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Published December 03, 2012, 09:54 AM

Grabanski: Markets push higher

Wheat traded with strength all last week as traders try to work in declining crop conditions.

By: Ray Grabanski, Agweek

Wheat: strong trading

Wheat traded with strength all last week as traders try to work in declining crop conditions. Technical buying and spillover support from the other grains added strength to wheat. For the week ending Nov. 29, December Minneapolis gained 17.5 cents, December Chicago gained 21.5 cents and December Kansas City added 39 cents.

Wheat opened the week with gains, following corn. Kansas City had larger gains because of the continuation of warm, windy conditions on the Southern Plains. While continued concerns about dry conditions threaten the production prospects for 2013, we are not at risk of running out of wheat anytime soon. Export inspections were disappointing at 7.8 million bushels, and Russia raised export estimates by 3 million to 5 million metric tons to be at 15.5 million metric tons.

The Nov. 27 session had wheat breaking out of the recent quiet trading range with a big move to the upside. Gains of up to 31 cents in the Kansas City winter wheat markets were a result of a further decline in the crop condition ratings and continued warm, dry and windy conditions in the Southern Plains.

Wheat traded with gains throughout the Nov. 28 session. Early in the session, wheat was trading with strong gains with most of the support spilling over from the Nov. 26 friendly crop progress report (wheat’s current rating is the worst for this time frame since 1986). This marks the seventh session straight that wheat traded with gains. Technically, wheat still has some room to move higher, as most of the exchanges are sitting in the middle of their ranges. The only item missing from the U.S. wheat market is demand.

The Nov. 29 session started with gains, but by early -morning, wheat started to lose its strength. Pressure spilled over from a sloppy corn market to start the wheat sell-off. Additional pressure for wheat came from a bearish export sales estimate. Traders have been expecting U.S. wheat exports to improve as a result of tight world wheat stocks. Stocks might not be as tight as thought, as the Ukraine has continued to be an exporter of wheat, increasing its hard cap four times. The Ukraine first had estimated the wheat export cap at 4 million metric tons, then 5 million, then 5.5 million. Now, the Ukraine government is estimating the cap at 5.8 million metric tons. It is currently at 5.44 million metric tons.

The U.S. Department of Agriculture reported wheat export inspections for the week ending Nov. 23 at 7.8 million bushels. This brings the year-to-date export inspections pace to 448.5 million bushels, compared with 519 million at this time last year. Wheat export sales pace was estimated at 10.3 million bushels. This brings the year-to-date export sales pace for wheat to 593.2 million bushels, compared with 658.4 million for last year. With 27 weeks left in wheat’s marketing year, shipments need to average 24.1 million bushels and sales need to average 18.8 million to make USDA’s projection of 1.1 billion bushels.

As of Nov. 25, 88 percent of the nation’s winter wheat crop was emerged, compared with 84 percent the previous week and 91 percent for the five-year average. Winter wheat conditions dropped 1 percent to 33 percent good to excellent, 41 percent fair and 26 percent poor to very poor.

Corn: traded to resistance

Corn hit $7.60 with major resistance last week, being driven by short covering and spillover strength from the wheat and soybean complex. River transportation concerns south of St. Louis also offered support. Traders also are keeping an eye on the U.S. fiscal cliff issue, as it could result in a large amount of fund selling. For the week ending Nov. 29, December corn was up 5 cents.

Gains were seen in the corn trade on Nov. 26 and 27, with follow-through buying from the previous week. The strength in the wheat market also spilled over to offer support, as winter wheat conditions continue to deteriorate. Noncommercial traders were buying on concerns about the weather in Argentina. The upside was limited, as the export inspections were disappointing and below USDA estimates.

Profit-taking entered the corn market on Nov. 29, after closing unchanged on Nov. 28. Corn reached major resistance and struggled to create any buying interest above $7.60. Fund selling and profit taking were uncovered. The ethanol report was disappointing, as it came in below estimates and a five-week low for production. The Nov. 29 export sales report was also below estimates. Cheaper corn in the former Soviet Union and South America is still limiting U.S. exports.

Ethanol production for the week ending Nov. 23 averaged 803,000 barrels per day, down 13.7 percent versus last year. Total ethanol production for the week was 5.62 million barrels. Corn used in production for the week ending Nov. 23 is estimated at 84.3 million bushels versus 85.16 million the previous week. This crop year’s cumulative corn used for ethanol production is 1.02 billion bushels. Corn use needs to average 86.64 million bushels per week to meet this crop year’s USDA estimate of 4.5 billion. Stocks as of Nov. 23 were 18.35 million barrels, which is down 3.06 percent versus the previous week and up 7.63 percent versus last year.

