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Published October 29, 2012, 10:43 AM

Soybean demand remains firm

The wheat markets appeared to be on a roll last week as a result of news that the Ukraine will implement an export ban on wheat.

By: Ray Grabanski, Agweek

Wheat: friendly fundamentals fail to move market

The wheat markets appeared to be on a roll last week as a result of news that the Ukraine will implement an export ban on wheat. But once the dust settled for the week, wheat only posted small gains. For the week ending Oct. 25, December Minneapolis gained 2.75 cents, December Chicago gained 25 cents and December Kansas City improved by 6.25 cents.

Wheat closed higher to start the week, but well off the daily highs. World weather is a concern for wheat; dry conditions have hurt Australia’s crop and concern grows for wheat in the Southern Plains. Outside markets were supportive early, but the support waned later in the session as the dollar recovered.

The Oct. 23 session started off lower because of weakness in the other grains. The Dow fell more than 240 points and the dollar experienced strong gains. Wheat moved higher as soybeans broke into positive territory, but selling from both commercial and noncommercial traders pressured the market, keeping prices below unchanged. The Oct. 22 crop progress report showed winter wheat planting progress on pace with the five-year average, but emergence behind the average.

On Oct. 19, Ukraine announced plans to implement a wheat export ban on Nov 15. Ukraine officials are concerned that wheat stocks are declining too fast (because of poor yields). The Ukraine government is saying 5 million metric tons of wheat will be allowed to be exported this year and that amount will be reached by Nov 15. Wheat rallied on this news, trading with double-digit gains for most of the session. Adding support to wheat was the Oct. 22 crop progress report, which continues to show a slower-than-expected emergence pace for winter wheat because of dry soil conditions. This will lead to a low crop condition rating.

Wheat traded on the defense Oct. 25 with all three of the exchanges losing ground. Early selling was tied to profit taking as traders took profits. Late session selling was tied to spillover pressure from the other grains, as both corn and soybeans struggled. Technical selling also was seen as adding selling pressure late in the session.

The U.S. Department of Agriculture reported wheat export inspections pace for the week ending Oct. 19 at 16.4 million bushels. This brings the year-to-date export shipments pace for wheat to 392.9 million bushels, compared with 441.3 million for last year. Wheat export sales pace for the week ending Oct. 19 was estimated at 21 million bushels. This brings the year-to-date export sales pace for wheat to 527 million bushels, compared with 583 million for last year. With 32 weeks left in wheat’s marketing year, shipments need to average 23.7 million bushels and sales need to average 19.5 million to make USDA’s projection of 1.15 billion.

As of Oct. 21, 81 percent of the nation’s winter wheat crop had been planted, compared with 71 percent the previous week and 80 percent for the five-year average. Winter wheat emerged as of Oct. 21 was at 49 percent, compared with 36 percent the previous week and the five-year average of 56 percent.

Corn: poor export demand

The upside movement in corn continues to struggle as a result of the lack of export demand. Corn demand for ethanol did show an improvement last week, but not enough to offset the loss in export demand. Price has certainly done its job of rationing supply. For the week ending Oct. 25, December corn was off 20 cents.

Corn traded lower the first three days of the week. Pressure came from poor export numbers. Cumulative export inspections are only 9.8 percent of the USDA export estimate versus the five-year average of 13 percent. News that Japan is using more feed wheat in its rations and Mexico is looking at corn in Brazil and Argentina added weakness. Mexico canceled a 270,000- metric ton purchase of U.S. corn on Oct. 23. Losses were limited by the strength in the soybeans. Traders were expecting an increase in ethanol production last week, and the report did confirm that, along with a four-week high in corn used for ethanol. South American corn prices also have moved higher on the week that has traders talking that their supply is tightening.

Corn struggled on Oct. 25 and traded with the sharpest losses of the week. Pressure came from the lack of fresh news, as well as from the negative outside markets. Disappointing export sales continue to limit upside movement in the corn market. As of Oct. 18, cumulative corn sales stand at 37 percent of the USDA estimate for the 2012 to 13 marketing year versus a five-year average of 42 percent.

Ethanol production for the week ending Oct. 19 averaged 801,000 barrels per day. This is up 0.5 percent from the previous week and down almost 12 percent from last year. Total ethanol production for the week was 5.6 million barrels. Corn used in production is estimated at 84.1 million bushels, which was a 420,000-bushel increase from the week prior and a new four-week high. Corn use needs to average 86.6 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 592.4 million bushels. Stocks as of Oct. 19 were 18.7 million barrels, which is down 1.2 percent from the previous week and up 8.5 percent from last year.

