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Published December 24, 2012, 08:42 AM

Chinese cancellations drop market

The wheat markets had losses of 15 to 20 cents last week, following along with the steep losses seen in the row crop markets. Noncommercial money was flowing out of the grain markets ahead of the holiday breaks and year-end.

By: Ray Grabanski, Agweek

Wheat: lowered by row crop market

The wheat markets had losses of 15 to 20 cents last week, following along with the steep losses seen in the row crop markets. Noncommercial money was flowing out of the grain markets ahead of the holiday breaks and year-end.

The wheat markets opened Dec. 17 with small gains but were pulled lower during the day as commercial and noncommercial money exited the grain markets. Pressure came from the soybean market as it was unable to hold gains after trading above $15. Export inspections were disappointing again last week.

The wheat markets had mixed trade on Dec. 18 and finished higher, fighting off pressure from steep losses in the soybean market. The dollar index made new lows for the month, raising hopes for future export business. There was also talk about a possible reduction in exports from Argentina in the coming months, and some wheat appearing in feed rations as well.

The wheat markets started the day with gains on Dec. 19 but were eventually pulled lower due to the steep losses in the row crop markets. Wheat had support from a big Egyptian purchase of 290,000 tons of U.S. wheat. Losses continued on Dec. 20 as steep losses in the soybean and corn markets added pressure throughout the day. Wheat traded through technical support as noncommercial traders pulled money out of the grain markets ahead of the New Year.

Trade on Dec. 21 brought some short covering and profit taking to finish the week, allowing the market to trade with light gains. News of millers dumping high protein spring wheat on the market in favor of lower protein winter wheat for blending purposes serves to remind producers not to expect any improvement in bids for high protein wheat.

The U.S. Department of Agriculture reported export inspections of 16.4 million bushels of wheat for the week ending Dec. 14. This brings the year-to-date export inspections pace to 492.1 million bushels, compared with 567.2 million bushels at this time last year. With 24 weeks left in wheat’s marketing year, shipments need to average 23 million bushels to make USDA’s revised projection of 1.05 billion bushels. The wheat export sales pace for the week ending Dec. 14 was estimated at 23.9 million bushels. This brings the year-to-date export sales pace for wheat to 649.1 million bushels, compared with 698.8 million bushels for last year. With 24 weeks left in wheat’s marketing year, sales need to average 17 million bushels to make USDA’s revised projection of 1.05 billion bushels.

Corn: fund liquidation

The sharp losses in the soybean trade and sluggish demand pushed corn down to five-month lows. New-crop contracts trended lower with large acreage estimates to be planted in 2013 being the main pressure point. For the week ending Dec. 20, corn dropped 35 cents.

Corn lost ground on Dec. 17 and closed near session lows. The export inspections were disappointing and added selling pressure. The shipment number was better than the past few months and did create some talk that demand could be starting to come to the U.S. Argentina has 72 percent of the corn crop planted versus 82 percent at this time last year, while Brazil is near complete. Corn traded under pressure again on Dec. 18 with sharp losses in the soybean trade spilling over. Corn has also felt pressure from technical selling and long liquidation.

The corn market traded lower Dec. 19. The ethanol report was disappointing as stocks and imports grew. The futures felt additional pressure as export demand remained sluggish and China cleared its first two cargos of Argentina corn. Additional selling interest surfaced at midday with an increase in estimated corn acres for 2013. A private firm released its estimate for 2013 corn acres at 99 million, which is 1.3 million acres larger than its November estimate and 2.1 million over what was planted in 2012.

This would be the largest planted acreage since 1936. Corn traded lower again on Dec. 21 and to five-month lows. The sharp losses in the soybean complex spilled over to corn and another poor export sales report added to the selling. As of Dec. 13, cumulative corn sales stand at 43 percent of USDA’s forecast versus a five-year average of 54 percent.

Ethanol production for the week ending Dec. 14 averaged 822,000 barrels per day and down 0.24 percent versus the previous week and down 12.8 percent versus last year. Total ethanol production for the week ending Dec. 14 was 5.75 million barrels. Corn used in production was estimated at 86.3 million bushels. Corn needs to average 86.6 million bushels per week to meet this crop year’s USDA estimate of 4.5 billion bushels. This crop year’s cumulative corn used for ethanol production is 1.3 billion bushels. Ethanol stocks as of Dec. 14 were 20.8 million barrels, which is up 4.04 percent versus the previous week and up 17.9 percent versus last year. Imports increased to 2.59 million barrels and up 1.75 million for the week ending Dec. 14.

