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Published October 01, 2012, 11:37 AM

Stocks report to the rescue

By: Ray Grabanski, Agweek

Wheat: report erases weekly losses

Wheat struggled last week, losing a lot of ground during the first four sessions of the week. Early pressure was a result of spillover selling from a lower corn and soybean complex. Late session pressure was a result of reports out of Russia that the country has no wheat supply issue and that no sort of export reduction plan is in the works. For the week ending Sept. 27, December Minneapolis lost 43.5 cents, December Chicago dropped 46.5 cents and December Kansas City was down 48 cents. On Sept. 28, almost all of the losses were erased because of a lower-than-expected wheat stocks estimate in the Sept. 28 U.S. Department of Agriculture quarterly grain stocks report. The small grains summary was as expected.

All three of the wheat exchanges opened on the defense and traded with losses. Early selling spilled over from the lower corn and soybean complex. Losses were limited by reports that high-ranking officials in Russia are showing concerns that, at the current rate of exporting, Russia is on track to run out of wheat sooner than later.

Wheat started the Sept. 25 session with small losses to small gains. Wheat was able to rally slightly with early support coming from technical support and light support spilling over from a stronger U.S. soybean and corn market. But once the other grains started to lose their gains, wheat followed. In all, wheat is in a tug of war between its own negative fundamental news, planting progress as winter wheat planting progress advances and thoughts that wheat export demand could increase once Russia implements an export reduction plan.

The Sept. 26 session had wheat lower on spillover pressure from weak corn and soybeans, as well as a sharply higher U.S. dollar. Rain is in the forecast for the western plains, where it will be beneficial to planting. Australian wheat remains in the headlines, as recent rains were disappointing.

Wheat traded on the defense again Sept. 27 because of technical selling and profit taking. Additional pressure was a result of reports out of Russia that it has no wheat inventory issue, and the talk of potential export reduction plans should cease, as Russia has no plans to slow wheat exports.

As of Sept. 23, 25 percent of the nation’s winter wheat was planted, compared with 11 percent the previous week and 27 percent for the five-year average.

Corn: harvest pressure

The corn market traded under pressure again last week, losing 32 cents in the December contract as of the Sept. 27 close and down 50 cents in the last 10 trading sessions in the December 2013 contract. Harvest pressure continued to drive the futures lower. Harvest is at a record pace and yields have been better than expected in many areas. Corn was able to cut losses Sept. 28 (most contracts were limit up) because of a bullish USDA grain stocks report, which estimated corn stocks at 138 million bushels less than expected (reports put stocks at 988 million bushels compared with estimates of 1.126 billion bushels).

Corn traded with small losses on Sept. 24 and 25. Traders were estimating that 40 percent would be harvested in the Sept. 24 report. The report stated that 39 percent of the harvest was complete and talks that we should be at 50 percent by the end of the week added pressure. Illinois requested permission from the U.S. Food and Drug Administration to blend high aflatoxin corn with good-quality corn to be used in animal feed. Iowa was just recently granted permission.

Corn traded with red ink again on Sept. 26 and 27, while closing sharply lower on continued fund liquidation. The outside markets were weak and strength in the dollar came from talk of the European debt crisis. The huge losses in the soybean trade also added weakness and pressured corn back to levels last seen in mid-July. The ethanol report was also disappointing on Sept. 26, and margins are in the red. The Sept. 27 market felt pressure from a terrible export sales report. Rumors that three livestock companies in North Carolina signed a deal to import 750,000 metric tons of Brazilian corn in the next six months did not help the demand picture.

Ethanol production for the week ending Sept. 21 averaged 809,000 barrels per day, which is down 3 percent versus the previous week and down 3.8 percent from last year. Total ethanol production for the week was 5.7 million barrels. Corn used in production for the week ending Sept. 21 is estimated at 85 million bushels versus 87.6 million the previous week. Corn use needs to average 86.32 million bushels per week to meet this crop year’s USDA estimate of 4.5 billion. This crop year’s cumulative corn used for ethanol production is 258.2 million bushels. Stocks as of Sept. 21 were 19.26 million barrels, which is down 0.34 percent versus the previous week, but up 10.95 percent versus last year.

Crop conditions were 24 percent good to excellent, 25 percent fair, and 51 percent poor to very poor. Corn that was mature was 88 percent, compared with 58 percent one year ago and a five-year average of 88 percent. Corn that was harvested was 39 percent, compared with 12 percent one year ago and a five-year average of 13 percent.