As of Oct. 21, corn harvest progress was at 87 percent complete, compared with 60 percent one year ago and a five-year average of 49 percent.

USDA’s export inspections report was bearish for corn. There were 9.6 million bushels of corn reported shipped, below the 22.5 million needed to meet USDA’s projection of 1.15 billion. The export sales report for corn was at 5.6 million bushels, well below the 15.9 million needed to meet USDA’s projection of 1.15 billion.

Soybeans: it’s all about demand

Soybeans have traded up to resistance levels and seem to be content to hang around these levels as the market looks for direction. Export demand continues to be strong for U.S. soybeans and that has helped soybeans remain the market of choice. For the week ending Oct. 25, November soybeans were up 29.75 cents.

Soybeans closed with gains on Oct. 22 and 23, despite outside markets that were negative to commodities (the U.S. dollar was higher both days). Strong demand combined with a quick harvest, now 80 percent complete, to provide support to the market. South American weather will remain a factor as the longer-term forecast remains favorable. The Oct. 22 export inspections were strong, putting year-to-date inspections 30 percent ahead of USDA’s target.

The Oct. 24 session had soybeans higher on follow-through buying from the Oct. 23 strong finish. Commercial buying supported the market, as demand remains strong. A rebound in outside markets on better economic news for China and the U.S. also was supportive. South American weather is a factor, with current conditions being supportive, as northern Brazil is dry, while southern Brazil and Argentina are wet. USDA announced a sale of 105,000 metric tons to undisclosed destinations the morning of Oct. 24.

Soybeans were lower through much of Oct. 25, as buy orders appeared to run out after three consecutive higher closes. The outside markets were negative with the U.S. dollar higher. The export sales, while strong, were not as high as many traders expected. The trend remains downward for soybeans, leaving the market susceptible to noncommercial long-liquidation. USDA announced a sale of 120,000 metric tons of soybeans to undisclosed destinations on Oct. 25.

USDA reported soybean export inspections pace for the week ending Oct. 19 at 61.4 million bushels. This brings the year-to-date export shipments pace for soybeans to 242.4 million bushels, compared with 158.5 million for last year at this time. Soybean export sales pace for the week ending Oct. 19 was estimated at 19.2 million bushels and shipments were reported at 60.3 million.

Soybean harvest progress as of Oct. 21 was at 80 percent, compared with 71 percent the previous week and the five-year average of 69 percent.

Barley

USDA reported no export shipments for barley for the week ending Oct. 19. This brings barley’s export inspections pace to 4.47 million bushels, compared with 5.39 million for last year at this time. There was no barley export sales reported for the week. This brings the year-to-date export sales pace to 5.5 million bushels, compared with 3.8 million for last year at this time. Oct. 25 cash barley bids in Minneapolis increased last week, putting feed barley bids at $5.60 per bushel, while malting barley bids were at $7.15.

Durum

USDA reported no export shipments for durum for the week ending Oct. 19. Durum export sales pace was estimated at a negative 1.2 million bushels (cancellation). This brings the year-to-date export sales pace for durum to 11.5 million bushels, compared with 11.6 million for last year. Oct. 25 cash bids for milling quality durum were at $8.25 per bushel in Berthold, N.D., while Dickinson, N.D., bids were at $8.35.

Canola

Canola futures on the Winnipeg, Manitoba, exchange closed the week ending Oct. 25 with $5.40 (Canadian) gains. Solid demand from commercial traders supported the gains. A dip in the Canadian dollar and the perception that canola was undervalued relative to other oilseeds supported, as well. Additional support was a result of news that China was buying Canadian canola — at least three cargos. Late session gains were trimmed by selling from a weaker U.S. soybean complex. Oct. 25 cash canola bids in Velva, N.D., were at $27.87 per hundredweight.

Sunflowers

As of Oct. 21, USDA was estimating the nation’s sunflower harvest progress at 76 percent complete, compared with 61 percent the previous week and 23 percent for the five-year average. Soybean oil export sales pace for the week ending Oct. 19 was estimated at 12 trillion metric tons, bringing the year-to-date total to 239.1 trillion metric tons, compared with last year’s 85.7 trillion. Oct. 25 cash sunflower bids in Fargo, N.D., were at $24.75 per hundredweight.

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