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Published October 08, 2012, 11:48 AM

Markets retreat after friendly report

The wheat exchanges traded on the defense for most of last week with selling spilling over from more negative demand news

By: Ray Grabanski , Agweek

Wheat: no follow-through buying

The wheat exchanges traded on the defense for most of last week with selling spilling over from more negative demand news. Rains in the Southern Plains added to the selling pressure. For the week ending Oct. 4, December Minneapolis dropped 36.25 cents, December Chicago dropped 33.25 cents and December Kansas City declined 40.75 cents.

Wheat started the week off on the defense. Early selling was tied to thoughts that the Sept. 28 gains were overdone. Wheat seemed to get caught up in corn’s bull run Sept. 28, which probably was not all justified. Additional selling was a result of better-than-expected rains for the Southern Plains.

Wheat struggled again Oct. 2 as most months traded with sharp losses. Early selling was tied to spillover pressure from the other grains (especially soybeans). Additional selling was tied to improving weather conditions for the Southern Plains, as well as in Australia. News that Russia was starting to release wheat out of its domestic reserves in an attempt to cut domestic prices of wheat added pressure.

Wheat opened the Oct. 3 session lower and extended session losses. Selling spilled over from a lower corn and soybean complex. Additional selling was tied to news that the U.S. did not garner any wheat in Egypt’s recent 180,000-metric-ton tender. The entire sale went to France. Late in the session, wheat was able to recover, with strength spilling over from a rallying corn and soybean market. Soybeans and wheat have traded down to support lines, so this little bounce was not totally unexpected.

The Oct. 4 session had wheat trading in a lackluster fashion. Early support spilled over from a stronger corn and soybean complex, as well as from news that Japan bought U.S. wheat overnight. A friendly Statistics Canada report added buying support. But wheat was a follower, as once corn and soybeans turned lower, so did wheat. The selling was enough to push wheat to end with small losses on the close.

Statistics Canada estimated Canada’s 2012 all wheat production estimate at 26,733.2 trillion metric tons, 1 percent lower than expected in July but 5.8 percent more than last year. Winter wheat production was estimated at 3,694 trillion metric tons, about as expected in July, but 20.8 percent higher than last year. Spring wheat production was estimated at 18,641.2 trillion metric tons, 2.2 percent lower than expected in July, but 3.4 percent higher than last year.

Corn: report has no follow-through

The corn market traded limit up Sept. 28 as a result of a bullish U.S. Department of Agriculture report. The report estimated Sept. 1 corn stocks at 988 million bushels, compared with expectations of 1.126 billion. Traders thought this would carry over into last week, but instead, futures moved sideways. The market seems to be marking time waiting for USDA’s October crop production report.

Corn traded with decent gains Oct. 1 as a result of support from follow-through buying from the Sept. 28 friendly USDA report, but the sharply lower soybean and wheat markets weighed on the corn during the day session. Export inspections also came in below expectations and that added weakness. Cumulative export inspections are now 6 percent of the current USDA estimate versus the five-year average of 8 percent. More of the same type trading occurred Oct. 3 as corn traded under pressure early because of sharp losses in the soybean and wheat markets. Poor demand and harvest pressure, which is at a record pace, is also limiting buying interest.

On Oct. 4, corn traded mixed in slow trade before settling just below unchanged. Commercial buying was supportive to the market throughout the day, which seems to indicate that demand rationing has not had enough of an impact yet. Spillover pressure from soybeans and wheat limited corn’s upside through much of the session. Corn traded higher early Oct. 4 as a result of the positive outside markets and spillover support from the gains in the soybean complex. But buying interest moved to the sidelines and corn softened into the noon hour and closed mixed. Pressure came from a private company’s estimate of 123.9 bushels per acre, up from its previous estimate of 121.4 bushels per acre and also above USDA’s estimate of 122.8 bushels per acre.

Ethanol production for the week ending Sept. 28 averaged 785,000 barrels per day, which is down 9 percent versus last year. Corn used in production is estimated at 82.4 million bushels, a 16-week low. This crop year’s cumulative corn used for ethanol production is 340.6 million bushels. Corn use needs to average 86.4 million bushels per week to meet this crop year’s USDA estimate of 4.5 billion. Stocks were 18.8 million barrels, which is up 8.5 percent versus last year.

Soybeans: another lower week

The soybean market struggled last week with pressure coming from a better-than-expected yield report, as well as from a rapid advancing harvest. For the week ending Oct. 4, November soybeans were down 49.75 cents.

