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Published January 07, 2013, 10:54 AM

Funds liquidate to begin new year

The wheat markets had losses of 21 to 31 cents last week. The Kansas City market had the lighter losses because of a continuing weather premium in that market.

By: Ray Grabanski, Agweek

Wheat: searching for buyers in 2013

The wheat markets had losses of 21 to 31 cents last week. The Kansas City market had the lighter losses because of a continuing weather premium in that market. The wheat markets are starting 2013 in a heavily oversold position, but have not yet given the funds a good reason to be buyers.

Wheat opened and traded with losses throughout most of the early part of the session on Dec. 31. Early selling was tied to continued concerns that the U.S. economy was going to go over the fiscal cliff. But in true fashion, a compromise was made around noon, and that resulted in a recovery to be staged in the grains. The majority of the buying appeared in the Kansas City market as weather concerns added to the buying.

The wheat markets started the new year Jan. 2 with gains in the first few minutes of trade before the early buying interest faded away and heavy selling pressure took its place. Technical selling and noncommercial liquidation drove the grain markets lower. Chicago wheat looks to test support at $7.50, after losing more than 80 cents in December. The monthly update to winter wheat conditions showed further decline in the Kansas and Oklahoma crops, with Kansas now down to 24 percent good to excellent and Oklahoma now down to 11 percent.

Wheat traded with small gains for much of the day Jan. 3, despite pressure in the soybean market and gains in the dollar index. Despite the recovery in the dollar, U.S. wheat is still priced lower than European wheat on the world market. Traders are looking for export business to pick up in the Middle East.

Jan. 4 trade brought 6- to 8-cent losses, with March Chicago trading below the $7.50 support line. Strength in the dollar and another disappointing export sale report put pressure on the wheat markets, and fund liquidation continued to pressure the grain markets in general. The funds need a reason to buy grains, and they are not getting any right now.

The U.S. Department of Agriculture reported wheat export inspections pace for the week ending Dec. 28 at 7.76 million bushels. This brings the year-to-date export inspections pace to 515.8 million bushels, compared with 596.3 million for this time in 2011. With 22 weeks left in wheat’s marketing year, shipments need to average 24.3 million bushels to make USDA’s projection of 1.05 billion.

Wheat export sales pace for the week ending Dec. 28 was estimated at 14.7 million bushels. This brings the year-to-date export sales pace for wheat to 700.9 million bushels, compared with 719.8 million for this time in 2011. With 22 weeks left in wheat’s marketing year, sales need to average 15.8 million bushels to make USDA’s projection of 1.05 billion.

Corn: starting 2013 on a slide

March corn was 12 cents lower last week, while the December contract fell 25 cents. The absence of demand and nonthreatening weather in South America continues to pressure the futures.

The corn market traded with small losses early in a thinly traded market on the last day of the year Dec. 31, but firmed up late in the morning and closed with small gains. Dec. 31 continued to flow out of the market early with investment selling and large money remaining in the bank. Support came late in the day from news that lawmakers reached an agreement on the fiscal cliff.

To start the New Year Jan. 2, corn traded sharply higher on the open, but quickly moved into red ink and closed there. Early support came from the strong outside markets that were driven by legislation that avoided the fiscal cliff. Additional support came from talk that water levels on the Mississippi continue to decline and could cause a closure to barge traffic. Selling interest soon emerged after the strong opening and the losses in the soybean and wheat markets spilled over. New export sales remain silent and U.S. corn is still at a $15 per metric ton premium to Brazil corn. The weather is good in South America and harvest should start within the next three weeks for its earlier-planted crop. Traders continue to see South American production near last month’s USDA estimates.

The corn market traded on both sides of unchanged Jan. 3 before settling with light losses. Support held at $6.85 in the March contract, but there was little news to get the market excited. Losses continued on Jan. 4, with trade pushing below the $6.85 level to trade to the lowest levels seen since the first week of July. Noncommercial money has been flowing out of the grain markets to start 2013.

USDA’s export inspection report was bearish for corn. There were 7.9 million bushels of corn reported shipped, well below the 25.1 million needed to meet USDA’s projection of 1.15 billion for the 2012 to ’13 marketing year. This was below the pre-report estimates of 8 million to 15 million bushels. The export sales report for corn was at 1.9 million bushels and below the 18 million needed to meet USDA’s projection of 1.15 billion. This was below the estimates of 4.3 million to 7.9 million bushels and bearish for corn. Total shipments last week were at 8.1 million bushels, below the 25 million needed for the 2012 to ’13 marketing year.

Soybeans: lower to begin new year

As of the Jan. 3 close, March soybeans were down 31.5 cents on the week, while November 2013 soybeans were 18.5 cents lower. Export demand for soybeans remains strong.

Soybeans closed lower, but well off the day’s lows on Dec. 31 on renewed fund liquidation ahead of the holiday and the end of the year. Demand for soybeans remains strong as USDA announced a sale of 140,000 metric tons to an undisclosed destination, though that news was mostly ignored by the market. The Dec. 31 export inspections were strong, as well.

Soybeans surged higher on the open of the pit the morning of Jan. 2, only to quickly fall back into negative territory on the way to a close near session lows. There was little commercial action noted as favorable South American weather continues to limit gains. Early harvest has begun in Mato Grosso, Brazil, with early yields looking very good. Outside markets were mostly supportive, with crude oil and the Dow Jones higher, while the U.S. dollar was near unchanged.

Soybeans closed lower again Jan. 3 on noncommercial long-liquidation following another cancellation by China. There is growing potential for heat and ridging in Argentina this week, but South American weather remains good near-term. Early yields look good in Brazil, as a USDA attaché estimated soy production at 83 million metric tons, compared with 66.5 million metric tons last year and the official 81-million-metric-ton projection. Soy shipments from Brazil are falling below last year’s pace, which could shift further demand to the U.S. The technical outlook for soybeans is negative at the moment.

USDA reported soybean export inspections pace for the week ending Dec. 28 at 35.5 million bushels. This brings the year-to-date export shipments pace for soybeans to 774 million bushels, compared with 566.4 million for 2011 at this time. Soybean export sales pace for the week ending Dec. 28 was estimated at 16 million bushels, bringing this year’s total to 1,134 million, compared with 886.2 millino last year at this time.

Barley

USDA reported no barley export inspections for the week ending Dec. 28. Year-to-date export shipments are at 5.58 million bushels, compared with 5.61 million for this time in 2011. There were no new barley export sales reported. The Jan. 3 cash barley bids in Minneapolis had feed barley at $5 per bushel, while malting barley bids were at $7.15.

Durum

USDA reported no durum export inspections for the week ending Dec. 28. There were no new export sales either, with the year-to-date export sales pace at 15.6 million bushels, compared with 15.2 million for this time in 2011. Jan. 3 cash bids for milling quality durum were at $7.75 per bushel in Berthold, N.D., and $7.90 in Dickinson, N.D.

Canola

Canola futures on the Winnipeg, Manitoba, exchange had net losses of $14 to $18 (Canadian) per ton for the week. Pressure came from a continued selloff in soybean futures and weakness in global oilseed markets. Unlike the other grain markets, canola does still remain rangebound. Major support is at $570.60 (Canadian) per ton, which was still well below the Jan. 4 trade. Cash canola bids in Velva, N.D., were at $27.43 per hundredweight on Jan. 3.

Sunflowers

The soybean oil export sales pace for the week ending Dec. 28 was estimated at 31.3 trillion metric tons. This brings the year-to-date total to 663.2 trillion, compared with 2011’s 170.3 trillion metric tons. With 38 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 $22.40 per hundredweight on Jan. 3.

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