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Published October 22, 2012, 10:58 AM

Late week rally

The wheat market traded with moderate gains last week.

By: Ray Grabanski, Agweek

Wheat: higher on spillover from corn and soybeans

The wheat market traded with moderate gains last week. For the week ending Oct. 17, December Minneapolis gained 19.75 cents, December Chicago was up 11.75 cents, and December Kansas City gained 14.5 cents.

Wheat closed lower Oct. 15, but well off session lows as late buying from both commercial and noncommercial traders provided support. Follow-through selling after sharp losses Oct. 19 combined with spillover pressure from weak corn and soybean markets.

Wheat was higher early on Oct. 16, but fell into midday as corn and soybeans slipped. Trade volume was low and the market closed near the middle of the day’s trading range. Winter wheat planting is right on schedule, but will need more moisture to avoid poor condition rating. Outside markets were supportive on Oct. 16, with strong gains in the Dow and sharp losses in the U.S. dollar.

Wheat contracts were higher on Oct. 17 and 18 because of commercial buying and spillover support from corn and soybeans. Australian weather has been supportive to wheat futures, with concern tied to dryness and low temperatures. On Oct. 17, it was reported that Argentina’s Ag Ministry pegged this year’s crop at 11.5 million metric tons, compared with 13.2 million last year.

The U.S. Department of Agriculture reported wheat export inspections pace for the week ending Oct. 12 at 7 million bushels. This brings the year-to-date export shipments pace for wheat to 376.1 million bushels, compared with 423.6 million for last year at this time. Wheat export sales pace for the week ending Oct. 12 was estimated at 15.1 million bushels. This brings the year-to-date export sales pace for wheat to 506 million bushels, compared with 571.4 million for last year. With 33 weeks left in wheat’s marketing year, sales need to average 21 million bushels to make USDA’s projection of 1.2 billion.

As of Oct. 14, 71 percent of the nation’s winter wheat crop had been planted, compared with 57 percent the previous week and 71 percent for the five-year average. Winter wheat emerged as of Oct. 14 was at 36 percent, compared with 23 percent the previous week and the five-year average of 44 percent.

Corn: support lines hold

The corn market was up 8 cents for the week as of the Oct. 18 close. To start the week, corn traded under pressure from long liquidation. Buying interest resurfaced later in the week, as money flowed back into the commodities once the grains traded down to support lines.

Corn struggled and traded with red ink on Oct. 15. Pressure came from long position liquidation and talk of little demand at these price levels. The Oct. 19 rumor (that Southeastern livestock producers purchased a large quantity of corn from Argentina and that is in addition to what was purchased from Brazil a few months ago) spilled over to add selling pressure. It was the same story on Oct. 16. Corn traded 8 cents higher in the overnight, but lacked any follow-through buying during the day. Corn drifted lower into the noon hour as speculator and fund selling reemerged. Export demand has been poor and talk that Japan is sourcing Ukraine corn does not help the picture.

Corn closed with 7 cent gains on Oct. 17 and at session highs after trading near unchanged for most of the session. This was the slowest trading day of the week for corn, as it searches for fresh news. A slowdown in fund long liquidation and speculator selling offered support. The upside was limited, as traders were expecting to see an increase in ethanol production this week, but it came in lower and below USDA estimates. The European Union is expecting to increase corn imports, but talk is that it will source Black Sea and South American supplies. Corn traded with strength on Oct. 18 and closed near session highs. Support came from short covering and the strength in soybeans. Talk of tightening global supplies also created buying interest.

Ethanol production for the week ending Oct. 12 averaged 797,000 barrels per day versus 800,000 the previous week. Weekly production was down 0.4 percent versus the previous week and down 12.2 percent versus last year. Total ethanol production for the week was 5.6 million barrels. Corn used in production the week ending Oct. 12 was estimated at 83.7 million bushels versus 84 million the previous week. Corn use needs to average 86.5 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 508.3 million bushels. Stocks as of Oct. 12 were 18.9 million barrels, which is down 1.4 percent versus the previous week and up 11.4 percent versus last year.