Soybeans were lower throughout Oct. 1 and 2, as investors continued to liquidate their net-long futures positions, strengthening the downtrend despite a bullish longer-term commercial outlook. The poor stocks number Sept. 28 combined with harvest pressure and yield reports that continue to come in better than expected to pressure the soybean market. The Oct. 1 crop ratings reinforced yield reports somewhat, as good to excellent ratings did not change and poor to very poor ratings decreased 1 percent. As of Oct. 2, November soybeans were down nearly $2.60 from the contract high of $17.89 less than one month ago. Oct. 1 export inspections were seen as bullish.

Soybeans were sharply lower throughout much of the day on Oct. 3 before renewed commercial buying supported a bounce to slightly above unchanged into the close. The active harvest continued to put pressure on the soybean market, but harvest pressure is expected to begin to back off this week, as we get closer to the end of the harvest. Moisture levels remain below normal in much of Brazil, but recent rains have helped ease the stress.

The Oct. 4 session had soybeans trading higher as the strong rally continued off of the Oct. 3 test of support. Supportive buying interest came from both the commercial and noncommercial side of the market. The Oct. 4 bullish export sales and shipments added to the positive tone. The market saw gains erode into the close, falling in the middle of the day’s trading range, but still sharply higher. The Statistics Canada report Oct. 4 left Canadian soybean production virtually unchanged, with a 0.8 percent increase.

Barley

USDA reported barley export inspections (shipments) pace for the week ending Sept. 28 at 8,000 bushels, with 4,000 to Canada and 4,000 to Mexico. Barley export sales pace was estimated at zero.

Statistics Canada estimated Canada’s 2012 barley production at 8,590.9 trillion metric tons, 9.6 percent less than expected in July, but 10.8 percent larger than last year.

Cash barley bids in Minneapolis increased last week, putting feed barley bids at $5.50 per bushel, while malting barley bids were at $7.05.

Durum

Statistics Canada estimated Canada’s 2012 durum production at 4,398 trillion metric tons, 3 percent larger than expected in July and 5.4 percent larger than last year.

Oct. 4 cash bids for milling quality durum were at $8 per bushel in Berthold, N.D., while Dickinson, N.D., bids were at $7.85.

Canola

Canola futures on the Winnipeg, Manitoba, exchange closed the week ending Oct. 4 with $9.70 (Canadian) gains. Canola traded with large losses to start the week, but the back half of the week saw heavy gains to more than offset the losses. Canola was pressured early in the week by slip-over selling pressure from a lower U.S. soybean complex. Late session gains were a result of production concerns, as harvest results have been disappointing. Additional support was a result of a friendly Statistics Canada report, which showed less canola production than expected.

Statistics Canada estimated Canada’s 2012 canola production at 13,359.4 trillion metric tons, 13.3 percent less than expected in July and 7.8 percent less than last year. Additional support spilled over from a stronger U.S. soybean complex.

Oct. 4 cash canola bids in Velva, N.D., were at $27.99 per hundredweight.

Dry beans

For the week ending Sept. 30, the following states were reporting dry bean crop progress and conditions: North Dakota: 95 percent harvested, compared with 51 percent for the five-year average; Minnesota: 93 percent harvested, compared with 69 percent for the five-year average; Nebraska: 45 percent good to excellent, 45 percent fair and 10 percent poor to very poor, unchanged from the previous week, 65 percent harvested, compared with 70 percent for the five-year average; Idaho: 93 percent harvested, compared with 82 percent for the five-year average; and Michigan: 42 percent good to excellent, 36 percent fair and 22 percent poor to very poor, a decrease of 2 percent from the previous week, 64 percent was harvested, compared with 56 percent for the five-year average.

Sunflowers

As of Sept. 30, North Dakota’s sunflower crop had 92 percent bracts turning brown, compared with 78 percent for the previous week and 58 percent for the five-year average. The harvest was 16 percent complete, compared with 4 percent the previous week and the five-year average of 1 percent. North Dakota’s sunflower crop condition rating was estimated 55 percent good to excellent, 30 percent fair and 8 percent poor to very poor.

Statistics Canada estimated Canada’s 2012 sunflower production at 76.6 trillion metric tons, compared with 19.8 trillion metric tons for last year.

Oct. 4 cash sunflower bids in Fargo, N.D., were at $26.10 per hundredweight.

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