Soybeans: prices continue to fall

Soybeans struggled last week with pressure coming from a rapidly advancing harvest. Additional selling is coming from reports of better-than-expected yields. For the week ending Sept. 27, November soybeans were down 51 cents. Half of the weekly losses were trimmed on Sept. 28 as a result of a surprising grain stocks report. The report was bearish to soybeans, as stocks were increased because of a 37.5-million-bushel increase in the 2011 crop.

Soybeans were lower on Sept. 24, as funds continued to liquidate long positions. The sell-off extended the recent downtrend, as yield reports continue to be better than expected as the harvest moves along at a strong pace. Sept. 24 export inspections were seen as bearish.

Turn around Sept. 25 brought strength into the soybean market as the market tried to bounce back from the Sept. 24 losses. News that Brazil had exhausted its exportable supplies was supportive. The weather forecast remains favorable (warm and dry) for the ongoing harvest.

Selling returned Sept. 26, as soybeans were sharply lower as noncommercial traders continue to liquidate long positions. Pressure comes from moisture in Brazil that has been beneficial to early planting, as well as yield reports that continue to come in better than expected. The European Union debt crisis returned to the headlines, leading to a sharply stronger U.S. dollar that pressured commodities. USDA announced a sale of 140,000 metric tons of soybeans for 2012 to 2013 delivery to an undisclosed destination.

Soybeans were trading lower early Sept. 27, with pressure being attributed to continued reports of better-than-expected yield and unstable outside markets. Additional weakness came on reports that China has sold 400,000 metric tons of reserve soybeans. Positioning ahead of the Sept. 28 quarterly stocks report was also a factor. USDA reported a sale of 110,000 metric tons of soybeans to China for 2012 and 2013 delivery. Sept. 27 export sales were seen as bullish, while export inspections were considered bearish.

Soybeans dropping leaves as of Sept. 23 was at 73 percent, compared with 57 percent the previous week and the five-year average of 59 perecnt. Soybeans harvested as of Sept. 23 was at 22 percent, compared with 10 percent the previous week and the five-year average of 8 percent. USDA’s weekly crop condition rating report estimated the U.S. soybean crop at 35 percent good to excellent, 31 percent fair and 34 percent poor to very poor, an increase of 2 percent from the previous week.

Barley

USDA reported barley export inspections (shipments) pace for the week ending Sept. 21 at 8,000 bushels, all going to Mexico. Barley export sales pace was estimated at a negative 1.3 million bushels because of a cancellation from South Korea.

Cash feed barley bids in Minneapolis were at $5.35 per bushels, while malting bids were $7.

Durum

USDA reported durum export inspections (shipments) pace for the week ending Sept. 21 at 1.369 million bushels, with 713,000 bushels going to Belgium and 398,000 going to Venezuela. Durum export sales pace was estimated at 1.9 million bushels.

Sept. 27 cash bids for milling quality durum were at $8 per bushel in Berthold, N.D., while Dickinson, N.D., bids were at $7.80.

Canola

Canola futures on the Winnipeg, Manitoba, exchange closed with $21 (Canadian) losses for the week ending Sept. 27. The canola market struggled with most of the selling pressure spilling over from another rough week in the U.S. soybean complex. Losses were limited by lower-than-expected yield results, as yields in the Northern Plains have not been as strong as expected because of poor weather conditions during flowering.

Sept. 27 cash canola bids in Velva, N.D., were at $27.02 per hundredweight.

Dry beans

For the week ending Sept. 23, the following states were reporting dry bean crop progress and conditions: North Dakota: 90 percent harvested, compared with 33 percent for the five-year average; Minnesota: 87 percent harvested, compared with 51 percent for the five-year average; Nebraska: 45 percent good to excellent, 45 percent fair and 10 percent poor to very poor, a 4 percent increase from the previous week, 44 percent harvested, compared with 48 percent for the five-year average; Idaho: 82 percent harvested, compared with 69 percent for the five-year average; and Michigan: 44 percent good to excellent, 34 percent fair and 22 percent poor to very poor, a decrease of 2 percent from the previous week, 39 percent was harvested, compared with 40 percent for the five-year average.

Sunflowers

As of Sept. 23, North Dakota’s sunflower crop had 78 percent bracts turning brown, compared with 54 percent for the previous week and 36 percent for the five-year average. Harvest is estimated at 4 percent complete, compared with 1 percent the previous week and nothing for the five-year average. North Dakota’s sunflower crop condition report estimated its crop at 57 percent good to excellent, 35 percent fair and 8 percent poor, a decrease of 3 percent.

Sept. 27 cash sunflower bids in Fargo, N.D., were at $26.80 per hundredweight.

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