Corn that was harvested was 79 percent, compared with 42 percent one year ago and a five-year average of 38 percent.

USDA’s export inspection report was bearish for corn. There were 17.2 million bushels of corn reported shipped, below the 22.3 million needed to meet USDA’s projection of 1.15 billion. This was below the pre-report estimates of 20 million to 26 million. The export sales report for corn was at 6.6 million bushels and below the 15.7 million needed to meet USDA’s projection of 1.15 billion. This was below the estimates of 7.9 million to 11.8 million bushels and bearish for corn.

Soybeans: strong later in the week

Soybeans struggled to start the week, trading down to support for the second time in a short period of time. Technical buying stepped in at these levels, helping the soybeans push back above $15. Additional support came from news of some export sales. For the week ending Oct. 18, November soybeans were up 23 cents on the week.

Soybeans opened the week sharply lower, setting a new low. Investor long-liquidation continues to pressure the market, as the current downtrend strengthens despite fundamentals that remain friendly longer term. South American weather remains favorable with recent beneficial rains. Strong demand continues to provide long-term support.

Soybeans were higher early on Oct. 16, but closed near unchanged. Oct. 17 saw a late surge of buying from both commercial and noncommercial traders lift the market to double-digit gains. Strong demand and exports continue to provide support to the market, as China is expected to remain an active buyer. Gains were limited by profit-taking by investors and a favorable weather forecast for South America. On Oct. 16, USDA announced a sale of 110,150 metric tons to undisclosed destinations.

The Oct. 18 session had soybeans higher throughout the day as investment money began to flow back into the market. Continued Chinese demand and a belief that Brazil is out of exportable soybeans were supportive. The long-term commercial outlook for soybeans continues to grow more bullish. Oct. 18 export sales and shipments were bullish, coming in well above the pace needed to meet USDA’s projection.

USDA reported soybean export inspections pace for the week ending Oct. 12 at 57.8 million bushels. This brings the year-to-date export shipments pace for soybeans to 180.5 million bushels, compared with 114.5 million for last year at this time. Soybean export sales pace for the week ending Oct. 12 was estimated at 19.2 million bushels and shipments were reported at 54 million.

Soybeans harvested as of Oct. 14 was at 71 percent, compared with 58 percent the previous week and the five-year average of 58 percent.

Barley

There were no reported export inspections or sales for barley last week.

As of the Oct. 18 close, cash barley bids in Minneapolis decreased slightly, putting feed barley bids at $5.45 per bushel, while malting barley bids fell to $7.05.

Durum

USDA reported durum export inspections (shipments) pace for the week ending Oct. 12 at 683,000 bushels. There were no reported export sales for durum last week.

As of the Oct. 18 close, cash bids for milling quality durum were 25 cents higher for the week at $8.25 per bushel in Berthold, N.D., while the Dickinson, N.D., bid increased 25 cents to $8.25.

Canola

Canola opened the week lower on Oct. 15, but bounced higher for the rest of the week. Tightening canola supplies and improving technical signals combined with gains in Chicago Board of Trade soybean futures to lead the canola market higher.

As of the Oct. 18 close, November canola gained $11.30 (Canadian). Cash canola new crop bids in Velva, N.D., were 15 cents higher at $27.87 per hundredweight.

Sunflowers

The harvest was 61 percent complete, compared with 33 percent the previous week and the five-year average of 11 percent. North Dakota’s sunflower crop condition report estimated the crop at 63 percent good to excellent, 31 percent fair and 6 percent poor to very poor.

Soybean oil export sales pace for the week ending Oct. 12 was estimated at 24.5 trillion metric tons, bringing the year-to-date total to 227 trillion, compared with last year’s 81.5 trillion.

As of the Oct. 18 close, cash sunflower new crop bids in Fargo, N.D., lost 30 cents to $25.50 per hundredweight.

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