USDA’s export inspections report was bearish for corn. There were 15 million bushels of corn reported shipped, well below the 24.6 million bushels needed to meet USDA’s projection of 1.15 billion bushels. This was within the pre-report estimates of 9 million to 15 million bushels. The export sales report for corn was at 4.7 million bushels, below the 17.3 million bushels needed to meet USDA’s projection.

Total shipments for the week ending Dec. 14 were at 17.1 million bushels and below the 24 million bushels needed for the 2012 to ’13 marketing year.

Soybeans: lower amid cancellations

After posting solid gains for the past four straight weeks, profit taking and long liquidation hit the soybean complex. Additional selling was tied to news that China and an unknown destination were canceling soybean purchases (about 40 million bushels in all). For the week ending Dec. 20, soybeans were down 88 cents.

Soybeans traded above $15 overnight before meeting technical resistance and slipping back to close near unchanged on Dec. 17.

The close near the day’s lows was attributed in part to weakness in corn and wheat as well as continued favorable weather forecasts for much of South America. USDA announced a sale of 151,000 metric tons to unknown destinations that provided little support as it was likely priced into the market already. The export inspections were low versus expectations, but still well above the amount needed to keep pace with USDA’s projection.

Soybeans were sharply lower Dec. 18, closing near the day’s lows on selling pressure from both commercial and noncommercial traders. Pressure came as USDA announced canceled sales of 300,000 metric tons of soybeans to China and 120,000 metric tons that had been sold to unknown destinations. A sale of 110,000 metric tons to unknown destinations was announced as well, but the trade saw the cancellations as more relevant. Weather in South America remains favorable, particularly in Brazil.

Dec. 19 and 20 brought a different story to the soybean complex as further export cancellations were being announced Dec. 20. Export sales to China of 540,000 metric tons were cancelled, bringing the total for the week for China to 840,000 metric tons cancelled.

This brought in a massive amount of selling. Additional pressure came from profit-taking as traders started to position square ahead of the Christmas holiday. The export sales were below expectations, but still well above the amount needed to keep pace with USDA’s projection.

USDA reported soybean export inspections pace for the week ending Dec. 14 at 37 million bushels. This brings the year-to-date export shipments pace for soybeans to 687.3 million bushels, compared with 490.9 million bushels for last year at this time. Soybean export sales pace for the week ending Dec. 14 was estimated at 22.8 million bushels, bringing this year’s total to 1.115 billion bushels, compared with 851.5 million bushels last year at this time.

Barley

USDA reported no barley export inspections for the week ending Dec. 14. Year-to-date export shipments are at 5.57 million bushels compared with 5.61 million bushels 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 bushels for last year at this time. Cash barley bids on Dec. 20 in Minneapolis had feed barley at $5.10 per bushel while malting barley bids were at $7.15.

Durum

USDA reported export inspections of 338,000 bushels of durum. The durum export sales pace for the week ending Dec. 14 was estimated at 700,000 bushels. This brings the year-to-date export sales pace to 14 million bushels compared with 13.7 million bushels for last year. Cash bids for milling quality durum on Dec. 20 were at $8 per bushel in Berthold, N.D., and $7.60 in Dickinson, N.D.

Canola

Canola futures on the Winnipeg, Manitoba, exchange had net losses of $14 to $18 (Canadian) per ton last week. Pressure came from a steep sell-off in soybean futures and weakness in global oilseed markets. The market traded below initial support levels, but support did hold at $570.60 (Canadian) per ton. Cash canola bids in Velva, N.D., were at $26.91 per hundredweight on Dec. 20. Cash bids have not dropped as fast as futures, with end-users trying to keep the grain moving.

Sunflowers

Soybean oil export sales pace for the week ending Dec. 14 was estimated at 5.8 trillion metric tons. This brings the year-to-date total to 614.5 trillion metric tons, compared with last year’s 160.7 trillion metric tons. With 40 weeks left in the soybean oil marketing year, soybean oil exports have exceeded USDA’s projection of 540 trillion metric tons. Cash sunflower bids in Fargo, N.D., were at $21.15 per hundredweight on Dec. 20.

Ray Grabanski is president of Progressive Ag, a Fargo, N.D.-based hedge brokerage firm. Reach Grabanski at (800) 450-1404.

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