunflower bids in Fargo, N.D., were at $28.05 per hundredweight.

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