USDA’s export inspections report was bearish for corn. There were 15.9 million bushels of corn reported shipped, well below the 23.6 million needed to meet USDA’s projection of 1.15 billion. This was within the pre-report estimates of 13 million to 17 million bushels. The export sales report for corn was at 10.4 million bushels, below the 16.6 million bushels needed to meet USDA’s projection. This was below the estimates of 15.7 million to 25.6 million bushels and bearish for corn. Total shipments were at 14.5 million bushels, below the 23.3 million needed for the 2012 to ’13 marketing year.

Soybeans: demand supports market

Soybeans, like corn, traded up to resistance levels. Support was a result of weather concerns in South America, as well as from continued strong demand for U.S. soybeans. For the week ending Nov. 29, January soybeans were up 22.75 cents.

Soybeans traded higher Nov. 26 and sharply higher Nov. 27 on support from commercial traders. Exports have remained strong, though they were below trade expectations Nov. 26. South America’s weather has been mixed with too much moisture in Argentina and not enough in parts of southern Brazil. The outside markets were negative with crude oil and the Dow Jones both experiencing losses. Soybeans closed near the middle of the day’s trading range. The Nov. 26 export inspections came in well above the amount needed to keep pace with USDA’s projection.

Soybeans were lower Nov. 28 because of a lack of follow-through momentum overnight and light noncommercial selling throughout the day. The South American forecast still was mostly favorable, pressuring the market. Strength in the corn and wheat markets limited losses in soybeans, and strengthening inverses in the front months indicate strong commercial interest. USDA announced a sale of 290,000 metric tons of soybeans to China Nov. 28.

January soybeans were slightly higher Nov. 29, extending the short-term higher trend. Strong demand and firm outside markets were supportive, as crude oil and the Dow Jones were higher and the U.S. dollar was lower. The South American extended forecast is favorable, with rain expected for dry areas and a dryer period anticipated for those locations that are too wet. The Nov. 29 export sales came in well above the amount needed to keep pace with USDA’s projection.

USDA reported soybean export inspections pace for the week ending Nov. 23 at 45.5 million bushels. This brings the year-to-date export shipments pace for soybeans to 547.2 million bushels, compared with 397.1 million for last year at this time. Soybean export sales pace was estimated at 11.7 million bushels, bringing this year’s total to 1,005.3 million, compared with 782 million last year at this time.

Barley

USDA reported barley export inspections for the week ending Nov. 23 at 88,000 bushels, all going to Japan. This brings year-to-date export shipments to 5.55 million bushels, compared with 5.6 million for last year at this time. There was no barley export sales reported, with the year-to-date export sales pace at 5.6 million bushels, compared with 3.8 million for last year at this time. The Nov. 29 cash barley bids in Minneapolis had feed barley at $5.55 per bushel, while malting barley bids were $7.25.

Durum

USDA reported no export inspections of durum last week. There were no new export sales for durum, with the year-to-date export sales pace at 12.2 million bushels, compared with 12.8 million for last year. Nov. 29 cash bids for milling quality durum are at $8.25 per bushel in Berthold, N.D., with Dickinson, N.D., bids at $8.15.

Canola

Canola futures on the Winnipeg, Manitoba, exchange gained $21.30 (Canadian) for the week ending Nov. 29. Canola traded with strength all week. Support came from gains in other oilseed markets, weakness in the Canadian dollar and slow farmer selling. Canola also was supported by strong commercial demand. Additional support was a result of thoughts that canola is undervalued when compared with the U.S. soybean complex. Nov. 29 cash canola bids in Velva, N.D., were at $27.62 per hundredweight.

Sunflowers

The soybean oil export sales pace for the week ending Nov. 23 was estimated at 122.5 trillion metric tons, with 121.5 trillion being old crop and 1 trillion being new crop. This brings the year-to-date total to 570.9 trillion metric tons, compared with last year’s 121.9 trillion. With 43 weeks left in the soybean oil export marketing year, soybean oil exports have exceeded USDA’s projection of 540 trillion metric tons. Nov. 29 cash sunflower bids in Fargo, N.D., were at $23.40 per hundredweight.

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